Introduction
‘We must respond to the ever-changing environment with the unchanging essence of our culture’.
—Deliang Hu, General Manager of Baiyun Power GroupAccording to survey data, 68% of family firm owners in Mainland China believe that reinforcing their family culture can help their firms navigate crises. However, only 24% formally articulate their family culture in writing, and fewer implement it effectively.Footnote 1 This unexpected discrepancy between perception and action reveals a common challenge for family firms: lack of comprehensive understanding of the nature of family culture and the practical strategies to harness it as a competitive asset. This disconnect underscores the need to explore how family culture can be actively leveraged to ensure long-term competitive advantage (CA).
Similar challenges are evident in the literature, where family culture is defined as ‘the artifacts, perspectives, basic values, and assumptions shared by family members’ (Vallejo, Reference Vallejo2011). While scholars agree that family culture is a vital strategic resource for achieving CA (Barney, Reference Barney1986; Habbershon & Williams, Reference Habbershon and Williams1999; Stasa Ouzký & Machek, Reference Stasa Ouzký and Machek2023), they also recognize its ‘double-edged sword’ effect. Family values often emphasize tradition, kinship, and obedience, which provide CA in the early stages of entrepreneurship by leveraging intra-family resources (Aronoff, Reference Aronoff2004; Fang, Singh, Kim, Marler, & Chrisman, Reference Fang, Singh, Kim, Marler and Chrisman2022; Goel, He, & Karri, Reference Goel, He and Karri2011). However, these same values can lead to nepotism, arbitrary power, and challenges to sustained CA and growth (Soleimanof, Rutherford, & Webb, Reference Soleimanof, Rutherford and Webb2018; Tan, Reference Tan2019; Zahra, Hayton, Neubaum, Dibrell, & Craig, Reference Zahra, Hayton, Neubaum, Dibrell and Craig2008). Yet, little research explores how to address these challenges, often treating the double-edged effect of family culture as an inevitable reality.
One key reason for this gap is that previous studies view family culture as a static and deterministic factor, overlooking its evolving and dynamic nature (Cruz, Hamilton, & Jack, Reference Cruz, Hamilton and Jack2012; Rau, Schneider-Siebke, & Günther, Reference Rau, Schneider-Siebke and Günther2019). In a rapidly changing environment, understanding the dynamic nature of family culture is critical for maintaining CA because it offers insights into the heterogeneity of values, purposes, and alignment among family members (Hall & Nordqvist, Reference Hall and Nordqvist2008; Stasa Ouzký & Machek, Reference Stasa Ouzký and Machek2023; Tipu, Reference Tipu2018).
Actually, strategy scholars have argued that the unique, unrepeatable CA of family firms often results from the distinctive history and experiences of their leaders (Hall & Nordqvist, Reference Hall and Nordqvist2008; James, Hadjielias, Guerrero, Discua Cruz, & Basco, Reference James, Hadjielias, Guerrero, Discua Cruz and Basco2020; Nayak, Chia, & Canales, Reference Nayak, Chia and Canales2020). Given these unique sources of CA, researchers should explore its formation from a micro and dynamic perspective, illustrating how micro-level foundations are connected to macro-level outcomes (De Massis & Foss, Reference De Massis and Foss2018). The affordance theory provides a valuable lens for exploring the subtle relationship between family culture and CA. Affordance refers to the potential behavioral possibilities the environment offers specific individuals (Ramstead, Veissière, & Kirmayer, Reference Ramstead, Veissière and Kirmayer2016). Besides its objective natural traits, scholars have revealed affordance's designed traits, which depend on human-beings' intentional exploitation (Maitlis & Christianson, Reference Maitlis and Christianson2014). Similarly, from affordance perspective, family culture also possesses natural affordance and designed affordance. This allows us to examine the dynamic interactions between family firm actors and family culture, and thus explore the solutions for double-edged problems. Therefore, how family firm actors perceive and interact with family cultural affordances needs an in-depth investigation. Sensegiving theory framework can be drawn on to analyze this question (Maitlis & Christianson, Reference Maitlis and Christianson2014).
Thus, this study addresses the following research question through a longitudinal case study of Baiyun Power GroupFootnote 2 (hereafter Baiyun): how can family firms overcome the double-edged effect of family culture to ensure sustainable CA? Focusing on this key question, this article makes four contributions. First, this study probes into the dynamic and constructible nature of family culture by identifying two distinct types of family culture affordances. The natural affordances reflect the static understanding of family culture as depicted in current literature, while the designed affordances, frequently underutilized in both literature and practical application, necessitate the intentional and adaptive actions of family firms to be fully realized. Second, a three-stage process model is developed to explain how to address the double-edged issue of family culture on family firms' CA with a cognition constructive approach. This model enhances the strategic literature by providing specific sensemaking and sensegiving strategies to different stakeholder in different environments. Third, following the ‘how’ question, this study answers the ‘why’ question by revealing the mechanisms underpinning the subtle interplay between environmental factors, sensemaking and sensegiving strategies, family culture affordances, and the cognition and actions of stakeholders. The mechanism reveals the reason why these constructive strategies are effective in a family firm situation. Finally, this study reveals the importance of establishing intimate social interaction and robust bonds between family members for achieving sustainable CA in family firms. The natural affordances and the instinctive sensegiving strategies can be found in family firms, but rare in nonfamily firms. These insights, derived from the dual context of family and business, inject innovative ideas into the realms of strategic management and sensegiving literature.
Theoretical Background
Affordances, Sensemaking, and Sensegiving: Expanded Perspectives
The concept of affordances, introduced in psychology, describes the potential action possibilities that the environment provides to individuals (Gibson, Reference Gibson1986). Early studies predominantly focused on the objective features of affordances, treating them as fixed attributes of the environment. However, later research made a critical shift, arguing that the realization of these affordances is not just determined by the objective environment itself, but also by the individual's subjective perceptions and the broader social context (Miyamoto, Nisbett, & Masuda, Reference Miyamoto, Nisbett and Masuda2006; Pedersen & Bang, Reference Pedersen and Bang2016). This interactive perspective emphasizes that affordances are co-constructed by both environmental features and the capabilities of the individual, making it essential to consider both objective and subjective dimensions of affordances (Ramstead et al., Reference Ramstead, Veissière and Kirmayer2016).
This shift is particularly significant when applied to culture and society study. Scholars now categorize affordances into natural affordances, which arise organically from cultural environments, and designed affordances, which emerge from man-made cultural resources (Dickey, Reference Dickey2005; Ramstead et al., Reference Ramstead, Veissière and Kirmayer2016). Both types of cultural affordances are essential for understanding how individuals internalize societal norms, values, and behavioral patterns through cultural interactions (Ingold, Reference Ingold2018). Importantly, the utilization of these affordances depends heavily on the abilities and actions of the individual, meaning that not all affordances are equally accessible to everyone. Some may be effectively harnessed, while others remain untapped, demonstrating the critical role of individual agency in this process.
Sensegiving, which involves interpreting and utilizing the environment, is key to bridging the gap between the potential of affordances and their practical application (Benbenisty & Luria, Reference Benbenisty and Luria2021; Nayak et al., Reference Nayak, Chia and Canales2020). Furthermore, culture serves as a powerful catalyst for managers' sensegiving efforts. When embedded in organizational culture, sensegiving enables leaders to offer clear rationales for why certain actions are taken, providing a coherent narrative that influences others and aligns their support (Elsbach & Stigliani, Reference Elsbach and Stigliani2018; Kraft, Sparr, & Peus, Reference Kraft, Sparr and Peus2018). Sensegiving works in tandem with sensemaking: in response to environmental changes and challenges, managers first engage in sensemaking to render their past experiences coherently, then by sensegiving they proactively shape the significance of future actions and interpret it to stakeholders of the organization (Weick, Reference Weick2006). This dynamic process is critical for understanding how the explicit or implicit expectations, norms, and routines presented by family cultural affordances are communicated either subtly or explicitly (Kraft, Sparr, & Peus, Reference Kraft, Sparr and Peus2015; Maitlis & Lawrence, Reference Maitlis and Lawrence2007; Ravasi & Schultz, Reference Ravasi and Schultz2006). By framing sensegiving as a deliberate act of communication about the essence of organizational culture and the leaders' preferences for changes (Ravasi & Schultz, Reference Ravasi and Schultz2006; Rouleau, Reference Rouleau2010), managers can strategically leverage family culture to enhance CA.
