Entrepreneurship and Family Business: Volume 12

Subject:

Table of contents

(25 chapters)
Content available

The peer-reviewed chapters in Volume 12 emphasize the role of family systems in shaping entrepreneurial outcomes. Interestingly, spousal influence is a major topic in three of the chapters. Another important theme is family business identity and how a range of different influences – from within-family perceptions to broad institutional pressures – affect family business image and organizational performance. Both quantitative and qualitative research methods are employed to address the role of entrepreneurship in family businesses.

Drawing on organizational identity theory, we develop a model linking family ownership and expectations, entrepreneurial risk taking, and image in family firms to explain family firm growth. Testing our model on a sample of 163 Swiss family firms, we suggest that entrepreneurial risk taking and image can both lead to growth in family firms. We further find that family expectations have an influence on both entrepreneurial risk taking and family firm image. This finding suggests that family firms may benefit from two growth paths – forward looking risk taking and the image of the family firm that builds on the past, and that these paths are nurtured by family expectations.

In this chapter we investigate the role of family-specific factors in facilitating or constraining business exit in family firms. Family business literature seems to have an implicit bias toward continuity and persistence in the founder's business. This is explained by heavy emotional involvement and development of path-dependent core competences over generations. However, several long-lived family firms were able to successfully exit the founder's business. Exit allowed them to free significant strategic resources, which were later reinvested in exploiting novel entrepreneurial opportunities. Our aim is to investigate the process of exit from the founder's business in family firms, to explain both triggers and obstacles to decommitment and de-escalation. We address this issue through the study of the Italian Falck Group's exit from the steel industry in the 1990s, followed by successful startup of a renewable energy business. By carefully triangulating different data sources and different voices within and outside the controlling family, we develop a framework describing family-specific facilitators and inhibitors of business exit, and subsequent startup of a new business. Three types of family-specific factors emerge as relevant in shaping a family firm's likelihood and speed of exit from a failing business: family-related psychological triggers and obstacles to business exit; family-specific components of the structural de-escalation context; family responses to ensuing de-escalation and exit needs. The emerging framework offers a more nuanced interpretation of decommitment activities in family firms, pointing to the differential role family-specific factors may play as facilitators or inhibitors of business exit. We also suggest how these family-specific results may contribute to a deeper understanding of exit in nonfamily firms. Our results also have practical implications for family business entrepreneurial management. Actively managing the different determinants of exit choices that emerged from our study will set the stage for de-escalation from a failing course of action – a dynamic capability all family firms should learn and practice if they intend to transfer their entrepreneurial orientation to next generations.

The decision of whether or not to start a new business is a question pondered by many people and something that about .004% of the U.S. population decides to do every month (Kauffman Foundation, 2005). This decision becomes more complicated with the involvement of family members. One would be hard pressed to find any business enterprise without some sort of family influence and involvement at some point in the start-up or ongoing operations of the business. While most entrepreneurship research points to legal, environmental, regulatory, technological, or demographic changes as triggers that spur individuals into action, the role of family influence in new business founding is often overshadowed or not addressed at all (Aldrich & Cliff, 2003).

The purpose of this study was to explore the couple relationship context within the venture creation process over time. Conservation of Resources and Family FIRO theories were the theoretical foundation, and constructs from these theories were integrated to develop the analytical framework. The sample consisted of couple-level data from 94 start-up businesses at Time 1 with information from entrepreneur and spouse; there were 78 businesses at Time 2. Analysis of spousal resources invested in the newly created businesses indicated that direct and indirect spousal involvement in the business, spousal moral commitment, spousal perception of entrepreneur's business self-efficacy, business communication quality, and emotional support from the spouse were enabling resources during the venture creation process. Work overload and work and family conflict were constraining resources during this process. Couples in a very strong relationship reported significantly more enabling resources and fewer constraining resources than couples not in a very strong relationship.

Family is a variable rarely included in organizational research (Dyer, 2003). Chua, Chrisman, and Sharma (1999) argued that one way researchers could bring clarity to the concept of family business would be to distinguish between operational and theoretical definitions. In this paper, we provide a theoretical definition for family business that is based on social capital theory (Coleman, 1988; Nahapiet & Ghoshal, 1998; Lesser, 2000; Portes, 1998; Putnam, 1993). A family business is one in which the social structure of the family overlaps with the social structure of the business. The result is that the social structure in the business takes on some of the characteristics of the family, especially in small businesses. In addition, and importantly, the social structure of the family takes on some characteristics of the business. In this paper, we focus on how the social structure that exists between marriage partners may influence the social structure in family firms.

