Contextualizing Family Firms in the Arab World

 

Logo Rodrigo fondo transparente1st International Academic Conference

28th February 2018

 Call for papers:  “Contextualizing Family Firms in the Arab World”

Arab family firms cannot be fully understood without considering the context in which families and firms exist. While contexts determine organizational behavior (Johns, 2006), the footprints of family firms recursively manifest themselves in regional socio-economic contexts (Basco, 2015). Therefore, to fully understand the Arab family firm phenomenon, scholars must go beyond its boundaries by recognizing and exploring the multiple embeddedness of family firms in general. We must consider the micro-context of the family, the meso-context of the industry, and the macro-context of the country/region, all of which are characterized by paradoxes of conflict and peace, stability and instability, certainty and uncertainty, and modernity and tradition (Basco, 2017).

In the Arab World, socio-economic activities have traditionally been embedded in kinship relationships in Bedouin, rural, and urban societies. Families are the dominant institutions through which individuals transmit their culture, legacy, religion, expectations, and traditions and interact in society (Barakat, 1993) by creating their own identity. In this context, Arab families act as a filter absorbing changes caused by contemporary economies, social and economic globalization forces, societal conflicts, political transformations, the influence of the recent colonial past, and cultural pressures from Western and Eastern cultures.

Even though the family business field has gained external legitimacy (Chrisman, Chua, & Steier, 2003; Perez Rodriguez & Basco, 2011), the lack of an overall family business theory is mainly due to the shortage of studies integrating contextual dimensions. A theory of family firms “must explain and predict not only the interaction between family and business systems at the individual and family firm levels but also the interaction between family firms and the environment at the aggregate level” (Basco, 2015, p. 260). In this sense, contextualizing the family firm in the Arab World could help clarify firm familiness (Gomez-Mejia, Cruz, Berrone, & De Castro, 2011; Habbershon & Williams, 1999), which focuses on the effect family has on firm behavior and performance, and regional familiness (Stough, Welter, Block, Wennberg, & Basco, 2015), which focuses on the family firm’s effect on regional development.

The aim of this conference is to advance previous efforts to contextualize the family firm phenomenon in different institutional and cultural environments (e.g., Gupta, Levenburg, Moore, Motwani, & Schwarz, 2008), particularly in the Arab World (e.g., Bizri, 2016; Fahed-Sreih & Djoundourian, 2006; Welsh & Raven, 2006).

We invite submissions to the conference titled “Conceptualizing Family Firms in the Arab World.” The purpose of the conference is to gather researchers who are investigating the family firm phenomenon in the Arab World. We expect that contextualizing family firms in the Arab World will shed new light on the nuances of family firms in terms of their phenomenological perspectives and theoretical development.

Submission Guidelines and deadline

We encourage scholars, especially PhD students and young researchers, whose research focuses directly or indirectly on family businesses in the Arab World to submit their works in progress at different stages. Abstract submission should be one document with a cover page (title, author’s name, affiliation, email) and a two-page abstract (topic of research, theories, method, results, contributions)

Abstract submission should be sent electronically to rbasco@aus.edu

Deadline Abstract by 30/11/2017

Authors Notification by 31/12/2017

Final papers (final submission) by 31/01/2018

 

Conference Highlights

Travel Research Grants

The Sheikh Saoud bin Khalid bin Khalid Al-Qassimi Chair in Family Business offers six scholarships for PhD students from the Arab World to travel to and attend the conference. Potential candidates who would like to apply for a travel/accommodation grant should send their application letter and CV with their abstract submission by 30/11/2017.

Career Academy

We have designed a special event for PhD students and young scholars called the Career Academy Workshop to discuss the challenges of developing an academic career in the Arab World. Topics will include matters related to earning a PhD, building an academic career, publishing research, and building local and international networks.

Special Issue

In collaboration with Journal Family Business Strategy, papers presented at the conference will be eligible for a special topic section, “Contextualizing Family Firms in the Arab World.”