Family Culture and Cultural Affordances: A More In-Depth Exploration
Family culture refers to a set of artifacts, codes of conduct, values, and senses of purpose shared by specific family members (Dyer, Reference Dyer1986; Schein, Reference Schein1985; Vallejo, Reference Vallejo2011). These cultural elements are derived from the shared upbringing, education and life experiences of dominant family members, who play a pivotal role in shaping and preserving the family's unique identity. As these members continue to influence the family, they pass down this cultural distinctiveness to future generations, ensuring its continuity and stability over time (Jaskiewicz, Combs, & Rau, Reference Jaskiewicz, Combs and Rau2015; Rau et al., Reference Rau, Schneider-Siebke and Günther2019). This cultural consistency fosters operational strategies that are uniquely tailored to the family firm, often resulting in higher levels of commitment and stewardship, which can translate into CA (Arz, Reference Arz2021).
Most studies on family culture, taking a static perspective, are interested in its effects on the outcomes of family firm (Hanson, Hessel, & Danes, Reference Hanson, Hessel and Danes2019; Långstedt, Reference Långstedt2018). Even in studies that adopt a constructivist approach, such as ‘transformational cultures’ or ‘cultural shaping’, the focus remains on how trust, commitment, and long-term orientation in family culture contribute to CA (Denison, Lief, & Ward, Reference Denison, Lief and Ward2004; Fletcher, Massis, & Nordqvist, Reference Fletcher, Massis and Nordqvist2016), often overlooking the interactions between the firm, the environment, and the individuals (Azeem, Ahmed, Haider, & Sajjad, Reference Azeem, Ahmed, Haider and Sajjad2021; Sánchez Marín, Carrasco Hernández, Danvila Del Valle, & Sastre Castillo, Reference Sánchez Marín, Carrasco Hernández, Danvila Del Valle and Sastre Castillo2016). However, to fully grasp the potential value of family culture on CA, we must look beyond its static elements and focus on how it interacts with various actors in the firm. Family culture shapes the behavior of firm leaders, family members, and employees alike. Actions such as participation, learning, adaptation, loyalty-building, entrepreneurial orientation, and strategic decision-making are all deeply embedded within the family cultural context (Azeem et al., Reference Azeem, Ahmed, Haider and Sajjad2021; Cruz et al., Reference Cruz, Hamilton and Jack2012; Stasa Ouzký & Machek, Reference Stasa Ouzký and Machek2023; Zahra, Sapienza, & Davidsson, Reference Zahra, Sapienza and Davidsson2006). Yet, these studies merely explain the static relationship between family culture and the various outcomes of family firms, falling short in exploring the dynamic process and mechanisms through which family culture interacts with external factors and actors. A more nuanced approach is needed to understand how family culture adapts and evolves, particularly in response to external challenges.
The concept of affordances allows us to reframe the way to view family culture. From the affordance perspective which focuses on the adaptive and constructive actions exhibited by enterprises in response to the environment (Nayak et al., Reference Nayak, Chia and Canales2020), we can reexamine the aforementioned actions associated with family culture across family firms' different entrepreneurship stages and look deeper into the heterogeneous sources of CA (Barney, Reference Barney1986). In a word, the affordance theory provides a valuable framework for examining how family firms sustain CA by integrating cultural elements into their daily operations and long-term strategies.
Family Culture's Role in Competitive Advantage: The Double-Edged Sword
How firms achieve and sustain CA, that is, firm-specific factors which are deemed valuable, rare, inimitable, and nonsubstitutable, over their rivals has been the enduring inquiry in the strategic management literature (Barney, Reference Barney1991; Nayak et al., Reference Nayak, Chia and Canales2020). CA can derive from a firm's complex, tacit, historically shaped, and, hence, idiosyncratic set of routines and competencies, such as culture (Teece, Pisano, & Shuen, Reference Teece, Pisano and Shuen1997). Therefore, in family business literature, the role of family culture in generating CA is a subject of interest in strategic management (Barney, Reference Barney1991; Ge, De Massis, & Kotlar, Reference Ge, De Massis and Kotlar2022; Maury, Reference Maury2018). Most relevant studies explain the relationship between family culture and CA from the perspective of a resource-based view and suggest that, as a unique resource, family culture contributes significantly to a firm's success, yet it can also be a source of vulnerability if not carefully managed (Tan, Reference Tan2019). On the one hand, a strong family culture can motivate members to protect the family's honor and drive long-term growth (Arz, Reference Arz2021). On the other hand, certain cultural traits, such as conservatism and nepotism, can hinder innovation and adaptability (Chrisman, Chua, Pearson, & Barnett, Reference Chrisman, Chua, Pearson and Barnett2012; Morhart, Herzog, & Tomczak, Reference Morhart, Herzog and Tomczak2011). For instance, nepotism may limit the firm's ability to attract nonfamily professional managers, impeding its access to external resources (Firfiray, Cruz, Neacsu, & Gomez-Mejia, Reference Firfiray, Cruz, Neacsu and Gomez-Mejia2018; Qiu & Freel, Reference Qiu and Freel2020). Additionally, the concentration of decision-making power within a small group of family members can restrict diversity and openness in strategic thinking, which increases the risk of strategic stagnation (Zahra, Reference Zahra2005). These challenges highlight the importance of viewing family culture as a dynamic resource that requires continuous adjustment according to changes environment (Långstedt, Reference Långstedt2018).
Family firms must remain vigilant about its potential negative impact, fully unlocking the competitive potential of family culture to achieve sustainable CA. Unlike temporary advantages, which are short-term gains easily eroded by competition, sustainable competitive advantages reflect a firm's enduring ability to consistently outperform rivals through unique resources or continual adaptation to external challenges (Sirmon, Hitt, Arregle, & Campbell, Reference Sirmon, Hitt, Arregle and Campbell2010). By balancing tradition with strategic flexibility, family firms can leverage their cultural heritage while remaining responsive to the evolving business landscape (Arz, Reference Arz2021). This balanced approach is essential for ensuring sustainable CA in a rapidly changing environment.
Methods
We sought to explain how family firms address family culture's double-edged effect on CA with a longitudinal single-case study (Yin, Reference Yin2003). As Burgelman (Reference Burgelman2011) suggests, combining grounded theorizing with modern historical methods allows longitudinal single-case studies to conduct in-depth analysis of unique phenomena, so as to produce novel conceptual frameworks, and establish theoretical bridges between historical narratives and reductionist quantitative models. Case studies, in essence, focus on understanding how social actors create meaning through their artifacts, which helps explain their behaviors and the underlying processes (Fletcher et al., Reference Fletcher, Massis and Nordqvist2016). Therefore, this approach is appropriate for answering ‘how’ questions regarding family culture's role in CA.
Sample
Through theoretical sampling, we chose Baiyun as a ‘revelatory case’ (Eisenhardt & Graebner, Reference Eisenhardt and Graebner2007). Baiyun is a Chinese family firm with a 56-year entrepreneurship history and more than 100 years family history. Its step-by-step evolution from a blacksmith workshop to a leader in China's green power industry lies heavily on the founder-family's ‘blacksmith culture’. Moreover, Baiyun adopted a unique approach to intentionally adhere to and leverage its family culture to establish CA. The entrepreneurship history of Baiyun exhibits a rare and comprehensive evolution process of its family culture and CA.
Baiyun's exceptional performance and collaborative innovation leadership in its industry (see the Appendix for objective dataFootnote 3) indicate that it has established sustainable CA. Although our analysis does not claim that Baiyun's CA entirely stems from its family culture, preliminary findings suggest that such culture plays a crucial role in building trust with customers and government agencies, improving internal collaboration, and accumulating industry expertise.
