Escalation of conflict in large private family businesses

This study investigates escalation of intra-familial conflicts in family top management teams. Using a Critical Incident Technique approach, this study uses interviews to collect data from 23 family and non-family individuals and groups within six large-scale privately-held family businesses in Indonesia. The study develops a theoretical model to explain why family business conflicts escalate and become destructive. An inductive content analysis found that the use of a dominating strategy by both parties in dealing with conflict, the expression of negative emotions, and the involvement of non-family employees are more likely to cause escalation. This study contributes to the theory of family business conflict to help family business more satisfying and productive.

The nature of intra-familial conflict in large-scale privately-held family businesses in Indonesia

This thesis is a qualitative study aimed at better capturing the complexity of conflict in family businesses. An inductive content analysis revealed two important issues: the dynamics of intergenerational conflicts and the escalation process of conflicts. The results demonstrated that conflicts are more likely to be intergenerational than intra-generational due to the role of senior members in daily business operations, generational differences, and a perception gap that exist between generations concerning each other’s competencies in doing the business. Furthermore, the set of factors contributing to conflict escalation is related to how family members handle the conflict, how they manage their emotions, and how they are able to avoid non-family employee involvement. These findings provide a foundation for taking preventative actions, implementing strategies for managing conflicts or devising effective solutions for resolving conflicts before they become more destructive.

Transfers of Family Businesses to Non-Family Buyers - The Selling Business Family Perspective

This study focuses on business families and how they handle transitions such as business transfers. It also tries to shift the balance of research away from successions and towards business transfers as a key topic for family business researchers. In addition, it contributes to the family business research field by further highlighting the importance of the various different contributions in the family business from business family members other than the entrepreneurial founder. Based on interviews with both business family members and business brokers, it appears as important for business families who are selling their family business that it is managed in a similar way in the future regardless of the shift in ownership and management. It is also important that the employees can stay with the business. However, employees are seldom regarded as potential buyers of the family business; most preferably, from the point of view of business family members, this should be somebody who is similar to themselves. Business transfers can be lengthy processes, but once the family business is sold, previous owners most often want to leave the family business. This disengagement can be difficult for business family members if they have not managed to build up some other identity outside the family business environment. Money may compensate for the loss in the short run, but something else is needed in the long run, since the management of money is usually not perceived as that interesting. A family business transfer can have great influence on the members of the business family who is selling, and therefore it is suggested that personal due diligence could be of some help when planning the transfer. That tool can help business family members to analyse their own personal situation, but it may also make it easier to understand how the other business family members feel about the forthcoming change. Everyone is influenced in different ways during a family business transfer, and awareness of this fact may make it easier for the whole business family to adjust to their new environment.

The family role on the internationalization process of family businesses: a two-case study

Essa dissertação procura identificar o papel da família no processo de internacionalização de dois negócios familiares: JBS, a maior empresa de proteína animal do mundo e Cutrale um dos líderes mundiais no mercado de suco de laranja. Empresas familiares possuem características que são intrínsecas a esse tipo de empresa. Muitos dos motivos de se internacionalizar ou mesmo o modo como eles se internacionalizam podem ser extremamente característicos. Assim, através de uma pesquisa qualitativa, os dois estudos de caso foram analisados baseados em teorias de internacionalização de empresas familiares. Porém, nessas companhias estudadas, a família não desempenhou um papel relevante no processo de internacionalização das mesmas. Com esses resultados, questões surgiram, como por exemplo, se o tamanho ou segmento da empresa tiveram um impacto na importância do papel que a família possui no processo de internacionalização. Essas questões não eram o foco do estudo porém fornecem muitos subsídios para uma próxima pesquisa.

Corporate governance development in privately held family businesses: a multiple case analysis

The objective of this study is to better understand and illustrate the process and the motivations for corporate governance implementation in Brazilian privately held family businesses. Three case companies were analyzed through an adapted developmental framework to illustrate the progression in corporate governance in response to changes in the ownership, investment and management dimensions over time. In this development, causal relationships between corporate governance and the three other framework dimensions were identified. It was found that the analyzed companies´ corporate governance implementation was motivated by the need to curb agency costs, whereas a cornerstone in this development was the first generational change. Only after the family businesses have reached the necessary maturity on all three dimensions, corporate governance practices were implemented. Put simply, the analyzed case companies developed formal systems as they grew more complex. This study complements the academic discussions on corporate governance in family businesses by offering Brazilian evidence on its underlying motivations and sequential implementation over time.