Registration

There is no registration fee.

Tentative Program 

27 of February, 2018 Welcome reception, 7pm-10pm, Sharjah

Academic Conference: 28 of February, 2018 – Keynote speakers – Plenary sessions

Business Family Conference: 1 of March, 2018 – Keynote speakers and panel sessions

Venue

American University of Sharjah, Sharjah, United Arab Emirates

Organizers

Rodrigo Basco (American University of Sharjah), Alreem Al Ammari (American University of Sharjah), and Farida El Agamy (Tharawat Family Business Forum)

 

 Aus logo (colour)                                                             JFBS

  TFBF Logo - original - 2017                                Sheraa

References

Barakat, H. (1993). The Arab World. Society, culture, and state. Berkeley, California: University of California Press.

Basco, R. (2015). Family business and regional development-A theoretical model of regional familiness. Journal of Family Business Strategy, 6(4), 259–271.

Basco, R. (2017). The multiple embeddedness of family firms in Arab World. In S. Basly, P.-L. Saunier, & A. Marouane (Eds.), Family Businesses in the Arab World – Governance, Strategy, and Financing (p. forthcoming).

Bizri, R. (2016). Succession in the family business: drivers and pathways. International Journal of Entrepreneurial Behavior & Research, 22(1), 133–154.

Chrisman, J. J., Chua, J. H., & Steier, L. P. (2003). An introduction to theories of family business. Journal of Business Venturing, 18(4), 441–448.

Fahed-Sreih, J., & Djoundourian, S. (2006). Determinants of longevity and success in Lebanese family businesses: An exploratory study. Family Business Review, 19(3), 225–234.

Gomez-Mejia, L. R., Cruz, C., Berrone, P., & De Castro, J. (2011). The Bind that Ties: Socioemotional Wealth Preservation in Family Firms. Academy of Management Annals, 5(1), 653–707.

Gupta, V., Levenburg, N., Moore, L., Motwani, J., & Schwarz, T. V. (2008). Culturally-sensitive models of family business in Germanic Europe. Hyderabad, India: ICFA University Press.

Habbershon, T. G., & Williams, M. L. (1999). A Resource-Based Framework for Assessing the Strategic Advantages of Family Firms. Family Business Review, 12(1), 1–25.

Johns, G. (2006). The Essential Impact of Context on Organizational Behavior. Academy of Management Review, 31(2), 386–408.

Perez Rodriguez, M. J., & Basco, R. (2011). The cognitive legitimacy of the family business field. Family Business Review, 24(4).

Stough, R., Welter, F., Block, J., Wennberg, K., & Basco, R. (2015). Family business and regional science: “Bridging the gap.” Journal of Family Business Strategy, 6(4), 208–218.

Welsh, D. H. B., & Raven, P. (2006). Family business in the Middle East: An exploratory study of retail management in Kuwait and Lebanon. Family Business Review, 19(1), 29–48.

“What if corruption is a matter of being or not being for family firms”

By Rodrigo Basco and Ramsha S. Khan

This is an interview with Dr. Thomas Bassetti of University of Padua (Italy). Dr. Bassetti published an article in the Journal of Family Business Strategy in collaboration with Dr. Dal Maso Lorenzo and Dr. Lattanzi Nicola entitled: “Family Businesses in Eastern European Countries: How Informal Payments affect Exports”

What has inspired you to write about the topic of corruption and family businesses in Thomasthe Eastern European Countries?

In May 2008, I read an article published by The Economist talking about corruption in Eastern Europe. The title of the article was “Talking of virtue, counting the spoons”. The central point of the article was that the EU enlargement process has generated temptingly puddles of public money to steal. According to the journalist, a more effective approach to fight corruption is the simplification of the public administration. Public administration should be simplified to the point where bribes are either unnecessary or extremely evident.