Case Review
Baiyun's entrepreneurship history
Baiyun is owned by the Hu family, a rare and unique entrepreneurial family in China known for its distinctive ‘blacksmith’ culture and its stable business development over time. Shijie Hu, the grandfather of Baiyun's current owner, started his blacksmith career in 1957. He inherited ironmaking skills from earlier generations, and these skills were further honed through his military experience during World War II. Over the decades, this accumulation of skills and survival experience has played a pivotal role in shaping the Hu family culture.
The second-generation successors were Shike Hu's five children. Led by Mingsen Hu, the eldest brother, the siblings took advantage of China's reform and opening-up policies and the demand for industrial development. They successfully transformed Baiyun from a handcraft workshop into a modern factory. In 1998, Baiyun entered the high-barrier power supply equipment industry.
The third-generation successors are Mingsen Hu's sons: Deliang Hu, the current president of the group company, and Dezhao Hu, the general manager of the listed company. Several of their cousins also work at Baiyun. The third-generation lead Baiyun in a technological innovation way, with ‘to be the practitioner and leader of green smart energy industry’ as their vision. Baiyun went public in 2016 and is now one of China's top 100 manufacturing enterprises.
Today, Baiyun employs over 10,000 people and operates 17 manufacturing bases across China. Its products and services span the power grid industry, metallurgical industry, smart manufacturing, new energy, and environmental protection sectors. Baiyun has one of the most comprehensive product chains in its industry. In Table 1, we constructed a timeline of Baiyun's entrepreneurship history by identifying key events and the relevant context.
Baiyun's entrepreneurship history
Baiyun's family culture
The roots of Baiyun's family culture trace back to 1910, shaped by Hu family's ironmaking tradition and societal changes. Through each developmental phase, this culture evolved in response to shifting social and business contexts. We organized a concise cultural history based on the company's timeline to capture these shifts. Figure 1 illustrates the key periods of Baiyun's family culture during these transformative phases.
Key periods in the development of Baiyun's family culture
From 1910 to 1995, Baiyun operated primarily as a blacksmith workshop, with its family culture emerging naturally in alignment with the craft. As stated in the Hu family's records, Shijie Hu, the founder of Baiyun, inherited forging techniques from his father and made agricultural tools for villagers as a traveling blacksmith. His children, when grown up, joined him as his assistants. In the 1960s, Shijie Hu had his first blacksmith workshop in Guangzhou, his hometown. He continued his trade with his children, working hard and earning a loyal customer group through his skill and reputation for integrity. With the reform and opening policies in 1979, the family expanded their operations by opening a second workshop near the ancestral home to produce specialized hardware products. These years of blacksmithing not only cultivated the Hu family's technical expertise but also instilled survival skills. ‘Blacksmith spirit’ became a symbol of resilience and unity for the Hu family, which would form the backbone of Baiyun's enduring family culture.
During the transition to an industrial factory (1996–2002), Baiyun encountered significant employee turnover, prompting a deliberate exploration and refinement of its family culture to better integrate it into the company's operation. In the scaled-group development stage (2003–2015), Baiyun took conscious steps to optimize and deepen its cultural elements. Finally, as Baiyun entered the ecosystem-building stage (2016–2023), the family culture was proactively designed and iterated to fit a more complex commercial landscape.
Data Collection
Following previous case studies, we use semi-structured interviews and observation as the primary data sources, and archival data as the secondary (Bingham, Gibb Dyer, Smith, & Adams, Reference Bingham, Gibb Dyer, Smith and Adams2011). The timeframe for our investigation spanned from January 2021 to August 2024.
Semi-structured interviews
A total of 23 semi-structured interviews were conducted with Baiyun's internal and external stakeholders. We selected interviewees based on theoretical sampling and their suitability to answer our key questions (Shi, Liang, & Ansari, Reference Shi, Liang and Ansari2024; York, Hargrave, & Pacheco, Reference York, Hargrave and Pacheco2016). The interviewees should include core family members, nonfamily executives, employees responsible for organizational culture management, ordinary employees, and key customs. The snowball sampling technique was employed by asking each initial theoretically sampled interviewee to recommend suitable candidates for further interviews (Lincoln & Guba, Reference Lincoln and Guba1985; Shi et al., Reference Shi, Liang and Ansari2024). We conducted these in-depth interviews to trace the development of family culture throughout the company's lifecycle and to explore the different interpretations of the culture by various stakeholders.
To ensure data completeness, we conducted supplemental interviews through WeChat, phone calls, and informal conversations. This allowed us to promptly follow up on new issues requiring further clarification, and verify previous information, such as the timing of key events.
Archival data
Before and during the interview phase, we conducted a systematic search of secondary data focusing on Baiyun's CA and family culture by reviewing its internal archives, company brochures, presentations, advertisement videos, official website, public interview report of Baiyun's leaders, industry reports, and annual company reports. These data, comprising about 460 thousand words, were synthesized according to the specific stage of cultural development.
Observation
We visited Baiyun four times at its office area, manufactory area, and smart-monitor center. In addition, one of our authors spent 2 months working with Baiyun's employees. The observation allowed us to understand how the family culture influences the employees' attitude and behavior, and how it shapes Baiyun's operation and business practices. Ultimately, we compiled the data corpus, as presented in Table 2.
Data corpus
Notes: FP1–FP3 refer to family members, NFP4–NFP10 refer to nonfamily members, and F1–F7 refer to second-hand files. Detailed secondary data can be found at the OSF link provided in the notes.
Data Analysis
We combined the bracketing and the grounded theory strategies from process analysis (Langley, Reference Langley1999). The grounded theory strategy helped us generate core concepts from the data, while the Time bracketing strategy provided a framework for capturing the temporal evolution of these concepts. Data analysis was conducted iteratively between the literature, data collection, and analysis, following four main sequential steps.3 While we adhered to the foundational principles of grounded theory, we opted not to confine ourselves to a singular methodological framework that could potentially restrict our design, data collection, and findings (Pratt, Kaplan, & Whittington, Reference Pratt, Kaplan and Whittington2020).
Step 1: Identifying categories of family culture, strategy, and CA
Excluding irrelevant paragraphs, we identified every sentence likely to be relevant to family culture, strategy, and CA aiming at exploring the initial concepts. Ultimately, 57 initial concepts were abstracted from a total of 526 original sentences. Based on existing theories, we examined the intrinsic connections among initial concepts and integrated related concepts into 20 core constructs which were further classified into 7 categories (see Figure 2). The categories identified in this study were based on the family entrepreneurial context, cultural affordances, sensegiving behavior, microfoundations of family firm CA, and sources of CA. When identifying the source of CA, we integrated subjective assessments with objective performance metrics during the coding process. The perceived advantages articulated by respondents were cross-verified against annual reports and media coverage for validation.
Data structure diagram
Step 2: Identifying temporal phases in the dynamic evolution of CA and family culture
To gain deeper insights into ‘how’ Baiyun's family culture evolved over time, we used axial coding to identify changes and thematic patterns across all core constructs (Langley, Reference Langley1999; Strauss & Corbin, Reference Strauss and Corbin1998).
Based on the ‘conditions-action-outcome’ framework proposed by Strauss and Corbin (Reference Strauss and Corbin1998), we developed the logical framework of ‘entrepreneurial situation – exploration actions associated with family cultural affordances – sources of competitive advantage’. Next, our longitudinal study enabled us to use temporal bracketing (Langley, Reference Langley1999; Shi et al., Reference Shi, Liang and Ansari2024) to identify three distinct phases manifesting how Baiyun took different sensegiving strategies in different entrepreneurship situation and resulted in different sources of CA (see Table 3). In the survival-oriented situation, parents of the Hu family taught their children with family culture, which fostered exceptional unity among family members, leading to resource advantage limited to the family. So, we had the main category – ‘Natural Family Cultural Affordances Resulting in Temporary CA’. In the expansion-oriented situation, we observed that family culture did not provide additional benefits to Baiyun but hindered its development. Actions were taken to redesign and reconstruct family culture, which established foundation for further exploiting family cultural affordances. Then, the core category ‘Family Cultural Affordances Transformation’ was abstracted. In the sustainability-oriented situation, the categories of ‘designed affordances’, ‘embedding strategy’, ‘symbolic strategy’, and ‘extensive ecological synergy’ reflected how family managers consciously leveraged family culture to shape sustainable source of CA. These categories were then classified as ‘Designed Family Cultural Affordances Promoting Sustainable CA’. We drew on typical quotations and live conversations to illuminate these three stages. The data structure and illustrative quotations are provided in the attachment.
