1 CONFLICT, PARTICIPATIVE DECISION MAKING, AND GENERATIONAL OWNERSHIP DISPERSION: A MULTILEVEL ANALYSIS

This study examines how participative decision making and generational ownership dispersion affect conflict in family firms. Participative decision making was found to be associated with cognitive and relationship conflict. Furthermore, the relationship between participative decision making and conflict as individual-level variables was moderated by generational ownership dispersion as firm-level variables. When ownership was dispersed through multiple generations, participative decision making was found to be positively related to cognitive and relationship conflict, but in one- and two-generational ownership firms those same relationships were found to be negative. EXECUTIVE SUMMARY Recent research has discussed how family firms need to encourage beneficial conflict that increases options and improves the quality of decisions while preventing dysfunctional conflict that hurts relationships (Kellermanns & Eddleston, 2004). Our study examined both types of conflict and how they are affected by participative decision making. Results from our study show that participative decision making is related to beneficial and dysfunctional conflict, but the relationships are complex and contradictory. The study showed that in one- and two-generational firms, increasing participative decision making decreases both types of conflict, the detrimental as well as the beneficial. These effects were reversed in multigenerational firms: increasing participative decision making increases beneficial but also detrimental conflict. Our study helps explain why managing conflict is difficult in family firms, and assists family firm owners and managers in anticipating and preparing for beneficial as well as detrimental outcomes from their decision making and conflict management activities