As an economist, I immediately thought that corruption can be represented as a market characterized by two different sides: the demand side and the supply side. The Business Environment and Enterprise Performance Survey (BEEPS) gave us the opportunity to investigate this hypothesis. In particular, we were interested in exploring under which conditions a firm may be interested in bribing public officials. Usually, bribes are devoted to buying a competitive input or to facilitate an administrative process. In this second case, even a competitive firm may be interested in bribing a civil servant. In particular, a risk-averse firm facing institutional inefficiencies may decide to bribe a public official just to overcome these inefficiencies that threaten its own survival. In this sense, bribes act as an insurance against institutional inefficiencies.

What are the main results of the article published in the Special Issue?

First, when we examine the relationship between corruption and export, it is important to take into account the reasons why firms bribe public officials. Second, in contrast to non-family firms, family firms are particularly sensitive to corruption. Finally, informal payments aiming to facilitate business operations tend to support export-oriented family firms.

What is the theoretical application of your research? What are the future lines of research of this topic?

The main theoretical implication of our research is that risk-aversion plays a role in the willingness to use informal economy channels. So, if family firms are more risk averse than non family firms, the former may be more involved than the latter in informal activities just because of their risk attitude.

Although we provided robust evidence on the causal relationship between the family firms’ demand for bribery and exports in Eastern European economies, given the nature of the dataset, we were not able to distinguish among different compelling explanations for our evidence.  Therefore, a first strand of literature should explore the mechanisms behind our findings. Similarly, a second strand of literature should investigate whether our findings apply only to Eastern European countries or not. In this second case, there could be a minimum level of institutional inefficiencies below which risk-averse firms have no incentive to bribe public officials.

What is the practical application of your research for policy-makers?

Our article has some important implications in terms of anti-bribery policies. According to our results, policy-makers should distinguish informal payments into pure corruption payments (i.e., payments devoted to acquire an additional competitive input) and facilitation payments (i.e., payments devoted to accelerate inefficient administrative procedures). If informal payments are devoted to facilitate business’ operations, before fighting these deplorable practices, policymakers should remove those market and institutional inefficiencies that hamper business operations. This is why facilitation payments are tolerated also in the U.S. In addition, since family firms are the most common form of business entity, this policy intervention may boost family firms’ export, favoring economic growth and development.

Entrepreneurship, Migration and Family in Peripheral Contexts – Avenues for Growth and Internationalisation

IMAGENCall For Papers

International Journal of Entrepreneurship and Small Business

 

Guest Editors
Maria Elo
University of Turku, Finland

Susanne Sandberg
Linnaeus University, Sweden

Per Servais
University of Southern, Denmark

Allan Discua Cruz
Lancaster University Management School, UK

Rodrigo Basco
Sheikh Saoud bin Khalid bin Khalid Al-Qassimi Chair in Family BusinessAmerican University of Sharjah, UAE

Description
The International Journal of Entrepreneurship and Small Business (IJESB) has recently published several articles about migrant entrepreneurship and internationalisation. The purpose of this special issue is to continue and extend this academic dialogue about entrepreneurship, migration and family in peripheral contexts as dimensions that can influence new business creation, internationalisation and socio-economic development. Peripheral contexts often create pressures to internationalise and to find alternative entrepreneurial strategies and resources. This special issue aims to foster further understanding of these topics, which are of increasing relevance around the world.

Peripheral contexts are often disadvantageous, e.g. being constrained by the shortage of customers, the lack of physical and human resources, the higher cost of imported raw materials, obstacles in terms of logistics and the scarcity of international networks (e.g. Dana, 1996; Freiling, 2008; Sandberg, 2013). In addition, many peripheries face severe problems of brain drain as urbanisation and migration absorbs the young potential elsewhere. Furthermore, novel challenges arrive as the crisis-driven migration wave reaches these areas and creates a need to integrate newcomers into the local economies and societies (e.g. Heikkila et al. 2015). However, to understand the challenges of business development in peripheral contexts, it is necessary to explore three main interconnected elements: entrepreneurship, migration, and family.