Identifying temporal phases in the dynamic evolution of CA and family culture
Step 3: Building a model of the dynamic interaction between family firms, family culture, and CA
In this step, we followed the approaches outlined by We then processed and selectively coded the data, systematically integrating categories to model processes and strategies. Finally, we developed a storyline illustrating how family firm leaders exploit family cultural affordance with corresponding sensgiving strategies and contribute to CA. To construct the model, we correlate the temporal patterns identified in Step 2. While the categories (e.g., entrepreneurial situation of family firms, family cultural affordances, and associated exploratory actions) are represented as boxes in the model, arrows illustrate the dynamic processes. Annotations (1) Family managers (Decision-makers), (2) Family members, (3) Enterprise members, and (4) External stakeholders represent various individuals involved in these actions, offering a comprehensive understanding of how family firms intentionally advance family culture to gain identification from diverse audiences, thereby generating CA.
Step 4: Establishing trustworthiness
Throughout the coding process, we sought to ensure the trustworthiness of our findings by triangulating multiple data sources (Lincoln & Guba, Reference Lincoln and Guba1985). We conducted member checks (Langley & Abdallah, Reference Langley and Abdallah2011), and two researchers performed back-to-back coding using MAXQDA software to conceptualize and categorize the interview materials. When certain concepts and categories were disputed, another researcher with a higher level of specialization was invited to intervene in the coding process. Concepts and categories were revised based on the researchers' professional opinions, mitigating potential subjective biases. After these steps were completed, the theory was iterated by comparing and validating the case data with existing theories until saturation was reached.
Case Analysis
Stage I: Natural Family Cultural Affordances Resulting in Temporary CA
Survival-oriented situation
This stage depicts a survival-oriented entrepreneurial situation, where the Hu family's primary goal was to fulfill basic survival needs and address the issue of low productivity. In 1957, the Hu family moved from the suburbs of Guangzhou to the urban area to seek entrepreneurial opportunities, aiming to ensure the family had sufficient food and clothing. The founder of Baiyun, Shijie Hu, inherited blacksmith expertise from his father and established a hardware factory to forge parts for the hydropower department with his five children. Till 1985, with the deepening of reform and opening-up policy, the second generation identified strong market demand, acquired a then-bankrupt hardware processing factory, and began transforming it into a hardware stamping products business. By the late 1980s, increasing electricity demand led to the development of electrical equipment such as meter boxes, lighting boxes, and power boxes. The Hu siblings' factory gradually entered the power distribution field, assembling three-box products and processing parts for hydropower installation and construction teams.
Baiyun's initial survival-focused challenges reveal how these entrepreneurship experiences shared by the family laid the foundation for family culture. Leveraging the family cultural affordance enables the family to turn cultural heritage into strategic assets.
Exploring affordances: Affordances, sensegiving, and the microfoundations of CA
(1) Natural affordances
Natural affordances resulting from the family culture highlight the potential for affective and disciplined action. The Hu family's culture, which was shaped by interactions with the agrarian environment, indicated an adaptation to nature.
Emotional action possibilities originate from entrepreneurial emotional events and local traditions, which are crucial in the context of family firms for maintaining family interests, control, and the transgenerational transfer of values (Klyver, Honig, & Steffens, Reference Klyver, Honig and Steffens2018). Traditional activities such as the Spring Festival can enhance cultural cohesion and impart family values to the younger generation, thus influencing management and cooperation dynamics.
Disciplined action possibilities significantly influence the behavior of successors and parental education through natural affordances. In the ecological context, family norms ensure the effective transfer of knowledge and skills across generations. Environmental adaptability and cooperative production models are crucial concerning disciplined action. The blacksmith workshop prioritized timely delivery and quality, necessitating the involvement of a larger number of family members. This collective production method fostered interactive and spatial education, thereby highlighting the importance of cooperation.
In conclusion, the natural affordances of family culture can help shape the behavior of successors and determine parental education and thus constitute a powerful intergenerational transmission mechanism that is essential for families' continuous development and maintenance of their cultural heritage.
(2) Sensegiving strategies: the empathic strategy and the preaching strategy
Empathic strategy. This strategy leverages emotional action possibilities inherent in family culture primarily through family members' collaborative experiences and the parents' educational companionship. This approach is more effective than a singular narrative at evoking emotional resonance among family members, so as to foster family stability and enhance successors' emotional engagement. The Hu family emphasizes emotional bonds across generations to promote members' collective identification with the family firm. Dezhao Hu, a third-generation member, recalled, ‘The second generation grew up working alongside their parents, witnessing the hardships of their elders’ entrepreneurship, and deeply understanding the importance of family unity’.
As a participatory approach, the empathic strategy effectively fosters family members' emotional attachment to the family's goals, thereby strengthening the family's emotional bonds.
Preaching strategy. This approach is characterized by storytelling and explanation that convey the importance of behavioral standards and entrepreneurial principles. Shijie Hu, the family patriarch, frequently gathered his children to tell them stories that condensed the wisdom and spirit of the family rooted in their blacksmithing tradition. His guiding principle was: ‘No matter how the enterprise develops, do not forget your original aspiration, essence, and reverence for society’. This preaching strategy effectively instilled three core family values among family members: perseverance (the will of iron), focus (intensity and commitment to a certain area), and collaborative unity (the unified pace of the tiny hammer and the large hammer when forging, the two hammers are in a symbiotic relationship with one another).
Consistent with Ingold's (Reference Ingold2018) perspective, culture and the environment are reciprocally formative. In our case, traditional Chinese culture sculpted the Hu family's adaptation to its milieu, while through sensegiving, the Hu family also cultivated a distinctive set of perceptual and operational competencies.
(3) The microfoundations of CA: emotional identification and value identification
At this stage, Baiyun's CA emerges from emotional identification and value identification among family members.
Emotional identification. It refers to the emotional connections and inter-preferences between individual member and the family, usually based on personal emotional experiences and memories. The second-generation leaders often recalled the time when they assisted their father with blacksmithing. The experience was harsh but the memory is proud. It fostered the younger generation's sense of responsibility, promoting their shared commitment to increasing family wealth.
Value identification. It refers to the alignment between individuals' beliefs and the family's core values. In the early entrepreneurship stage of the Hu family, the identification of values underpinned their efficient cooperation, which resulted in more human capital and financial resources than ordinary firms. A second-generation manager explained, ‘Since my childhood, my father has told us to be focused and united because the strength of the family is enormous. So we siblings have always been particularly united, and no one wants to fight for shares’.
That is why, during the manual blacksmithing period, the Hu family could maintain the quality of every product and always deliver goods on time. The family members were willing to work overtime in the hot workshop in hot summers just for positive word of mouth.
In summary, the emotional identification and the value identification can unify family member's cognition, enhance their commitment to the shared business, laying the groundwork for efficient family collaboration and resource mobilization.
Action result: Source of CA
At this stage, CA primarily stems from effective collaboration within the Hu family, with emotional identification enhancing resource procurement, especially human resources. Therefore, unlike other local blacksmith shops that operated under the ordinary model of a solitary blacksmith with apprentices, the Hu family could leverage emotional bonds to mobilize the five children and expand the business. The natural affordances of their family culture – marked by emotional contagion and a stable family identity – offered a strong psychological foundation for Baiyun's CA. Mingcong Hu, the second-generation family member, noted, ‘There were many blacksmiths in the village at that time, but only we survived, thanks to the hard work and unity of the entire family’.
In summary, during the early stage of CA formation, the Hu family instinctively relied on the natural affordances of their family culture through shared production experiences and parental education. Such affordances fostered deep emotional identification and values identification among family members which strengthened cohesion and unity of the family firm.
