1 CONFLICT, PARTICIPATIVE DECISION MAKING, AND GENERATIONAL OWNERSHIP DISPERSION: A MULTILEVEL ANALYSIS Kimberly A. Eddleston, Northeastern University College of Business Administration 319 Hayden Hall Boston, MA 02115-5000 617-373-4014 K.Eddleston@neu.edu Robert Otondo, Mississippi State University Franz W. Kellermanns, Mississippi State University ACADEMIC ABSTRACT 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. INTRODUCTION The dominant presence of the family, with the commingling of business and family roles, makes family firms a fertile field for conflict (Harvey & Evans, 1994). While some conflict can be beneficial, such as when it increases options, prevents premature consensus and improves the quality of decisions, other conflict can damage the harmony and relationships of family members in the family firm (Kellermanns & Eddleston, 2004). Furthermore, conflict is complex in family firms due to the presence of a generational shadow; that is, the prior generation’s excessive involvement in the family firm can cause social disruptions (Davis & Harveston, 1999; Harvey & Evans, 1994) and stifle the modernizing of organizational objectives and strategies (Handler, 1992). Much of the research that discusses conflict in family firms often focuses on family