The evolution of management from a trust to arm’s length model in family run businesses

Abstract

Purpose The primary purpose of this paper is to fill the research gap regarding the evolution of managerial processes within (largely family) diamond industry firms, especially over the past seven decades. Design/methodology/approach Qualitative data were gathered from interviews with 100 managers in the diamond industry in Israel, together with data from Israeli Government, industry and academic sources. Findings Over the recent life cycle of the diamond industry, with its changing structures and dynamics, participant firms have evolved through seven stages of engagement, from one based on trust and personal connections to more impersonal, standardized connections that exist today. Research limitations/implications In seeking to tell the story of industry participants as a group, the differences in behaviours between the family firms and the non-family firms have not explored. This should be the work of future research, which, if aimed at teasing out the results of this study, may help shed additional light on the strategic processes that occur within family firms. Practical implications Although the firms examined in this study were from one industry (and an arguably narrow cultural base), their development over time was not dissimilar to the experience reported in other industries and cultures. This suggests that the components of the evolution of the strategic process that ensues within family firms may be generalizable throughout cultures. In the absence of kin relationships, the importance of trust in their dealings cannot be overstated. Originality/value The findings demonstrate how one group of participants in the global diamond industry has responded to the changing economic, social and political contexts of their operations, where trust and personal connections have been replaced by more impersonal, standardized dealings.