Executive Managers in Peru's Family Businesses

As in many other developing countries, family businesses are major players in the Peruvian economy. Despite their growth into large-scale groups spanning a wide range of businesses, the owner families still have strong control over their ownership and management. However, Peru's liberal economic reforms in the 1990s brought intense competition into the national market. Not only have these family businesses been forced to compete against large-scale foreign capital that entered the national market through the privatization of state enterprises, but also against cheap goods imported from foreign countries. In order to compete, family businesses have had to move beyond the limited human resources available within the family. The advancement within owner families of new generations with better education and training together with the promotion to top managerial positions of professional salaried managers from outside the family are some of the measures owner families are taking to overcome their human resource limitations.

Executive Managers in Large Mexican Family Businesses

The involvement of members of owners' families in the running of large family businesses in Mexico is decreasing. Although family members still hold key posts such as that of CEO, other executive posts tend to be delegated to professional salaried managers. Top managers, including family members, share some common characteristics. They are young compared with managers in other developed countries, their quality as human resources is high, and many of them are graduates of overseas MBA courses. Most of them are sufficiently experienced. Improvement of quality among top managers is a recent phenomenon in Mexico, and has been encouraged mainly by the following two factors. First, globalization of business activities was promoted by intense competition among firms under conditions of market liberalization. In order to equip themselves with the ability to cope with the globalization of their operations, large family businesses tried hard to improve the quality of top management, by training and educating existing managers, and/or by recruiting managers in the outside labor market. Second, developments in the Mexican economy during the 1990s led to a growth in the labor market for top managers Thus, business restructuring caused by bankruptcy, as well as mergers and acquisitions, privatization and so on, led to the dismissal of business managers who then entered the labor market in large numbers. The increasing presence of these managers in the labor market helped family businesses to recruit well-qualified senior executives.

Financial Characteristics of Family Businesses and Financial Aspects of Succession

Family businesses are special in many respects. By examining their financial characteristics one can come to unique conclusions/results. This paper explores the general characteristics of the financial behaviour of family businesses, presents the main findings of the INSIST project’s company case studies concerning financing issues and strategies, and intends to identify the financial characteristics of company succession. The whole existence of family businesses is characterized by a duality of the family and business dimensions and this remains the case in their financial affairs. The financial decisions in family businesses (especially SMEs) are affected by aspects involving a duality of goals rather than exclusively profitability, the simultaneous presence of family and business financial needs, and the preferential handling of family needs at the expense of business needs (although it has to be said that there is evidence of family investments being postponed for the sake of business, too. Family businesses, beyond their actual effectiveness, are guided by individual goals like securing living standards, ensuring workplaces for family members, stability of operation, preservation of the company’s good reputation, and keeping the company’s size at a level that the immediate family can control and manage. The INSIST project’s company case studies revealed some interesting traits of family business finances like the importance of financial support from the founder’s family during the establishment of the company, the use of bootstrapping techniques, the financial characteristics of succession, and the role of family members in financial management.

Managing Succession and Knowledge Transfer in Family Businesses: Lessons from a Comparative Research

The most natural mode of family firm succession is the intergenerational ownership transfer. Statistical evidence, however, suggests that in most cases the succession process fails. There can be several reasons as a lot of personal, emotional and structural factors can act as an inhibitor to succession. The effectiveness of the implementation of any succession strategy is strongly dependent on the efficiency of intergenerational knowledge transfer, which is related to the parties’ absorptive capacity and willingness to learn. The paper is based on the experiences learned from the INSIST project. In the framework of the project different aspects of family business succession have been investigated in three participating countries (Hungary, Poland and the United Kingdom). The aim of the paper is to identify the patterns of management, succession, knowledge transfer and learning in family businesses. Issues will be examined in detail such as the succession strategies of companies investigated and the efforts family businesses and their managers make in order to harmonize family goals (such as emotional stability, harmony, and reputation) with business- related objectives (e.g. survival, growth or profitability).