Family businesses must be examined within the cultural contexts in which they are bred, nourished, and grown. According to Chrisman, Chua, and Steier (2003), family businesses are launched for reasons other than the desire for dollars and cents (or rupees and yen). In fact, the authors note, “Family businesses… bring together so starkly the economic and non-economic realities of organizational life…” (2003, p. 442). Calls for family business research that extend beyond traditional geographical boundaries to include global comparisons have been issued by Hoy (2003) and others. Fortunately, recent developments in cultural assessment and measurement methodology have provided tools to enable a better understanding of families and family businesses vis-à-vis the use of regional clusters and comparative lenses (Gupta & Hanges, 2004). Gupta and Hanges (2004) note three clusters of the Catholic ethic: Southern (or Latin) Europe, Latin America, and Eastern Europe. As shown in Table 1, more than three-fourths of the population in these clusters follows the Catholic faith. In this study, we examine the spirit of family business in these three clusters.

Less polemical authors have published useful overviews of scholarship and institutional development in family business (Chrisman, Kellermanns, Chan, & Liano, 2010; Heck, Hoy, Poutziouris, & Steier, 2008; Schulze & Gedajlovic, 2010; Sharma, 2004). I take this as license for hyperbole. In such a vein, I am skeptical eight times over: that the field can be objective, that it can be defined, that “family business” is the right label, that it will find useful theories, that kinship exists, that if it does exist (all right, I do believe it does) we really observe it in action, that the field can progress without regressing, that it can be relevant, and that it can find its niche in universities. “Skeptical” has a nice ring to it. I confess, though, that my concerns are worries more than a lack of willingness to believe. After all, I hope that the papers in this volume will goad us into avoiding pitfalls as the field develops.

Are the social domains of kinship and business on balance complementary or contradictory? Do ventures that invest heavily in both – conventionally referred to as “family firms” – bear a net gain or net loss? We are scarcely the first to raise these questions. How then will we try to contribute to an answer? We try this in five ways, all of them based on previous literature. First, we develop the dichotomy of kinship and business by taking seriously the metaphor of yin and yang, merging it with the anthropological constructs of structural domains such as “domestic” and “public.” This metaphor proves to shed light on the relevant literature. Second, we provide a qualitative survey of the costs and benefits of kinship in business. Third, we summarize the empirical work that addresses the performance outcomes from family involvement. Fourth, we consider the practitioner implications of these studies. Finally, we ask if scholars are as yet in a position to answer these questions.

What does anthropology have to contribute to the study of family enterprise and entrepreneurship? The answer to this question seems obvious: lots. As an anthropologist who has written on kinship and money, I applaud any effort to disseminate the insights my discipline offers on these topics (see Rutherford, 1998, 2001). We anthropologists certainly have poached shamelessly from other fields of inquiry, and we should be willing to give back. But my enthusiasm for this exchange comes with a proviso: anthropology is often not the enterprise that others imagine it to be. Anthropologists these days have a tendency to roam widely, off leash, exploring all sorts of unlikely nooks and crannies. As a result, anthropology's role in this emerging field, based mostly in business schools to date, may prove unpredictable. Anthropologists would be as interested in the value accorded to entrepreneurship as they are in its role in family enterprise. They would be as interested in the fact that scholars at business schools are seeking to unsettle assumptions about the relationship between kinship and capital as they are in this relationship per se. But one thing is for certain: if we are going to further this conversation, we have to include the right interlocutors. In this brief essay, I would like to offer some reflections on recent work by anthropologists who speaks to the study of family enterprise and entrepreneurship.

Students of kinship or of gender have to confront a similar problem. Their inquiries are made possible by the hard fact that human beings reproduce sexually. The two sexes have complementary and immutable functions in the reproductive process; that is, men impregnate and women gestate and give birth to infants. Therefore, each human child owes her existence to and, we say, is related by birth to, at least two other persons, who are, we say, his or her parents, and who themselves have two parents each, and so on ad infinitum. These relations are the stuff of kinship, which is often described by anthropologists as the social recognition or reinterpretation of the facts of biological reproduction.

Entrepreneurs may wish to be selective about which relatives to include or exclude in their businesses. For example, their child might be inept but their niece might be outstanding. What aspects of kinship systems affect their ability to make these sorts of choices? What enables them to bend their ties of kinship and marriage to the interests of their business? Most broadly, what dimensions of kinship lend themselves to tactical or instrumental actions? This question is sweeping just as my meaning of “entrepreneurs” is very broad: those who take actions with the goal of growing their capital (Stewart, 1991). This capital may take the form of newly started ventures, dynastic firms, or even in precapitalist systems other social forms, for example, rural estates farmed by followers.

The study of family firms can benefit greatly from increased collaboration between disciplines across the University campus. The purpose of this article is to propose some objectives of cross campus collaboration from the perspective of a member of the law school faculty. Contrary to popular belief, law school faculty members value both the empirical research and the insights of their colleagues in the social sciences and other disciplines. Much of the best legal scholarship in recent decades has been driven by doctrinal developments and research techniques that originated outside of law schools, in other departments and colleges on the University campus.

