Imacs 2016 imecs 2016 Proceedings (Preliminary version) of the 4
KEY PRINCIPALS OF FAMILY BUSINESS COMPREHENSION WITH HELP OF THE HISTORICAL ANALYSIS
Download 2.73 Mb.
|
- Navigate this page:
- 293.Introduction
- 294.1 Family Business Definition
- 1.1 Main Principles of Family Business Definition by Vallone
- 1.2 Historical Definition of Family Business
- 295.2 Discussion
- 296.Conclusion
- 297.Acknowledgment
KEY PRINCIPALS OF FAMILY BUSINESS COMPREHENSION WITH HELP OF THE HISTORICAL ANALYSIS292.Anastasia PetlinaAbstract Family business is the most extended and permeant form of business over all the history. The issue of family business started to pay attention of scholars relatively a while ago, thus there are some non-clarified points. The purpose of the paper is to investigate definitions of family business and define tendencies in specification of that. For insight into that phenomenon, it was decided to study the historical sources of the family business concept development during the twenty and twenty-thirst century, after evaluate them with the help of Vallone’s three key principals of determination of family business. The paper was prepared on the basis of research of the most cited scientific papers relating to the definition of family business with help of general theoretical scientific methods, in particular analysis, synthesis, analogy, comparison, generalizations, deduction and methods of expert estimates. As a result, it was found, that majority of family business definitions were created based on ownership criteria, the second most popular criteria is family members’ involvement in the business. The third offered criteria “intention to the succession” was used the least, despite that, criteria contributes to investigate the small and micro-family-owned enterprises. Although, for facilitation the identification of a family business with the help of the third criteria, it was suggested to examine a family ties of family business. The results of this study have allowed the finding of a definition for the family business, thereby, the structure of family ties of the biggest Czech family companies was determined. Key words: family business, business, ownership, definition, family ties JEL Code: D10, M50, R10 293.IntroductionFamily business is as old as the human civilization itself. However, the field of academic study of family business is relatively new in comparison with the established fields such as strategic management, finance or organization (Ramona et al., 2011). The development of family business subjects to theoretical and empirical studies of well-known international companies and many universities. The real wealth of any nation consists in a developed sector of small and medium-sized business, as evidenced by the experience of American, Asian and European countries. The family business covers a wide range of companies engaged in various sectors ranging from small to large international companies and amounting to more than 60% of all European business (Mandl, 2008). An interesting fact is that the oldest world companies are those like the Japanese construction family business company "Kongo Gumi", founded in 578. Other family companies having more than 1,000 years of successful experience in the family business e.g. are: Hoshi Japan (hospitality), Marinelli family in Italy (casting of church bells) or the Gulen de France family (wine-producer). The modern European family business operates in all of business sectors including food production, trading, running of restaurants or hotels, providing construction or financial services. The family business plays very important role in the developed economies. This topic of family business is independently taught in various universities. The issue of family business is also the subject of many investigations, where many research programs are added. It should be also noted that the family business is the theme of worldwide interest. The countries like Spain, Austria, Italy, Germany, Switzerland, Norway or the United Kingdom are the typical ones of the European Union showing a high level of family business. The small and medium-sized family companies do play very important role in the overseas countries, like the United States or Canada, where the dominant representation is also in the category of up to ten employees (Wilson, 2011). Furthermore, in viewing the family business in terms of its share in the total number of all registered firms in the respective national economies, we can see an evident share thereof, namely between 70 and 95% (Owens, 1994). For example, in the European Union, 85% of all registered companies are the family firms and, in the USA, it is even more than 95% (Pistrui et al., 2000). In the paper two terms are used: family business and family company. The term family business is used to designate an economic activity that earns money on a continuous basis. The term family company is used as a separate entity where individuals do their business. 294.1 Family Business DefinitionBefore starting to analyze different definitions, it is significant to state why having a generally accepted definition within the family business academia is primary for future extension of that field (Hanuska, 2014). Most of the definitions were created to suit of certain research. Heck and Trent (1999) maintain the argument of having a widely acknowledged definition by stating that “…a proper definition and count of family businesses is important to future research and current policy, practice, service, and education”. Promoting definitional consensus among researchers may increase the likelihood of theory development, in-depth empirical analyses, comparative studies, and replication” (Heck et al., 1999). Furthermore, distinction in definitions obstructs comparison of internationals investigations of family business. Using a common definition would therefore allow making clearer and comparable statistics of this entity, especially in case of its contribution to the economy (Mandl, 2008). Vallone (2013) is of the same opinion that an elaboration a generally accepted definition would “…circumscribe the field of investigation, and obtain a comparable sample for international researches; to individualize the presence and the specific characteristics of the family business in comparison to nonfamily business; in addition, it means to be able to compare more easily the empirical studies” (Vallone, 2013). For full understanding the development of family business study and that definition, it was decided to overlook historical tape of that field development. 