Power and Dominant Coalitions in Family Business

We address a key theoretical issue in the literature of dominant coalitions by explaining why, contrary to conventional wisdom, we observe the emergence of different coalitions under identical equity holdings of shareholders. Shifting the focus from exploring drivers of dominant coalition configurations in isolation (e.g., equity holdings), we expand on a relational perspective to explore how relational ties (soft power) among family shareholders interplay with equity holdings (hard power) in generating individual effective power to influence decision-making in the family firm. Drawing from and expanding on a cooperative game theory approach, this paper breaks new theoretical ground by providing insights into why and how the formation of relational ties (and lack thereof) among family shareholders affects the distribution of effective power in decision-making processes, over and beyond the share in equity holdings. Our work trains a micro-foundation lens on the study of dominant coalitions by disentangling and assessing individual effective power in coalitions of shareholders in family firms. We further propose a new perspective and a formal modeling to explain and measure why and how relational ties among members shape their effective power to influence decision-making, thereby shedding light on why and how members participate in different coalitional configurations.