What is it that makes something become an academic field in a research university? To answer this, it helps to think of three kinds of knowledge. From a common sense point of view, there are three main types of knowledge: “Know how,” “know what,” and “know why.” “Know how” refers to when we can actually do something in practice. “Know what” refers to information, facts, numbers, categories, or descriptive statements of things that happen. “Know why” refers to understanding the causes of the things that happen. With “know how” I can ride a bicycle. With “know what” I can name different parts or types of bikes. With “know why” I know why the derailleur makes the gears adjust correctly, or why one material will give a bike more flexibility.

Research concerning family business, from our perspective, is often limited by the theoretical paradigms that the researchers examine or use in their work. From the vantage point of the sociology of knowledge, Thomas Kuhn (1962) popularized the notion of “paradigms” within theoretical and scientific communities. Paradigms impose a specific view of the world onto the topics that are studied. Like “Schroedinger's Cat,” the theory used changes the “world” that is being investigated. As Kuhn pointed out, revolutions in thinking occur most frequently from “outside” the theoretical community that is committed to specific paradigms.

Research in the field of family enterprise is entering its second generation – the earliest scholarly research being in the late 1980s with the publication of the first volume of Family Business Review. Since then, research in the field has moved back and forth from almost exclusively conceptual research at the beginning, toward empirical and statistical research in the mid-1990s, and now, in the early part of the 21st century, trying to find new paths into qualitative research.

Although the Entrepreneurship Division of the Academy of Management includes family businesses within its domain statement, it is important to recognize that these are two distinct domains, although enjoying some overlap (cf. Stewart, 2008, for comparisons of family business with entrepreneurship and other domains). Both are comprehensive domains. They encompass the various functions of business administration: accounting, economics, finance, management, marketing, and so forth. And both extend beyond business administration departments. Entrepreneurship relates to the creation of intellectual property in science and engineering; it draws from sociology, psychology, and other liberal arts disciplines; and it extends into education programs as more kindergarten through high school programs incorporate exposure to free enterprise systems and venturing into their curricula.

Family shareholders expecting to fulfill their responsibility of aligning management interests with shareholder priorities and holding management accountable need a thorough understanding of financial statements. They need to be able to make sense of what the numbers say about the firm and its competitiveness. Financial literacy is, therefore, essential knowledge for every shareholder, not just the ones active in the management of the company. Without it, the desirable alignment of management and shareholders is at risk. Without it, family-business shareholders can easily become just as indifferent or impatient, fickle, and greedy as hedge fund managers and investors on Wall Street. The latter, aided by analysts and the media, often pressure well-managed publicly traded companies into short-term thinking.

The past decade of empirical research has established a body of knowledge about family business. A summary of this body of knowledge can be a guide for the content of family business instruction. One such summary now exists. A recent study compiled and assembled the dependent variables used in family business research (Yu, Lumpkin, Brigham, & Sorenson, 2009). This paper summarizes the findings of that study, discusses the extent to which course content in family business matches the current state of the field, and comments about possibilities going forward for courses in family business. Two textbooks are used to illustrate current course content: Family Business by Poza (2007) and Strategic Planning for the Family Business by Carlock and Ward (2001).

There is no sense trying to develop a new area with no support. You need at least some colleagues who acknowledge the importance of the topic and who, better yet, show an interest in pitching in. You need some institutional support too, from the dean, program director, and someone. Additionally, some students with a genuine interest are a must. Even with this beginning, you must promote the field all over your organization, get the resources you need, and find people who are committed and enthusiastic about what you're doing. All this while bearing in mind that small is “beautiful,” at least at the beginning.

According to Boyer (1990, p. 15), “the term ‘scholarship’ was first used in England in the 1870s by reformers who wished to make Cambridge and Oxford ‘not only a place of teaching, but a place of learning,’.…[it] referred to a variety of creative work carried on in a variety of places, and its integrity was measured by the ability to think, communicate, and learn.” Today, the word “scholarship” evokes thoughts of academic articles published in peer-reviewed journals, most frequently written by individuals holding academic ranks in colleges or universities. It is assumed that these articles are an outcome of dedicated and disciplined pursuit of knowledge aimed to enlighten man's thought processes, generate understanding, and enhance the ability to think and make good decisions. Clearly, in the last 150 years, the meaning of the word “scholarship” has changed significantly in higher education.

DOI
10.1108/S1074-7540(2010)12
Publication date
Book series
Advances in Entrepreneurship, Firm Emergence and Growth
Editors
Series copyright holder
Emerald Publishing Limited
ISBN
978-0-85724-097-2
eISBN
978-0-85724-098-9
Book series ISSN
1074-7540