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Corporate diplomacy and family firm longevity

Ciravegna, L., Kano, L., Rattalino, F. and Verbeke, A. (2020) Corporate diplomacy and family firm longevity. Entrepreneurship Theory and Practice, 44 (1). pp. 109-133. ISSN 1540-6520

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To link to this item DOI: 10.1177/1042258719838477


We discuss family firm longevity building upon a new conceptual lens, informed by transaction cost economics (TCE), but augmented with corporate diplomacy thinking. Family firms, because of their superior foundation of bonding social capital (interpreted here as a firm-specific, transaction cost-reducing governance mechanism), have an intrinsic advantage vis-à-vis nonfamily firms with regards to utilizing network ties supportive of longevity. Most family firms, however, fail to leverage effectively this governance tool to achieve longevity, due to bifurcation bias (BB), that is, the unchecked prioritization of assets and relationships that hold affective value for the family. We propose that corporate diplomacy, through its three process steps, familiarization, acceptance, and engagement, can help the family firm augment its baseline reservoir of social capital, and allows improved economizing on contracting challenges that endanger its survival. Externally, corporate diplomacy helps economizing on expressions of BB in relationships with outside stakeholders, thus augmenting bridging social capital. Internally, it can address biased treatment of family versus nonfamily human assets, thereby augmenting bonding social capital. Intergenerationally, corporate diplomacy supports access to, and improved reliance upon the firm’s social capital by next generation family members. The family firms that focus on corporate diplomacy processes and the resulting social capital creation greatly improve their chances of longevity.

Item Type:Article
Divisions:Henley Business School > International Business and Strategy
ID Code:84157
Uncontrolled Keywords:Economics and Econometrics, Business and International Management
Publisher:SAGE Publications


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