Entrepreneurship -understood in a broad sense (such as at societal, organisational and/or individual levels)- represents an important element of economic growth and development (e.g, Dana, 2011) because it refers to the mobilisation of physical, human and social resources for detecting, creating and developing opportunities (Ardichvili, Cardozo & Ray, 2003; Muzychenko, 2008) and taking risks (Knight, 1921; Zahra, 2005). In this sense, entrepreneurship means the ability of a society, existing firms or individuals to create new or expand existing economic activities, often internationally (Acs, Dana & Jones, 2003; Moen & Servais, 2002) and under difficult conditions (Hitt, Ireland, Sirmon & Trahms, 2011). Therefore, entrepreneurship in peripheral contexts can be better understood by linking two additional phenomena: migration and family.

The context of periphery in which entrepreneurs and firms dwell may affect the birth, development, growth and mortality of a firm. Beyond the traditional overlooked importance of a single entrepreneur, the entrepreneurial teams and families in business go about creating more than one business over time (Discua Cruz, Howorth & Hamilton, 2013), often responding to migration processes and changing institutional conditions (Fernandez Perez & Lluch, 2016). Moreover, contextual, seasonal or other value creation limitations may not allow a classic ongoing single figure in entrepreneurial activity (Rosa et al., 2014). The result of such dynamics is often embedded in the formation of entrepreneurial enclaves in peripheral areas (Johannisson et al., 2007) with greater effect on regional development.

Migration is a challenge and opportunity shaping peripheral entrepreneurship and development (e.g. Kalantaridis, 2010; de Lange, 2013). Migration is a cross-action element that may accelerate the economic and social development of a peripheral context (Dana, 1991; de Lange, 2013; Riddle, 2008). International migration may not only reduce the impact of brain drain by attracting new human resources serving as valuable input for existing firms, but could also be considered as a potential entrepreneurial resource and change agent (Riddle & Brinkerhoff, 2011). For instance, migrants and their access to diaspora networks provide multiple positive effects on venturing and international business (e.g. Elo, 2015; Sandberg & Jansson, 2014).

Furthermore, local families -because of their embeddedness in a region and their function as source and recipient of social traditions, culture and values- may also perform as an important entrepreneurial function (e.g., Basco, 2015). In particular, local socio-cultural embeddedness and family networks may assist the survival of new firms (Littunen, 2000). Therefore, both indigenous and migrant people may ¡V independently or in combination ¡V be the source of entrepreneurial activities accelerating the economic dynamism of peripheries through the creation of new and more global firms or the expansion/internationalisation of existing firms (cf. Madsen & Servais, 1997; Riddle, Hrivnak & Nielsen, 2010; Elo et al., 2015).

We welcome qualitative as well as quantitative and mixed methodologies, as long as they are well grounded in the literature. Please refer to the following articles:
• Dana, L.P. & Dumez, H. (2015) ¡§Qualitative Research Revisited: Epistemology of a Comprehensive Approach,¡¨ International Journal of Entrepreneurship & Small Business 26 (2), October 2015, pp. 154-170.
• Dana, L.P. & Dana, T.E. (2005) ¡§Expanding the Scope of Methodologies Used in Entrepreneurship Research,¡¨ International Journal of Entrepreneurship & Small Business 2 (1), 2005, pp. 79-88.

