Seduced into the family business
Article Type: Guest editorial From: International Journal of Entrepreneurial Behaviour & Research, Volume 16, Issue 5
In 2004, the International Journal of Entrepreneurial Behaviour and Research published a special issue considering family business (Vol. 10 Nos 1/2). Focussed upon the importance and unique qualities of the family business,this first special issue represented an important and ground-breaking acknowledgement of the family business as a unique organisational form. The guest editors of this second special issue appreciate the important contribution that family-based enterprises continue to make in an increasingly dynamic global environment. Whilst still a comparatively young field of enquiry, “family business” is gaining attention as an area of fertile academic research of both economic and social importance. Based upon such recognition, we hope others might be “seduced” into the family business research fold.
Since the 2004 issue much of the business landscape has seen dramatic change driven by the effect of what the world’s media has labelled the “credit crunch”. Global, regional, national and local economies have shuddered at the symptoms brought on by this banking led crisis. Within the morass and entanglement of complex financial instruments and economic constructs, it can be safely argued that regardless of stimulus or indeed stability packages, it is individual businesses that will be required to deliver any recovery. Whilst it is often the major employers such as General Motors or Royal Bank of Scotland that grab the headlines, it is small and often family run businesses that will have to be the real drivers of change and innovation.
At the planning stage of this special issue, the term “risk” was something that the banks often presented to the small and family business on a frequent basis and certainly did not refer to their own kind. Risk in all its manifestation is something that the entrepreneur, self-employed or family run business, have to deal with, often on a daily basis. Acknowledging this element of “risk”, it initially seemed a logical point from which to present the first of the articles in this special issue. However, further debate made the team realise that, for many family businesses, “risk” is often a permanent feature of business life but the initial starting point is the family.“Family” is both the overt and covert experience and backdrop that is brought from the outset to a family enterprise.
Having now moved into the second decade of the third millennium, past experience informs us that the business climate is set to remain a turbulent one; an environment where organisations, of all types and sizes, will have to manage their way through ever greater levels risk. Warren Buffett once made the comment, “Risk comes from not knowing what you’re doing”. Many of those in family businesses do not enter this territory knowingly or willingly, or with the appreciation of the risk involved. Many simply start a business with their partner (married, cohabiting or civil) – a form of organisational construct that represents the onset of a new dynamic between two individuals. The introduction of a third party, “the business”,creates a type of tripartite focussed relationship. The once solely “romantic”based union is now vulnerable to the demands and associated risks of a new enterprise, which may impinge upon their relationship in a positive or negative manner over a period of time. The creation of this type of family business brings with it many challenges, not least that of “shared leadership”. Nicholson and Bjornberg (2006, p. 116) draw attention to this neglected theme in leadership literature, yet a familiar phenomenon of significant importance within family business, “critical leader relationships”. They also draw attention to “the duality of professional and romantic involvement”and identify the hazards, resulting from “uncertainties and concerns”regarding inequalities in this type of relationship.
The challenges outlined above link directly to the development of the current special issue and the papers within it. In the first paper of this special issue, Dr John Blenkinsopp and Gill Owens give consideration is given to the role of “married” couples, and the link between family business and entrepreneurship. The paper develops an expanded conceptualisation of “copreneurship”,identifying the importance of “context” and role definition. Whilst copreneurship represents a significant proportion of new start-ups, the fact remains that many do not survive. The new demands placed on copreneurship couples, often brings with it the potential risk of disharmony. Indeed, recent comment amongst family lawyers in Scotland has highlighted the tricky nature of hospitality businesses started by two individuals who reside under the same roof– some at least will learn to their cost that if there is any debate around the nature of their personal partnership, a parting of their ways may become a matter for family not business law.
Whilst the distinction between a self-employment opportunity and the beginnings of a family business remain indistinct, the prospect of working independently and building a family business are both appealing and often entirely logical responses to periods of economic change. They also represent however, an ideal, often approached without rational calculation of the risk involved. Building on the premise of enterprise and entrepreneurial activities as risk-based endeavours from which individual businesses develop, leads into the second paper by Yong Wang and Panikkos Poutziouris. They provide valuable insights to the relatively under-researched theme of entrepreneurial risk taking in the family business context. Centred upon a sample of UK family firms, their quantitative survey considers individual and familial variables of risk-taking propensity and the impact on business performance. The study suggests that the length of an owner-manager’s industrial tenure is positively associated with risk taking; whilst their age is negatively connected; and the higher the number of generations from the owner family controlling the business, the more risk taking a business will be involved. The findings also indicate that the intensity of risk taking within the family firm correlate with the associated business performance.