Running in the Family – Paternalism and Familiness in the Development of Family Businesses

The study focuses on two features of family businesses (FBs), namely familiness and paternalism. These two concepts are inseparable in two ways: inseparable from family businesses and also from each other. Family businesses differ from one another in the degree of family involvement, leadership and management in the business. Paternalism as a leadership attitude is naturally present in FBs, especially in the founding stage of development. This feature provides the solid bases for establishing a strong and proud culture built around the personality and success of the founder. This characteristic however can become a major hindering factor upon succession. Through a review of the literature and the INSIST studies for Central Europe this study aims to identify the supportive and limiting factors of both phenomena and examine the case studies of the INSIST research project for signs of the existence of these supportive and limiting factors. It is found that the degree of familiness in these firms is a sliding scale and a lack of familiness is not a precursor for failure. Paternalism is found to be broken down into authoritarian, benevolent, moral and enlightened. After discovering studies claiming that paternalism is a stage in the process of leadership style changing from participative to autocratic (or vice versa) and that Central Europe and the current era of instability and uncertainty lead to employees preferring a more autocratic or paternalistic style, our findings suggest that there are more driving than restraining forces for family firms adopting a paternalistic style. Furthermore many cases appear to be on the path from an authoritative towards a more enlightened paternalistic leadership style either out of choice in the search to shake off the drawbacks of other types of paternalism or as part of a natural evolution of this particular leadership style within the context of this study.

Micro-family-owned businesses in hostile environment : future engine for growth?

Using panel data from the four waves of the Indonesia Family Life Survey in 1993, 1997, 2000 and 2007 we investigate the prerequisite for and contribution of micro-family-businesses to economic development. We find that family-owned firms are on average fairly profitable compared with the industrial sector profit standard. Failure rates between 1997 and 2000 are very low (about 10%), while the industrial sector experimented a massive shakeout of about 33% in the wake of the 1997 crisis (Ter Wengel & Rodriguez, 2006), with an increase in the number of family-businesses between the two years of observation. This paper contributes to the economics of entrepreneurship studies by continuing the discussion of entrepreneurship in hostile business environments (Baumol, 1990; Sobel, 2008).

Strategy for succession in family owned small businesses as a wicked problem to be tamed

Contemporary strategic-planning processes don’t help family businesses cope with some of the big problems they face. Owner managers admit that they are confronted with issues, such as those associated with succession and inter-generational transfer that cannot be resolved merely by gathering additional data, defining issues more clearly, or breaking them down into small problems. Preparing for succession is often put off or ignored, many planning techniques don’t generate fresh ideas and implementing solutions is often fraught with political peril. This paper presents a framework to explore the idea of wicked problems, its relevance to succession planning in family businesses and its implications for practice and policy. A wicked problem has many and varied elements, and is complex as well as challenging. These problems are different to hard but ordinary problems, which people can solve in a finite time period by applying standard techniques. In this paper the authors argue that the wicked problem of family business succession requires a different approach to strategy, founded on social planning processes to engage multiple stakeholders and reconcile family/business interests to foster a joint commitment to possible ways of resolution. This requires academics and practitioners to re-frame traditional business strategic planning processes to achieve more sustainable family business futures.