Stage II: Family Cultural Affordances Transformation
Expansion-oriented situation
In the 1990s, benefiting from China's energy policy reforms, many private enterprises secured large national orders and experienced exponential growth. Baiyun, also seeking to expand, was in demand of a large quantity of professional human resources from outside. However, it encountered challenges as its family culture hindered the integration of external resources. In 1996, Baiyun recruited a group of college graduates with competitive salaries. However, many of these new hires struggled to adapt to the company's culture of persistence and unity due to their unfamiliarity with the professional requirement of blacksmithing. This challenge was exacerbated by the perception that family members held a superior status within the firm, making it difficult for new employees to integrate into Baiyun's close-knit, family-like work environment. Despite the attractive salaries, over half of the new hires left within a year. A third-generation manager reflected, ‘We lost many college graduates, but it led us to reflect on our management model and try to upgrade it’.
Recognizing that the family culture could no longer sustain the firm's growth in its original form, Baiyun's leaders began to explore ways to adapt their culture to the evolving environment. For instance, company gatherings and team-building activities were exclusively limited to family members, creating a sense of superiority among them, while nonfamily members began to feel isolated and excluded. ‘It's a tradition in the Hu family to return to the ancestral home every year to pump iron, and after 20 years it's still a family event, and now our new employees can sign up for it’.
Exploring affordances: Transcendent sensemaking strategies
To address cultural challenges, five second-generation managers, including the chairperson, Mingcong Hu, initiated a new phase of transcendent sensemaking, which indicated that decision-makers had transcended their original thinking frameworks and patterns and obtained a more prospective understanding and imagination with a focus on the future.
(1) Absorbing external perspectives and adhering to the essential family culture
Baiyun's leaders understood that they needed to balance the new demands of the society with the rich heritage of the family culture.
Following the wave of resignation in 1996, the five second-generation leaders of Baiyun decided to absorb external perspectives by learning Western management systems and traditional Chinese culture. From 1996 to 2000, they participated in entrepreneurship training at Chinese universities, where they studied Confucian Culture alongside various management courses. This comprehensive study experience enabled the leaders to cultivate a strong ideological foundation, which subsequently shaped Baiyun's new sensegiving strategies regarding family culture.
Baiyun's collaboration with Toshiba further enriched this learning experience. Initially, in 1998, Baiyun and Toshiba partnered on small orders, which provided Baiyun with insights into Toshiba's brand management and corporate Culture. In 1999, negotiations began between Baiyun and Toshiba over a 200-million-yuan investment project. However, these discussions were prolonged for a year due to Baiyun's insistence on equal control in the partnership. A pivotal moment occurred when the president of Toshiba visited the Hu family's ancestral home. Observing that the family maintained their original ironmaking building and the spirit of simple craftsmanship, he ultimately agreed to a collaborative arrangement based on equal terms. This experience reinforced the leaders' commitment to preserving the essential family culture. ‘Never forget your roots, your soul, or your reverence for society’ served as a guiding principle for their strategic initiatives.
(2) Family culture conceptualization
In 2000, Mingcong Hu, the second-generation manager, authored a family biography and a family constitution, documenting the Hu family's entrepreneurial blacksmith history, wisdom, and moral norms in a structured manner. He distilled the family's effective values into accessible concepts such as ‘focus’, ‘collaboration’, and ‘hard work’. External values, such as ‘patriotism’, were incorporated, while existing concepts were given new significance. For instance, ‘focus’ was reinterpreted to emphasize ‘power distribution in manufacturing’, reflecting a strategic shift from traditional blacksmithing to emerging industries. The concept of ‘big hammer and small hammer’, encapsulating the Hu family's cultural essence, was connected with traditional Chinese values of thrift and loyalty.
This conceptualization of family culture enabled the Hu family to safeguard its socioemotional wealth (SEW) while integrating external perspectives.
(3) Pan-familialization
Pan-familialization acts as a fundamental prerequisite for the transmission of family values into the realm of business enterprises. As Baiyun's leaders expanded their perspectives, they recognized the importance of integrating nonfamily employees into their familial framework. Therefore, the second-generation leaders started to invite nonfamily managers to family events, such as birthday parties and New Year's Eve dinners. Meanwhile, the Hu family constitution explicitly prohibits family members from interfering in firm operations beyond their designated roles. Such pan-familialization fosters a strong value identification with the core tenets of blacksmith culture among nonfamily managers. As a result, many of these early managers continue to be with Baiyun up to this day and have ascended to senior executive positions, acknowledging the significance of blacksmithing culture in the firm's success. One senior executive, with over 20 years at Baiyun, remarked, ‘Our boss is quite astute in this regard. He treats us as family members, we feel trusted and respected. In addition, through these family events, we learn that the success of Baiyun is inseparable from the blacksmithing culture … the iron will, concentration, unity, and cooperation’.
Baiyun's pan-familialization has significantly reinforced alignment and trust between core employees and the family firm, thereby establishing a vital human resource foundation for the company's expansion.
Stage III: Designed Family Cultural Affordances Promoting Sustainable CA
Sustainability-oriented situation
In this stage, Baiyun transitioned from a traditional power equipment manufacturer to a service-oriented group with technical innovation, market expansion, and strategic capital operations as its strategies. Data from the China Bureau of Statistics (2005) indicate that over 6,000 firms operated in China's electrical equipment sector3, most of which were regional and lacked dominance. Baiyun ranked among the top 100 in 2003, reflecting a general upward trend in its industry position.
However, Baiyun experienced three unsuccessful attempts at IPO from 2003 to 2012, accompanied by negative media coverages. Facing fierce competition, the company recognized that to achieve sustainable CA, they must establish a positive corporate image, gain employee trust, and foster collaboration with external partners. Baiyun's leaders returned to the family culture to find a path forward.
By 2015, the company had bolstered its service capabilities in the power energy sector through an ‘industry + finance, demand + technology’ model. Family culture played a significant role in the process.
Exploring affordances: Affordances, sensegiving, and the microsources of CA
(1) Designed affordances
Throughout the process of transcendent sensemaking, the affordances of family culture are deliberately reshaped, shifting from their inherent natural qualities to intentionally designed features. These designed affordances provide family culture affordances to keep congruence not only with family heritage but also with specific corporate environment and social norms. How to design these family cultural affordance depends on what actions the family firm seeks to elicit from its stakeholders.
In this stage, the designed affordances of family culture are particularly evident in legitimization and symbolization tasks. During the listing preparation phase from 2003 to 2012, Baiyun faced significant challenges, including three consecutive IPO failures, negative media scrutiny, and heightened competition in the power industry. Meanwhile, many employees had yet to form a coherent understanding of the company's core values and vision, leading to a lack of confidence in Baiyun's risk management ability. These adversities prompted Baiyun's leaders to deliberate on promoting a robust corporate culture to establish a distinctive brand image and win stakeholders' acknowledgment.
(2) Sensegiving strategies: the embedding strategy and the symbolic strategy
Embedding strategy. Baiyun adopts sensegiving strategies to foster legitimacy among its stakeholders, which involves integrating family culture into a universally acknowledged institutional, historical, or practical framework.
Policy embedding. The significant impact of national culture on entrepreneurial strategies in China is evident in the practices of family firms (Ahlstrom & Bruton, Reference Ahlstrom and Bruton2001). When explaining its blacksmithing culture, Baiyun particularly emphasizes how it has been closely connected with the evolution of national policies since China's reform and opening up, demonstrating that each step of its development aligns with societal needs and policy directions. For example, Baiyun's goal has shifted from initially meeting the needs of developing social productivity in the early years of China's founding, to addressing the people's desire for a happy life in recent years. Baiyun's vision has undergone several revisions, and after China proposed the dual-carbon policy, it was determined to be ‘the practitioner and leader of green intelligent energy’. Baiyun also takes ‘following the leadership of the Communist Party of China’ as its main business principle. They are also very proud to publicize the visit of national leader Xi Jinping. The evidence of policy embedding can be found in Table 1.
History embedding. Baiyun combines the long history of the Hu family with its blacksmith culture. When they claim ‘The traceable history of Hu family began in 1910’, they are trying to persuading the audiences that a culture lasting for a century and supporting the family firm for over 50 years definitely has unique value and deserves recognition.