Subject Coverage
Some examples of relevant themes and research questions that might be considered include, but are not limited to, the following:
• How do context and place influence entrepreneurship and a firm¡¦s development, also internationally? For example, demanding business environments and locations, such as peripheral, emerging and remote areas, Arctic and Nordic business environments, rural countryside locations, islands and small island states-realities, and limitations of small nation states.
• How can context enable and foster entrepreneurial business and strategies through institutional frameworks, support systems and paths for developing entrepreneurship?
• How does the type and form of entrepreneurial activity influence venture survival and growth? For example, can non-ideal business context and non-mainstream businesses, such as seasonal business, niche markets, unusual life-style ventures, socio-cultural ventures, social entrepreneurship, diaspora entrepreneurship, transnational multi-actor partnerships and other portfolio entrepreneurship-solutions generate new strategies?
• How does in- and out-migration influence the entrepreneurial landscape?
• What is the role of embeddedness in local, glocal and global networks for entrepreneurship and expansion? How can multi-ethnic and international embeddedness enhance entrepreneurship and growth?
• What kind of business models, coping strategies and best practices, or failures and success stories, can be identified for internationalisation and growth, high psychic distances, logistical and virtual business solutions?
• Who are the people -the entrepreneurs and families- behind entrepreneurship? Why do entrepreneurs choose to do business in a peripheral context? Comparisons and analysis of types of entrepreneurs and their backgrounds, such as historical, local, virtual, minority, migrant, multigenerational diasporans, transnational and cosmopolitan diaspora.
• What kind of roles do family and the ethno-cultural setting have and how do they influence entrepreneurial businesses? How are family, business strategy and business development across countries managed for growth and prosperity?
Notes for Prospective Authors Submitted papers should not have been previously published nor be currently under consideration for publication elsewhere. (N.B. Conference papers may only be submitted if the paper has been completely re-written and if appropriate written permissions have been obtained from any copyright holders of the original paper). All papers are refereed through a peer review process. All papers must be submitted online. Please read our Submitting articles page.

Important Dates
Submission of manuscripts: 30 June, 2016
Notification to authors: 31 August, 2016
Final versions due: 31 October, 2016