1.1 Main Principles of Family Business Definition by ValloneOne of most interesting study belongs to Vallone, C., who published his literature review paper in 2013. He made a conclusion that in the family business discussion are three key principals: the degree of ownership, the intention to the succession, and the involvement of the family members in the business (Vallone, 2013). He understands ownership as “…the percentage of capital possessed by the family (by shares or quota) or the dominant influence represented by the family members’ ability to effect the remarkable and strategic choices” (Vallone, 2013). According to that expression determining the family business, family must have full control or must be the most influential unit in making strategic decisions. Concerning the expectation of transferring the company to the next generations (succession), Vallone (2013) states that “family business should concern only the companies managed by a family where the second generation is present or where there is a precise wish to transfer the business and family culture and the management to heirs, so that it is possible to exclude occasional business initiatives managed by two brothers, or by an individual with the aid of the partner” (Vallone 2013). He claims that because there are many examples, where husband and wife manage the business but not intend to transfer the business to the next generation. There are many explanations therefore, for instance, they have no children or, none of their children wants to keep on the business like the parents. In this way, in spite of full ownership of the firm, the “familiarity” thereof is slack due to the absence of intention to transfer the firm and business culture to the next generation (Hanuska, 2014). Another most essential element of family business, according to Vallone (2013), is the involvement of the family members in business. This element occurs as a decisive aspect in differentiation between the family business and non-family one, especially in case of small business. So, the author proposes to include this element as attribute of family business, because most of family companies are small companies, where founder works in the continuous way with the relatives (Hanuska, 2014). Nevertheless, Vallone (2013) in his work makes a conclusion that constant involvement of family members or their relatives in the business is not crucial, because it can lead to a limiting effect - elimination of some big companies which are hired not only by/to the non-family members, but also have external employees. 1.2 Historical Definition of Family BusinessFor understanding the historical tendencies of comprehension of family business, it was decided to follow the main historical investigations in that area and evaluate results with help of Vallone’s three key principals, which relate one of the most catchall determination of family business. If we look through the history, that it is an interesting fact that family business is one of the favorite subjects of business historians and nowadays, it represents one of the promising subfields of the business history (Coli, Rose, 2008). The family business started to attract business historians during the 1990s (Jones and Rose, 1993; Rose, 1995). According to A. Colli, there can be described as some “reactions” against the dominant Chandlerian approach interpreting the persistence of family capitalism as a dominant form of ownership and management in large, capital-intensive firms of the Second Industrial Revolution as a signal of inefficiency and backwardness (Colli, 2011). As she notes, the recent accent on family companies and family capitalism does not mean that business historians noted it as unworthy of attention. In business research before the 1990s, there was a lot of research about family business at both the “micro” level, i.e. about the dynamics internal to family firms and, the “macro” one, i.e. the research regarding the relationships between family firms and the more general environment, as well as respective national economies (Colli, 2011). Donnelley (1964) was likely the first to define the family business. His definition included one or more of the following conditions: (1) existence of family relationships as a key factor in succession; (2) presence of family member on board of directors; (3) reflection of family values in business; (4) actions of family member reflected on reputation of business; (5) presence of relatives involved and who felt obligated to hold stock for more than financial reasons; (7) entering the firm being a part of family member’s career decisions. Donnelley’s definition reflected early consulting observations of family business but it was difficult in meaning, empirically complicated to implement and so, it was not utilized in subsequent research studies (Zachary et al., 2011). A lot of definitions were created in that period of time, but they did not explain how the family business differs from non-family one. An example of definition, where the authors do not differentiate between the family business and non-family one was created by Backhard and Dayer (1983). They define the family