Business embedding. Blacksmith culture is closely integrated into Baiyun's business practices, with values like ‘focus’, ‘hard work’, ‘collaboration’, and ‘practicality’ permeating production, research and development, administration, and other activities. In 2003, the government of Guangzhou allocated a piece of land with great appreciation potential to Baiyun for constructing office buildings. Baiyun refused because they did not want to weaken their major business by engaging in real estate operations, nor did they want to lose their commitment to ‘practicality’ because the real estate industry is easy to make money. It is evident that the blacksmith culture contributes to Baiyun's stable and sustainable development, fostering efficacy identification among employees.
Symbolic strategy. Baiyun employs a three-pronged strategy to symbolize its blacksmith culture with distinctive slogans, images, and artifacts. These symbols allow them to quick and effective communication with outside stakeholders. The specific symbolic approaches are as follows.
Industry slogans. To express its commitment to the power equipment industry, Baiyun developed slogans such as ‘becoming the world's leading comprehensive solution provider for electric power energy’ and later, ‘the practitioner and leader of green smart energy’. These slogans serve as a concise expression of Baiyun's ethos, resonating strongly with stakeholders.
Classic images. Baiyun symbolizes its blacksmith culture through a sculpture depicting the first blacksmith workshop and the first-generation founder laboring within it. This sculpture is prominently displayed in the lobby of Baiyun's office building and its museum. Additional images, such as the ironmaking tools of the Hu family and the photo of their ancestral home, also serve as emblematic representations to reflect Baiyun's long-standing heritage and the essence of its family culture. These images contribute to promoting a distinct and easily recognizable brand identity for Baiyun.
Visual communication. Baiyun strategically utilizes these symbols in its propaganda efforts to establish tangible and relatable connections with stakeholders. They employ a variety of visual communication channels, such as social media, corporate museums, and public welfare activities. This strategy not only reinforces Baiyun's dedication to the green development of society but also redefines its image, aiming to leave a lasting, positive impression on the minds of stakeholders.
In summary, Baiyun develops metaphorical symbols for its blacksmith culture, which bolsters the brand's image and promotes engagement among its stakeholders. The ‘focused blacksmith’ emblem, in particular, encapsulates the values of diligence and pragmatism and is disseminated through a range of platforms, including media, exhibitions, and museums.
(3) The microfoundations of CA: efficacy identification and value identification
At this stage, the CA possessed by Baiyun is driven by efficacy identification and value identification among corporate employees and external stakeholders.
Transcendent sensemaking strategies employed by Baiyun have broken the rigidity inherent in the natural affordances of family culture, aligning these affordances with the moral values and psychological expectations of employees and external stakeholders. Under the influence of transcendent sensemaking, Baiyun's corporate culture is characterized by designed values such of ultimate refinement, passion, innovation, and far-reaching impact. Value identification on the part of corporate employees involves the acceptance of these core values and behavioral norms, fostering a more profound comprehension and commitment to strategic change. Employees' value identification facilitates the development of Baiyun's governance capabilities, setting it apart from typical enterprises.
The testimony of a key customer underscored the dedication of Baiyun's staff, stating: ‘The employees of Baiyun we have interacted are as realistic and down-to-earth as their leaders, especially among the executives in the company. They have dedicated decades of hard work to the company and embody the model image of the blacksmith culture advocated by Baiyun’.
The symbols developed by Baiyun, encapsulating the family's history, mission, heritage sites, and its close following steps related to the Communist Party of China have garnered the company an outstanding reputation in the industry and the region. Value identification reflects the individual's pursuit for virtuous, beneficial, and aesthetic ideals aligned with the organization, thus fostering an extensive ecological synergy of the enterprise. This encompasses the preservation of the organization's commercial standing and the nurturing of social networks.
In addition to value identification, employees and external stakeholders also exhibit strong efficacy identification with Baiyun's culture. Unlike value identification, efficacy identification is based on people's evaluation of the actual outcomes of behaviors, decisions, or strategies in terms of their effectiveness in yielding the anticipated positive results. In Baiyun's case, it represents the assessment of the performance of Baiyun's strategy grounded in its blacksmith culture, as perceived by its employees, the new generation of family members, and external stakeholders over the years. For instance, if Baiyun's strategy of focusing on power products enhances the company's production efficiency and employee satisfaction, it is considered effective, even if it does not perfectly align with the employees' personal values.
Action result: Sources of sustainable CA
Drawing on the microfoundations of CA that stem from the embedding sensegiving strategies, Baiyun has developed continuous trust, strategic focus, and extensive ecological synergy, which serve as the sources of sustainable CA.
Continuous trust. Chinese family firms like Baiyun tend to cultivate unity within the context of long-standing relationships in family. However, such entrenched familial values can restrict the extension of trust to external stakeholders (Chaudhary, Dhir, Ferraris, & Bertoldi, Reference Chaudhary, Dhir, Ferraris and Bertoldi2021). Baiyun has proactively addressed this issue by externalizing its family culture with the goal of fostering trust across a wider array of stakeholders. By weaving its century-old blacksmithing heritage into its corporate narrative, Baiyun enhances its reputation as a trustworthy and well-established entity, thereby enhancing its legitimacy in the local political and economic landscape. This strategic integration also aids in attracting talents who are aligned with the company's core values.
This initiative has resulted in a notable reduction in Baiyun's turnover rate over the past half-decade, thereby enabling the company to achieve CA by promoting internal trust. Consequently, Baiyun's family culture is instrumental not only in defining the company's long-term objectives but also in cultivating a cohesive workforce that aligns with the enterprise's vision.
Strategic focus. Baiyun's unwavering strategic focus is clearly reflected in the fluctuating presence of its subsidiary on the ‘Top 100 China Electrical Industry’ list from 2003 to 2023. Starting in 2007, the subsidiary experienced a seven-year absence from this prestigious ranking. However, it made a comeback in 2015, and since then, its ranking has steadily ascended. The group's overall ranking improved from fourth to third during this time. Given the list's fairness and authority, these top 100 rankings serve as an annual synopsis and benchmark for the development of the electrical industry in China. In the industrial context of predominantly state-owned enterprises, Baiyun's ranking as a family firm highlights its considerable influence within the electrical industry.
Baiyun's Managers attribute this influence to the persistence of the ‘focus’ culture within the company. As the company's culture influence expands from employees to stakeholders, it not only maintains the original business focus but also takes advantage of the significant technological research and development investments made during the company's early years, resulting in a high level of technical accumulation.
Extensive ecological synergy 3. Baiyun's extensive portfolio of joint invention patents exemplifies its CA in the contexts of collaborative innovation and technological advancement, which are supported by extensive ecological synergy. The corresponding evidence can be found in Appendix IV. This significant advantage is further underscored by the substantial increase in both the number of collaborators and joint patents observed following Baiyun's listing in 2016. Many investors, partners, and other stakeholders are attracted to Baiyun's unique family culture, particularly its historical roots and focused corporate image. The company's prospectus, which highlights the influence of its blacksmith culture on technological research and development, has reinforced stakeholders' recognition of the company's technical and innovative prowess. This situation has led to an increased propensity for customer collaboration and increased the engagement of a variety of external stakeholders.
Baiyun's family culture actively conveys positive signals of cooperation, thus reflecting the company's policy inclinations, collaborative spirit, and strategic developmental plans. The firm has established a notable reputation and presence in the context of local and governmental initiatives, thereby expanding its opportunities to engage in collaborative social endeavors with public entities. The establishment of the ‘Guangzhou City Double Carbon Alliance’ by Baiyun, along with the creation of a technology enterprise incubator, highlights its dedication to assembling a consortium of partners who concur with the company's Culture. This strategy has promoted not only a synergy in technological innovation but also in business operations. In general, Baiyun has expanded the volume of its business collaborations with both upstream and downstream enterprises, thereby obtaining significant CAs in terms of business resource acquisition and technological innovation efficiency.
How Can the Double-Edged Effect of Family Culture Be Overcome to Ensure CA?