Entrepreneurship and family firms : growth and survival

Family businesses dominate in a majority of economies (Astrachan and Shanker, 2003; Chrisman, Chua, and Sharma, 2005; Morck and Yeung, 2004). As entrepreneurial activities have been shown to be central to economic growth it is essential that family businesses, irrespective of ownership patterns, not only survive but also grow thus growing the economy overall. While a great deal is known about entrepreneurial activities and a body of knowledge is being developed in relation to entrepreneurial processes in family firms, more needs to be understood in relation to the dynamics of entrepreneurial activities at the individual family firm level. One area of particular interest is the dynamics within the business and the family and how these dynamics impact upon entrepreneurial activities. Specifically how relationships between and among family members engaged in the business can interact with professional non-family member senior executives. The senior executives can actively use their positions in such ways that initiatives suggested by family members are less successful than they might be. This paper addresses how ‘family’ aspects of a business can assist or impede the entrepreneurial activities of individuals. It takes into account some of the unique features of family businesses – such as the importance of ‘familiness’ as a competitive advantage; the direct links between ownership and control of a business and the recognition (often implicit) that individuals in families do make a difference to how the business functions (Habbershon and Williams, 1999, Sharma, 2004; and Tokarczyk, Hansen Green, and Down, 2007). This emphasis on individuals in families fits well with the idea of entrepreneur as individual, as expressed by Schumpeter (1934), Baumol et al (2007). The theoretical approach that adopted to explore the dynamics of processes occurring within family firms is structuration theory combined with a theory of embeddeness (Dacin, Ventresca and Beal, 1999; Giddens, 1979, 1984, Jack and Anderson, 2002; and Sarason, Dean and Dillard, 2006).

Micro-family-owned business : transitory survival mechanism or long term wealth creator?

Principal Topic: Entrepreneurship is key to employment, innovation and growth (Acs & Mueller, 2008), and as such, has been the subject of tremendous research in both the economic and management literatures since Solow (1957), Schumpeter (1934, 1943), and Penrose (1959). The presence of entrepreneurs in the economy is a key factor in the success or failure of countries to grow (Audretsch and Thurik, 2001; Dejardin, 2001). Further studies focus on the conditions of existence of entrepreneurship, influential factors invoked are historical, cultural, social, institutional, or purely economic (North, 1997; Thurik 1996 & 1999). Of particular interest, beyond the reasons behind the existence of entrepreneurship, are entrepreneurial survival and good ''performance'' factors. Using cross-country firm data analysis, La Porta & Schleifer (2008) confirm that informal micro-businesses provide on average half of all economic activity in developing countries. They find that these are utterly unproductive compared to formal firms, and conclude that the informal sector serves as a social security net ''keep[ing] millions of people alive, but disappearing over time'' (abstract). Robison (1986), Hill (1996, 1997) posit that the Indonesian government under Suharto always pointed to the lack of indigenous entrepreneurship , thereby motivating the nationalisation of all industries. Furthermore, the same literature also points to the fact that small businesses were mostly left out of development programmes because they were supposed less productive and having less productivity potential than larger ones. Vial (2008) challenges this view and shows that small firms represent about 70% of firms, 12% of total output, but contribute to 25% of total factor productivity growth on average over the period 1975-94 in the industrial sector (Table 10, p.316). ---------- Methodology/Key Propositions: A review of the empirical literature points at several under-researched questions. Firstly, we assess whether there is, evidence of small family-business entrepreneurship in Indonesia. Secondly, we examine and present the characteristics of these enterprises, along with the size of the sector, and its dynamics. Thirdly, we study whether these enterprises underperform compared to the larger scale industrial sector, as it is suggested in the literature. We reconsider performance measurements for micro-family owned businesses. We suggest that, beside productivity measures, performance could be appraised by both the survival probability of the firm, and by the amount of household assets formation. We compare micro-family-owned and larger industrial firms' survival probabilities after the 1997 crisis, their capital productivity, then compare household assets of families involved in business with those who do not. Finally, we examine human and social capital as moderators of enterprises' performance. In particular, we assess whether a higher level of education and community participation have an effect on the likelihood of running a family business, and whether it has an impact on households' assets level. We use the IFLS database compiled and published by RAND Corporation. The data is a rich community, households, and individuals panel dataset in four waves: 1993, 1997, 2000, 2007. We now focus on the waves 1997 and 2000 in order to investigate entrepreneurship behaviours in turbulent times, i.e. the 1997 Asian crisis. We use aggregate individual data, and focus on households data in order to study micro-family-owned businesses. IFLS data covers roughly 7,600 households in 1997 and over 10,000 households in 2000, with about 95% of 1997 households re-interviewed in 2000. Households were interviewed in 13 of the 27 provinces as defined before 2001. Those 13 provinces were targeted because accounting for 83% of the population. A full description of the data is provided in Frankenberg and Thomas (2000), and Strauss et alii (2004). We deflate all monetary values in Rupiah with the World Development Indicators Consumer Price Index base 100 in 2000. ---------- Results and Implications: We find that in Indonesia, entrepreneurship is widespread and two thirds of households hold one or several family businesses. In rural areas, in 2000, 75% of households run one or several businesses. The proportion of households holding both a farm and a non farm business is higher in rural areas, underlining the reliance of rural households on self-employment, especially after the crisis. Those businesses come in various sizes from very small to larger ones. The median business production value represents less than the annual national minimum wage. Figures show that at least 75% of farm businesses produce less than the annual minimum wage, with non farm businesses being more numerous to produce the minimum wage. However, this is only one part of the story, as production is not the only ''output'' or effect of the business. We show that the survival rate of those businesses ranks between 70 and 82% after the 1997 crisis, which contrasts with the 67% survival rate for the formal industrial sector (Ter Wengel & Rodriguez, 2006). Micro Family Owned Businesses might be relatively small in terms of production, they also provide stability in times of crisis. For those businesses that provide business assets figures, we show that capital productivity is fairly high, with rates that are ten times higher for non farm businesses. Results show that households running a business have larger family assets, and households are better off in urban areas. We run a panel logit model in order to test the effect of human and social capital on the existence of businesses among households. We find that non farm businesses are more likely to appear in households with higher human and social capital situated in urban areas. Farm businesses are more likely to appear in lower human capital and rural contexts, while still being supported by community participation. The estimation of our panel data model confirm that households are more likely to have higher family assets if situated in urban area, the higher the education level, the larger the assets, and running a business increase the likelihood of having larger assets. This is especially true for non farm businesses that have a clearly larger and more significant effect on assets than farm businesses. Finally, social capital in the form of community participation also has a positive effect on assets. Those results confirm the existence of a strong entrepreneurship culture among Indonesian households. Investigating survival rates also shows that those businesses are quite stable, even in the face of a violent crisis such as the 1997 one, and as a result, can provide a safety net. Finally, considering household assets - the returns of business to the household, rather than profit or productivity - the returns of business to itself, shows that households running a business are better off. While we demonstrate that uman and social capital are key to business existence, survival and performance, those results open avenues for further research regarding the factors that could hamper growth of those businesses in terms of output and employment.