business as a system that includes the family, the business, the founder, and such linking organizations as a board of directors (Chua et al., 1999). Classical family systems of theory (Bowen, 1985) developed from clinical work with actual families, but that theory did not include any specific recognition that owning and operation business might change the family life (Zachary et al., 2011). An importance in the family business research belongs to Rosenblatt et al. (1985). That qualitative research of family business explored both systems: family and entrepreneurial ones and included an overlap between those systems, tensions, role carryovers, compensation, and management of the business, working with relatives, and succession and inheritance (Zachary et al., 2011). The most cited definitions of family business during the twenty and twenty-first century are listed in the Table 1 and evaluated with help of Vallone’s three key principals of determination of family business: the degree of ownership (designated by code A), the intention to the succession (designated by code B), and the involvement of the family members in the business (designated by code C) (Vallone, 2013). For uncertain principal of determination, the code D is used. Tab. 1: The list of main family business definitions of twenty and twenty-first century
Source: Handler, 1989; Chua, et al., 1999; Brockhause, 1994; De Massis, at al., 2012; La Porta, et al., 1999; Litz, 1995; Vallone, 2013 Family business researchers are confronted with a definitional dilemma similar to that facing entrepreneurial researchers (Lansberg et al., 1988). Some researchers argue that at least one of family members should be active in the management/or ownership of the company, others think that there should be at least two active members of family. Still others require the family business with family members of different generations active in the business (Brockhause, 1994). Some scholars see the family as the owner of at least 51 % of the stock while others suppose the family has to have influence on decision making in business. It could be said that clear definition of family business will not be set up soon and agreed by most scientists because of wide difference of definition options. Despite of that, the Table 1 shows that the most generally used attribute in the studied definitions during the twenty sentry is the criterion of ownership equaling to 58 per cent. The authors of many researches support it, because most of scholars state that ownership is the main tool in legalization and keeping the power to influence a firm. The number of definition criteria occurrences in absolute as well as relative terms. Please note that the sum of percentages exceeds 100 per cent due to the fact that most definitions use multiple criteria. Involvement of the family members in the business is the second most used criteria, respectively 51 per cent of them. Intention to the succession is in 15 per cent of the identified definitions as less used criteria of family business. Thereby, it can be seen that criteria for family business describing “intention to the succession”, unfortunately, is not taken into account in many definitions, because that criteria could help to distinguish small family business from not-family.
„A family-owned enterprise is that one owned and possibly controlled by family or families or by selected family member(s), whereas its delivery to the next generation is supposed “. This definition presumes a company establishment under the § 5 of the Act No. 513/1991 Sb. (Commercial Act), where a company is described as a complex of material, personal and non-material business components. The term of “family” is not precisely defined within the Legal Code of the Czech Republic. However, a family is constituted by marriage. Author has defined the family as „a group of persons mutually associated not only by matrimony or relational bonds, but also by a common life-style”. One of author's scientific interests is business succession in the Czech Republic. For studying that field, it is necessary to analyze the family ties of family business in that country. Generated definition of family business was used for analyzing of family ties and the succession level of the biggest 65 Czech family companies. For that, secondary data by Forbes.cz were used (Mašek et al., 2015). Only the companies managed or owned by at least two generations of one or more families could be included into the identification of representatives. Also the sibling business was taken into account. On the contrary, the married couples in business were eliminated due to the absence of followers within the family business. For the ranking calculation within the list of companies, the family revenues and the EBITDA data were compared. Generally, 8 female establishers, 62 male establishers, 72 sons, 20 daughters and 5 siblings represent the Czech family big business in 2015 (Mašek et al., 2015). After analyzing the family ties of represented family companies, 28 types of family ties were detected. Only four of them represents the highest 25% represented cases. That was identified with help of the third quartile (Q3), which equals to 22 (n=28), it is clear that the cases with data lower than the value of indicator are equal to 75 % of the values of selection (see Fig. 1). The third quartile splits the lowest 75% of the data from the highest 25%. The results have been rounded to whole units. Those highest cases (25% of the data) are as follows: “Father + Son” (31 %), “Father+ Son+ Son” (15%), “Father + Son + Daughter” (5 %), “Father + Mother + Son + Daughter” (5 %). This research has shown an approximate average of big family business in the Czech Republic that may be presented as company, where family ties are represented by one father-establisher, 1.1 of sons and 0.3 of daughters (Mašek et al., 2015).