References
Acs, Z., Dana, L. P., & Jones, M. V. (2003). Toward new horizons: the internationalisation of entrepreneurship. Journal of International Entrepreneurship, 1(1), 5-12.
Ardichvili, A., Cardozo, R., & Ray, S. (2003). A theory of entrepreneurial opportunity identification and development. Journal of Business venturing, 18(1), 105-123.
Basco, R. (2015). Family business and regional development -theoretical model of regional familiness. Journal of Family Business Strategy, 6(4), 259-271.
Dana, L. P. (1991) Bring In More Entrepreneurs, Policy Options 12(9), November, pp. 18-19.
Dana, L. P. (1996). Self-employment in the Canadian sub-Arctic: an exploratory study, Canadian Journal of Administrative Sciences 13 (1), 65-77.
Dana, L. P. (2011). World Encyclopedia of Entrepreneurship, Cheltenham, United Kingdom: Edward Elgar.
Discua Cruz, A., Howorth, C., & Hamilton, E. (2013). Intrafamily entrepreneurship: The formation and membership of family entrepreneurial teams. Entrepreneurship Theory and Practice, 37(1), 17-46.
de Lange, D. E. (2013). Embedded diasporas: Shaping the geopolitical landscape. Journal of International Management, 19(1), 14-25.
Elo, Maria (2015) Diaspora networks in international business: A review on an emerging stream of research, in Larimo, J. Nummela, N. & Mainela, T. (eds.), Handbook on International Alliance and Network Research, Edward Elgar, Cheltenham, UK, 13-41
Elo, M., Harima, A., & Freiling, J. (2015). To Try or Not to Try? A Story of Diaspora Entrepreneurship. The Future of Global Organizing (Progress in International Business Research, Volume 10) Emerald Group Publishing Limited, 10, 283-293.
Fernandez Perez, P & Lluch, A (2016, forthcoming), Evolution of Family Business: Continuity and change in Latin America and Spain, Edward Elgar, Cheltenham, UK, Northampton, MA, USA
Freiling, J. (2008). Institutional designs in international transactions-an evolutionary economics perspective. Available at SSRN 1093271.
Heikkila, E., Kostiainen, A., Leinonen, J. & Soderling, I. (2015) Participation, Integration and Recognition, Changing Pathways to Immigrant Incorporation, Turku, 2015, Institute of Migration
Hitt, M. A., Ireland, R. D., Sirmon, D. G., & Trahms, C. A. (2011). Strategic entrepreneurship: creating value for individuals, organizations, and society. The Academy of Management Perspectives, 25(2), 57-75.
Johannisson, B., Caffarena, L. C., Discua Cruz, A. F., Epure, M., Hormiga, E., Kapelko, M., Murdock, K., Nanka-Bruce, D., Olejarova, M., Sanchez Lopez, A., Sekki, A.,Stoian, M., Totterman, H., & Bisignano, A. (2007), Interstanding the industrial district: contrasting conceptual images as a road to insight, Entrepreneurship & Regional Development, 19(6), 527 – 554.
Kalantaridis, C. (2010). In-migration, entrepreneurship and rural¡Vurban interdependencies: The case of East Cleveland, North East England. Journal of Rural Studies, 26(4), 418-427.
Knight, Frank H. (1921), Risk, Uncertainty and Profit, Boston, Massachusetts: Houghton Mifflin.
Littunen, H. (2000). Networks and local environmental characteristics in the survival of new firms. Small Business Economics, 15(1), 59-71.
Madsen, T. K., & Servais, P. (1997). The internationalization of born globals: an evolutionary process?. International Business Review, 6(6), 561-583.
Moen, O. & Servais, P. (2002). Born global or gradual global? Examining the export behavior of small and medium-sized enterprises. Journal of international marketing, 10(3), 49-72.
Muzychenko, O. (2008). Cross-cultural entrepreneurial competence in identifying international business opportunities. European Management Journal, 26(6), 366-377.
Riddle, L. (2008). Diasporas: Exploring their development potential. ESR Review, 10(2), 28.
Riddle, L., & Brinkerhoff, J. (2011). Diaspora entrepreneurs as institutional change agents: The case of Thamel. com. International Business Review, 20(6), 670-680.
Riddle, L., Hrivnak, G. A., & Nielsen, T. M. (2010). Transnational diaspora entrepreneurship in emerging markets: Bridging institutional divides. Journal of International Management, 16(4), 398-411.
Rosa, P., Howorth, C., & Discua Cruz, A. (2014). Habitual and portfolio entrepreneurship and the family in business. In Melin, L., Nordqvist, M. & Sharma, P. The SAGE Handbook of Family Business. London: Sage. 364-382
Sandberg, S. (2013). Emerging market entry node pattern and experiential knowledge of small and medium-sized enterprises. International Marketing Review, 30(2), 106-129.
Sandberg, S. & Jansson, H. (2014) Collective internationalization processes – A new take off route of private small and medium sized enterprises from China. Journal of Asian Business Studies 8(1): 29-42.
Zahra, S. A. (2005). Entrepreneurial risk taking in family firms. Family Business Review, 18(1), 23-40.

Special Issue – “Family Business and Regional Development”

2

Journal of Family Business Strategy – Volume 6, Issue 4

 

Editorial

Abstract. The purpose of this special issue is to stimulate research on the interaction between the fields of family business and regional science. Despite their overlapping themes and the high relevance of family firms for many regions, the two academic fields have emerged independently from each other, and little exchange exists. We discuss not only the role family firms play within the region in order to enhance our understanding of the ways family firms may (or may not) contribute to regional economic development but also the effect of socio-spatial and institutional context on firm behavior and performance. The set of empirical and theoretical articles included in this special issue represents an important early step bridging insights between the two fields.

 

Articles

Abstract. This article investigates the effect of corruption on the export share of family firms in Eastern European countries. Using the Business Environment and Enterprise Performance Survey and panel data methods, we find that, in contrast to non-family firms, family firms are rather sensitive to corruption. In particular, the export share of family firms is positively associated with informal payments that aim to facilitate business operations. There are at least three compelling explanations for these results. First, if family firms are more risk averse than non-family firms, informal payments may represent additional export risk insurance. Second, informal payments may help family firms compensate for the lack of managerial capabilities to export. Finally, when institutional inefficiencies obstruct business, corruption may be a tool for family firms to protect their socioemotional wealth.