Based on the analysis of Baiyun's entrepreneurship experience, we developed a model (Figure 3) to illustrate how family firms can overcome the double-edged effect of its family culture to obtain sustainable CAs by taking advantage of the designed cultural affordances. The model identifies three distinct stages that encapsulate the dynamic evolution of family culture from inherent natural affordances to intentionally designed affordances; along with this evolution, family culture ‘result in’, ‘transform’, and finally, ‘promotes’ sustainable CA. The model reveals that the four transcendent sensemaking strategies employed by leaders are essential for transforming family culture from natural affordances to designed affordances. Additionally, the sensegiving strategies used to leverage family cultural affordances are also demonstrated. We are discussing these issues in the following sections.
Dynamic evolution process of family culture affordances and family firm CA
Transcendent sensemaking: Breaking the cognition limitation
Transcendent sensemaking extends beyond everyday experience and conventional limitations, reflecting on and transcending the cognitive boundaries typically encountered by family leaders (Dawson & Sykes, Reference Dawson and Sykes2019). This process incorporates the designed affordances of family culture, thereby overcoming the cognitive limitations inherent in family leadership. Initially, as is the case for most Chinese family firms, Baiyun did not deliberately interfere with the family culture. The Hu family, deeply valuing blood ties, exhibited a natural instinct to ensure unity and survival of the family. As their family firm grows, Baiyun's leaders realized the importance of the recognition and trust from those outside their family. Therefore, they decided to develop a framework to conceptualize the essence of family culture and progressively implements a pan-familialization approach.
A characteristic feature of transcendent sensemaking is that it overcomes the cognitive limitations of individuals, introduces external perspectives, and encourages prospective thinking. When decision-makers overcome these limitations, they can adopt a broader perspective, consider a wider variety of the potential affordances and long-term impacts of family culture, and explore the legitimization and symbolization possibilities associated with family culture on this basis.
Sensegiving and the microfoundations of CA
In the previous analysis, it can be found that Baiyun apply different sensegiving strategies tailored to different audiences, these strategies interfere the cognition of the audiences toward Baiyun by arousing different types of identification. These identification forms the microfounations of CA.
During the initial stage, the family leaders instinctively utilize the empathy and preaching strategies to harmonize family members with the family culture's natural affordances. This approach fosters cognitive consistency among family members in terms of emotions and values. Emotional identification is derived from the deep emotional bonds that are formed through collective entrepreneurship and mutual support; these bonds are characterized by unwavering trust and a robust sense of family. Value identification motivates family members to actively pursue what the family values advocate because they believe that these values contribute to the family's collective objectives. In the Hu family, these values are ‘focus’, ‘unity’, and ‘hard work’. De Massis and Foss (Reference De Massis and Foss2018) highlighted these microsources of CA and suggested that they were instrumental during the early entrepreneurial phase. They strengthened familial ties, facilitated the alignment of development goals and enabled Baiyun to amass valuable resources and financial assets efficiently.
In the stage where designed affordances promoting sustainable CA, Baiyun employed embedding strategy that highlighted the connections between its culture and family history, government policies, and business operation, thereby enhancing the company's legitimacy, which means achieving value identification from the nonfamily executives, employees, and external stakeholders, who are instrumental with regard to helping a company obtain CAs. The alignment of stakeholders promoted by value identification and efficacy identification directly influences the goal setting and execution of key business operations, thereby ensuring enduring trust and strategic legitimacy.
This study revealed that business ecosystem collaboration involves the comprehensive evaluation of external stakeholders, including in terms of both value and effectiveness. A reputable brand legacy and substantial corporate achievements are attractive to external stakeholders. In this context, Baiyun is notable within the electrical industry due to the company's use of symbolic strategies to shape its corporate image, which helps the company enhance social communication and attract partners, thus promoting deep collaboration in both technological and social activities. Table 4 presents the correspondence between sensegiving strategies and the sources of CA.
The effects of sensegiving strategies on firms' competitive advantages
Discussion
With a three-stage process model demonstrating how family firms leverage family culture to achieve sustainable CA, this study identifies two varieties of cultural affordances, four sensemaking strategies, four sensegiving strategies, and the mechanism underpinning the effectiveness of these strategies. The insights extend the existing literature regarding the dynamic interplay between family firms, family culture, their stakeholders, and CA in a swiftly evolving environment.
Theoretical Contributions
First, this study enhances the literature on family firms by elaborating on the dynamic and constructible nature of family culture through the affordance perspective. Specifically, we identify two distinct types of family culture affordances, natural and designed, which foster temporary CA and sustainable CA, respectively. The natural affordances reflect the current literature's static comprehension on family culture, whereas the designed affordances emanate from the untapped meaning and possibilities of family culture to be unveiled through the family firm's deliberate and adaptive actions. In this way, we extend the current understanding of family culture from a static collection of traditions as it was originally identified (Dyer, Reference Dyer1986), into a dynamic system evolved through intentional family actions. This conceptualization lays the foundation for addressing the double-edged issue of family culture – transcending the constraints of natural affordances while exploring the potential of designed ones. Furthermore, this finding explains why existing literature often views family culture as a static factor. One reason is, typically holding a resource-based view, previous literature treats family culture as a unique endowment that provides family firms with inimitable resources (Fletcher, Melin, & Gimeno, Reference Fletcher, Melin and Gimeno2012; Stasa Ouzký & Machek, Reference Stasa Ouzký and Machek2023), which just captures the natural affordances of family culture while overlooking the existence of its constructible side in form of designed affordance.
Second, the present study contributes to the strategic management literature by proposing a three-stage process model that explains how to address the double-edged issue of family culture on family firms' CA with a cognition constructive approach. Teece et al. (Reference Teece, Pisano and Shuen1997) emphasize that ‘to integrate, build, and reconfigure internal and external competencies to address rapidly changing environments’ underpins a firm's sustainable CA. Helfat and Peteraf (Reference Helfat and Peteraf2003) and Nayak et al. (Reference Nayak, Chia and Canales2020) further focus on the importance of a firm's collective ability to sense subtle environmental changes and take relevant adaptive actions. However, how to build this ability and what the actual adaptive actions would be remain unexplored (De Massis & Foss, Reference De Massis and Foss2018; Helfat & Peteraf, Reference Helfat and Peteraf2015). Our three-stage model suggests that the natural affordances arising from the Hu family's instinctive actions have a limit to sustaining CA. To adapt to a changing environment, they must adopt four sensemaking strategies to reconstruct new meaning and interpretations of family culture. Among these strategies, absorbing external perspectives while adhering to heritage manifests Baiyun's ‘integrate’ ability as defined by Teece et al. (Reference Teece, Pisano and Shuen1997); family culture reconceptualization aligns with ‘build’ ability; pan-familization entails the reconstructing nonfamily members' identity, enabling them to partake in the family trust, thereby showcasing the family's ability of ‘reconfigure’. Additionally, the model shows four sensegiving strategies designed to gain recognition and understanding from stakeholders, which leverage the family firm's ‘integration’ and ‘build’ capabilities. These sensegiving strategies allow family firms to effectively communicate their cultural values to nonfamily employees and external stakeholders, facilitating resource integration from outside the family. Therefore, the constructive approach builds on and extends previous works with specific family firms' intentional interactions with the environment.
A further contribution of this study lies in the insights on the ‘why’ question by revealing the mechanisms underpinning the subtle interplay between environmental factors, sensemaking and sensegiving strategies, family culture affordances, and the cognition and actions of stakeholders. The reason why constructive strategies are effective in overcoming the double-edged effect of family culture in a family firm situation lies in the microfoundation and source of CA. As family firms deliberately apply proper sensemaking and sensegiving strategies, they actively reshape the cognitive mode of their stakeholders to align with their family culture, thereby fostering their identification through emotional resonance, shared values, operational efficiency, and enhanced legitimacy. This individual-level identification constitutes the microfoundation from which the source of CA emerges, ultimately manifesting in organizational outcomes characterized by efficient family collaboration, continuous trust, strategic focus, and extensive ecological synergy – each a pivotal source of sustainable CA. Efficient family collaboration and continuous trust, serve as typical sources of CA in family firm background, find their equivalence in SEW-related studies (Cennamo, Berrone, & Cruz, Reference Cennamo, Berrone and Cruz2012). For example, Chrisman et al. (Reference Chrisman, Chua, Pearson and Barnett2012) verify the relationship between family essence (culture) and family firms' adoption of family-centered noneconomic goals (family harmony, social status of family). Arz (Reference Arz2021) insists that a family's strong commitment toward the business can stimulate positive outcomes only when long-term-oriented priorities and a collective organizational environment exist simultaneously. His ‘strong commitment to business combined with long-term orientation’ epitomizes what we refer to as ‘strategic focus’. ‘Extensive ecological synergy’ is a novel concept introduced in our research, manifesting Baiyun's leading position in its industry.