A detailed research has shown an interesting peculiarity, namely the fact that the most of founders of those 65 biggest Czech family companies are still holding the companies in the hands (Mašek et al., 2015, Petlina et al., 2015). Only 16% of family companies are independently managed (or better owned) by the next generation (Fig. 2). Fig. 2. Actual Situation in Business Succession of the Biggest Czech Family Firms in 2015 Source: Mašek et al., 2015 Approximately one quarter of the represented companies handovers the business to the next generation (Mašek et al., 2015). Thereby statistics show that the establishers, rather tightening their business positions, are in no hurry to retire. This result can have several causes: a lack of decent business receivers; a difficulty in choosing a successor; the heirs are not ready to ascend the throne or, they have not enough experience and skills (Mašek et al., 2015). 296.ConclusionFamily business is the most prevalent and pervasive form of business throughout all the history. Family business consists of two main components: family and business. This combination determines the specification of that kind of business. Both have influence on each other. During scientific investigation of family business essence, it was detected, that huge diversity of family business definition leads to problems in practice. Particularly there is a problem with comparativeness of statistic data about family business. After analyzing the historical development of study and definition of family business, it was noted that majority of family business definitions were created based on ownership criteria, on the second place is family members’ involvement in the business. The criteria of intention to the succession is used very little, that does not let to investigate also the small and micro-family-owned enterprises in the Czech Republic, that represents substantial part of all business operating in the country. According that situation, the definition of family business was created, which should describe well representative family firms in the Czech Republic. Based on this, the research has shown that there are dominant family ties of the biggest Czech family companies, in cases where the father and son do manage the family business. See also the family ties of the biggest Czech family companies: father and two sons; father, daughter and son; father, mother, daughter and son. It was interesting to ascertain that 60% of father-establishers in representative companies are holding the business and they are in no hurry to retire. In 16% of the cases, the next generation manages the family business and 24% are in the succession process. That result will aid in the future research about family succession in the Czech Republic. One note should be said regarding the created definition, which will be used in further quantitative research of family business in the Czech Republic with using primary data. Although, for facilitation the identification of a family business with help of criteria of intention to the succession, family ties of representatives will be examined.
298.ReferencesZachary, R. K., Rogoff, E. G., & Phinisee, I. (2011). Defining and Identifying Family Entrepreneurship: A New View of Entrepreneurs. The Dynamics of Entrepreneurship, 57-76. Mandl, I. (2008). Overview of Family Business Relevant Issues: Final Report. Austrian Institute for SME Research, Vienna. Retrieved from: http://ec.europa.eu/enterprise/policies/sme/promoting-business/family-business/family_business_expert_group_report_en.pdf. Vallone, C. (2013). Contribution on family business definition. In The Firm's role in the economy: Does a growth - oriented business model exist? XXXVI AIDEA Conference. Retrieved from https://boa.unimib.it/retrieve/handle/10281/46789/69823/275_aidea2013_management-organization.pdf. Colli, A., Rose, M.B. (2008), “Family business”, in Jones, G. and Zeitlin, J. (Eds), Handbook, Oxford University Press, Oxford, 194-218. De Massis, A., Sharma, P., Chua, J. H., & Chrisman, J. J., (2012). Family business studies: An annotated bibliography. Cheltenham: Edward Elgar. Koráb, V., Hanzelková, A., & Mihalisko, M. (2008). Rodinné podnikání. Brno: Computer Press. Hnilica, J., Machek, O. (2014). Toward a Measurable Definition of Family Business: Surname Matching and its Application in the Czech Republic. Int Adv Econ Res International Advances in Economic Research, 21(1), 119-120. Petlina, A.; Koráb, V. (2015). Family Business in the Czech Republic: Actual Situation. Trendy Ekonomiky a Managementu, 9(23), 32-42. Mašek, J., Nádoba, Krajíčková, Z., J., Mareš, M., Franková, K., & Kalouš, P. (2015, May). 65 největších rodinných firem. Forbes Česko, 58-73.
Anastasia Petlina Brno University of Technology Kolejní 2906/4, 612 00 Brno-Královo Pole Petlina@fbm.vutbr.cz
Directory: wp-content -> uploads -> 2015 2015 -> Police Militarization 2015 -> 2015 ihbb championships: hs history Bowl Round 4 – Prelims First Quarter 2015 -> Wrtp/big step · 3841 W. Wisconsin Ave., Milwaukee, wi 53208 2015 -> Rao bulletin 1 December 2015 html edition this bulletin contains the following articles 2015 -> Darton College 2015 -> Training Workshop on Planning and Implementation of Multi-Sectoral Development Programme (MsDP) in Bihar Date : 6th 2015 -> Rao bulletin 15 June 2015 html edition this bulletin contains the following articles 2015 -> Rao bulletin 1 September 2015 html edition this bulletin contains the following articles 2015 -> Rao bulletin 1 August 2015 html edition this bulletin contains the following articles 2015 -> Science, and transportation united states senate Download 2.73 Mb. Share with your friends:
|