Business performance is affected by many risk-related factors, not least by the macro competitive environment in which family and non-family enterprises operate. As indicated earlier in this commentary, the turmoil created by an ever-changing economic climate has generated a greater sense of urgency for the need to explore the workings of family enterprises. The tapestry of family businesses within particular economies around the world is a rich one in terms of the interwoven ethnic groups undertaking business based upon the family unit. Research has increased our level of understanding in relation to the “business”and “family” procedures and customs of ethnic groupings. There is,however, still much which we need to learn, particularly the manner in which ethnic minority groups embed business practices within their families,communities and economies. One key element centres upon the business practices of second-generation entrepreneurs. In the third paper, Mark McPherson presents a comparative study based upon this theme, giving consideration to the similarities and differences associated with the business practices of South Asian entrepreneurs within family and non-family firms situated within the Greater London area. A majority of respondents in this study “considered entrepreneurship as something to embrace and not a means of economic survival”. Perhaps there is some credence here for the notion of second generation family members being “seduced into the family business”. However, there was also a minority who “were pushed into entrepreneurship”, impacting negatively on the father-son relationship. This reveals the pressure dimension of the family, entwined with its enterprise, where psychologically forces are brought to bare on family siblings to enter the business.
Family businesses represent an integral part of the culture of almost all countries; that they have an assumed and often taken-for-granted role is evident from our acceptance of films. From the stories of The Godfather to the urge for a different life illustrated humorously in Kung Foo Panda,family businesses offer the backdrop to many of Western cultures strongest stories. In the narrative of culture, however, lies evidence of the manner in which societies really work. This brings into question once more the similarities and differences present within varying environments in which family firms operate, along with the impact of generational change within them. Robert N. Lussier and Matthew C. Sonfield, in the fourth paper, present “ground floor” exploratory research centred upon a six country study representing significant differences in culture, economies, levels of entrepreneurial activities and family business demographics. Their comparative research study focuses upon first-, second- and third-generation family managerial characteristics and practices within Croatia, Egypt, France, India, Kuwait and the USA. The findings establish similarities and differences as family businesses evolve from first generation to second and then into the third generation across the country sample. However, only minor generational differences were identified between the different countries.
Despite potential, or actual, similarities/differences identified through an increasing level of research activity into family businesses, what is clear, is that such enterprises continue to play a critical role within virtually all economies throughout the world. What is also clear, is that “innovation is at the heart of the spirit of enterprise” and if businesses are to be sustainable they must “constantly innovate – even if only gradually”(European Union, 1996, p. 19). The theme of “innovation” is taken forward into the fifth paper by Rodney McAdam, Renee Reid and Neil Mitchell. They acknowledge the need for further research into the effectiveness of advancing SME competitiveness via increased innovation. They also draw attention to the dearth of research studies considering the implementation of innovation,particularly within the SME sector. Their paper makes a contribution to the family business domain by focussing upon the longitudinal development of innovation and its implementation. The study, conducted over a two-year period,explores the effects of critical incidents and crisis points upon attempts to implement innovation within a regional cluster of family-based manufacturing businesses.
The links between risk, leadership and the family business continue into the sixth and final paper of this special issue, authored here by Wilson Ng and Richard Thorpe. Presented as a case study centred upon a family controlled bank in Singapore, it explores the nature and processes of leadership as the bank undertook a major corporate acquisition, as part of its growth and development into a publicly quoted corporation, whilst maintaining family control. The paper explores the “extended” leadership system developed within the bank whereby “outsiders”, non-family members, were afforded “insider”status providing them with greater opportunities to progress within the bank’s management structure. In an era beset by financial difficulties, largely attributed to ill founded banking practices and management processes, it is reassuring to know that family-controlled banks can demonstrate examples of entrepreneurial leadership.
The collection of papers presented within this special issues provides us with further insights into the domain of family-based enterprises. Family businesses remain an essential part of societies – their study,development, support and on-going existence will be one of the keys to economic prosperity, community integration and personal wealth. How family businesses are encouraged remains open to debate; that they should be encouraged does not. Having an increasing academic basis for that process is key, and underpins the rationale for this second special issue: the on-going study of family businesses for their development of long-term success at a variety of economic, community and personal levels.
Claire Seaman, Stuart Graham, Richard BentGuest Editors