Finally, this study enriches the family business literature with fresh insights into the distinctive strategical logic and initiatives specific in family firms. The natural affordances of family culture and the corresponding sensegiving strategies, although merely lead to temporal CA and impede the family firm's growth in the second stage, lay a solid foundation through family collaboration for the firm's future development. They are insufficient, yet necessary for generating sustainable CA. In a family-involved business system, the achievement of sustainable CA hinges on the establishment of intimate social interaction and robust bonds between family members (Fang et al., Reference Fang, Singh, Kim, Marler and Chrisman2022). The natural affordances of family culture, primarily encompassing emotional bonds and intergenerational trust (Cennamo et al., Reference Cennamo, Berrone and Cruz2012), are seldom found in nonfamily firms. Similarly, the instinctive sensegiving strategies – empathetic and preaching strategies – are effective solely within family firms, particularly those of Chinese descent. In the context of Chinese families, where Confucian influence is prevalent (Chung & Luo, Reference Chung and Luo2008; Deng, Reference Deng2015), the family leaders typically embrace the duty of overseeing the well-being of the entire family lineage and preserving the family's harmony. Meanwhile, they exercise their family governance through unquestionable parental authority, with the younger generation adhering to a strict code of obedience (Fang et al., Reference Fang, Singh, Kim, Marler and Chrisman2022). The particularities of the Chinese family situation give rise to empathetic and preaching strategies that are uncommon in nonfamily firms. The sensegiving strategies in current literature, typically rooted in general business scenarios, often manifest as internal seminars, training sessions, and presentations (e.g., Dawson & Sykes, Reference Dawson and Sykes2019; Ravasi & Schultz, Reference Ravasi and Schultz2006). Moreover, the sensemaking strategies we reveal in the second stage of our process model illustrate how family culture evolves into corporate culture, crafting forward-looking and promising connections between family and business. The identification of these strategies tackles a fundamental inquiry that family businesses must grapple with as they navigate the entrepreneurial path. In summary, our insights, derived from the dual context of family and business, not only enrich the family business research but also inject innovative ideas into the realms of strategic management and sensegiving literature.
Managerial Implications
Our study has several managerial implications. First, unveiling the natural affordances and designed affordances of family culture renews family firm leaders' understanding of its extensive potential. This may motivate the leaders to reflect on whether their utilization of family culture is proper or sufficient. In reality, most family firms tend to manage their cultural heritage in an instinctive way, much as Baiyun did in the initial stage. To pursue sustainable CA, they should emulate Baiyun to employ sensemaking strategies to reconstruct the substance of their family culture and the relationship between stakeholders. Then, with sensegiving strategies, they should advocate for this renewed family culture to different audiences. In this way, family firms can effectively harness the strengths of their family culture, while mitigating any negative impact that might arise from it.
Second, family firm leaders should keep a lucid perspective on the pivotal moment of transitioning from natural affordances to designed affordances, and take proper sensemaking strategies. In the early stages of family entrepreneurship, family cultural heritage is instrumental in creating cohesive relationship among family members, which may introduce sources of CA from within the family. Therefore, family leaders should adopt empathetic and preaching sensegiving strategies to form and pass on their family culture within the family. As family firms encounter obstacles in their growth due to specific facets of their familial culture, it becomes imperative to embrace an external perspective to reshape this very culture. By blurring the delineations of the familial domain, they can harmonize internal emotions with external rationality and trust, fostering a more balanced and resilient organizational culture. Thus, an organizational culture based on family culture that resonates with both family members and external stakeholders should be established early on to support the intergenerational and cross-domain transmission of core values.
Third, in terms of internal cultural management, family firms should adopt embedding strategies. When the sensegiving audiences are internal employees, the firms should ensure that nonfamily members feel a sense of fairness and transparency through cultural legitimation processes. Our research suggests that embedding strategy helps combine the core values of family culture with societal norms, history traditions, allowing for the upgrading of corporate culture while preserving the family spirit. By involving employees in cultural activities, family firms can enhance employees' sense of belonging and organizational cohesion.
Fourth, in terms of the external cultural promotion, family firms should incorporate symbolic strategies. The strategic promotion of family culture to external audience is crucial in forging a robust corporate image. Given the limited opportunities for interaction with customers or other stakeholders, it is imperative to employ cohesive and succinct symbols to convey a potent impression. By strategically symbolizing the positive and unique facets of family culture with brand design, slogan, and exhibition, family firms can cultivate a distinctive persona with rich cultural information. This approach not only fosters market differentiation but also enhances public understanding and appreciation.
Limitations and Directions for Future Research
The primary limitation of this study lies in its emphasis on the positive facets of family culture, while the corresponding examination of the potential negative aspects, often referred to as the ‘dark side’, was thus insufficient. Although we try to illustrate examples where family culture impedes Baiyun's growth in our case studies – such as the difficulty in assimilating external human resources, a consequence of the deeply ingrained family-centric culture – the evidence remains limited. This is likely due to interviewees' reluctance to reveal the less savory aspects of their cultural heritage. This imbalance may impede our ability to obtain a comprehensive understanding of family firm dynamics.
Second, this study does not thoroughly explore the heterogeneity of family culture. We focus on a particularly unique case, replete with rich details and an extensive temporal framework. Despite these attributes, we have no chance to compare this case with its counterparts among overseas Chinese family firms and foreign family firms. In this study, the political and social environment exert significant impact on the formation and evolution of family culture, while such environment is rather unique in China. Over the past century, Chinese society has undergone profound transformation and modernization, with its rich traditional culture continuing to influence the behavior of its people. This influence may engender a diverse array of designed affordances. Future research could further examine this possible diversity within the framework of various social contexts.
Finally, while our research was enriched with secondary data sources, the heavy reliance on self-reported data from family firm members may have inadvertently introduced a subjective bias. This could have influenced the objectivity of our research outcomes. It is recommended that future studies incorporate objective, third-party data to more precisely examine the CA within family enterprises.
Data availability statement
The data that support the findings of this study are available from the corresponding author upon reasonable request.
Acknowledgments
This work was supported by the National Natural Science Foundation Project of China (Grant Nos. 71872054 and 72272038) and the Humanities and Social Sciences Planning Fund of Ministry of Education of China (18YJA630116). We thank David Ahlstrom and an anonymous reviewer for their helpful comments.
Jing Xi (melaniexi@163.com) is a full professor of management at the School of Management, Guangdong University of Technology, China. Her research interests include family business social entrepreneurship, traditional culture, and corporate sustainability. She has published several papers in journals such as Entrepreneurship Theory and Practice and Journal of Business Research.
Jiani Cai (cjn19666295836@163.com) is a doctoral student at the School of Management, Guangdong University of Technology, China. Her research interests encompass sustainable development in family businesses, the influence of informal institutions on family businesses, the digital transformation of manufacturing firms, and corporate digital innovation.
Xiaojie Wu (xiaojie_wu@163.com) is a full professor at the School of Management, Guangdong University of Technology, China. He has published in prestigious business and management journals such as Journal of Business Research, Asia Pacific Journal of Management, and Management and Organization Review. His research interests focus on multinational corporations (MNCs) and outward foreign direct investment, particularly in emerging economies like China.
Yongbin Cheng (15920120291@139.com) is an MBA student at South China University of Technology and the General Manager of Baiyun Power Group Co., Ltd. His research interests include innovation and entrepreneurial ecosystems, sustainable development, and green innovation in family businesses.
