Explaining competitive advantage in family firms: The Effectuation Paradox

Research into human resource management (HRM) systems suggests that investments in formal HRM are an important source of competitive advantage. This paper identifies the paradox that while family firms de-emphasize investments in formal HRM systems, they are still able to outperform their non-family counterparts. It is suggested that the root of this paradox lies in family firms preference for effectuation over causation when it comes to strategic decision making. A contingency model of the sustainable competitive advantage of family firms is developed, and the implications of the effectuation paradox for understanding HRM in family firms are discussed.