Ownership structure and business evaluation practices in family SMEs : evidence from empirical research in Italy

This paper presents early results from a pilot project which aims to investigate the relationship between proprietary structure of small and medium- sized Italian family firms and their owners’ orientation towards a “business evaluation process”. Evidence from many studies point out the importance of family business in a worldwide economic environment: in Italy 93% of the businesses are represented by family firms; 98% of them have less than 50 employees (Italian Association of Family Firms, 2004) so we judged family SMEs as a relevant field of investigation. In this study we assume a broad definition of family business as “a firm whose control (50% of shares or voting rights) is closely held by the members of the same family” (Corbetta,1995). “Business evaluation process” is intended here both as “continuous evaluation process” (which is the expression of a well developed managerial attitude) or as an “immediate valuation” (i.e. in the case of new shareholder’s entrance, share exchange among siblings, etc). We set two hypotheses to be tested in this paper: the first is “quantitative” and aims to verify whether the number of owners (independent variable) in a family firm is positively correlated to the business evaluation process. If a family firm is led by only one subject, it is more likely that personal values, culture and feelings may affect his choices more than “purely economic opportunities”; so there is less concern about monitoring economic performance or about the economic value of the firm. As the shareholders’ number increases, economic aspects in managing the firm grow in importance over the personal values and "value orientation" acquires a central role. The second hypothesis investigates if and to what extent the presence of “non- family members” among the owners affects their orientation to the business evaluation process. The “Cramer’s V” test has been used to test the hypotheses; both were not confirmed from these early results; next steps will lead to make an inferential analysis on a representative sample of the population.