Abstract. Family firms and industrial districts represent the pillars of the Italian manufacturing industry. Yet, the interplay between corporate ownership and the districtual organization of the industry has been basically overlooked. This paper reports preliminary evidence on the joint contribution of family firms and industrial districts to the competitive performance of Italian manufacturing firms. Descriptive and econometric analysis shows a positive effect of family ownership on firm profitability, as measured by the industry-adjusted Return on Sale (ROS), whereas the advantage of being located in an industrial district is less evident. Empirical evidence shows that the comparative advantages of family ownership change along the firm size distribution and according to the nature and relevance of the external (districtual) economies. Specifically, the performance impact of the interaction between the “district effect” and the “family effect” changes significantly across firm size classes: while these two effects operate as a substitute in smaller sized classes, they are complements in medium-sized firms. In particular, medium-sized firms (100–250 employees) are the best at leveraging the benefits of districtual organization, but only in the case of family ownership.

Abstract. This paper studies the effects of family governance and ownership on firm employment growth, extending existing knowledge by including in the analysis the regional context in which firms are located. We create a regional taxonomy to capture the urban–rural dimension and combine this with the corporate governance structure of the firm. Our results show that, being a family firm per se does not influence employment growth. However, when corporate governance structure and regional context are combined, the urban–rural context influences family firm and nonfamily firm employment growth differently, with family firms exhibiting greater employment growth, compared with nonfamily firms, in rural areas.

Abstract. A key issue for regional development studies is to determine the exogenous and endogenous factors and the processes that occur within the territory and favor sustainable regional growth and development. Despite theoretical and empirical advances in understanding the mechanisms behind regional development, one dimension has been neglected: family business. To address this gap, I aim to link the family business and regional development literatures by developing a theoretical model that attempts to serve as a framework for interpreting the potential role that family firms play in regional development. The model is based on the concept of regional familiness, suggesting that the embeddedness of family businesses in regional productive structures affects regional factors, regional processes, and regional proximity dimensions and thus alters external economies of agglomeration and regional externalities. Theoretical and practical implications are discussed.

Regional familiness for policy-makers

This is the third piece in a three-part series on family business and regional development. Read part one: “in search of the missing link” and part two “Regional Familiness – The missing link

Part 3: What can policy-makers and family owner-manager do for regional development?

By Rodrigo Basco, Ph.D.

We are arriving at our last stop in this trip arguing that it is not thewordle 2 number of family firms within the geographical space which makes them important, but the quality of their behaviour. The economic participation of family firms can be seen through aggregate numbers such as contribution to GDP or participation on employment rate, but these numbers are just the consequences of what is happening within the region.

Nevertheless, do we know how family firm behaviour affects regional economic development?

To answer this question, in the previous post, I sustained that family firms may alter soft issues such as proximity (physical, cognitive, social, organizational and institutional proximity) that enable regional processes to boost or to hinder economic and social development.

And! So what?

This new lens, regional familiness perspective, to approach the understanding and analysing of family firm and regional development could have two main stakeholders as recipients. First, for policy-makers who are interested in promoting regional policy for economic growth and development and, second, for family firms themselves which are interested in their own image within the geographical space.

Policy-makers are strongly convinced that they can intervene in economic and social spheres to reduce regional inequality. Policies at the local, regional, national, or supranational level have targeted phenomena such as entrepreneurship, innovation, and internationalization among others without considering the composition of firms within their local productive structures. Familiness characteristics have been omitted from the analysis for tailoring regional policies. Without knowing who receives support and how they interact within the environment, there is an increase in the likelihood that political interventions may fail. Family and non-family firms react differently to political incentives because family firms have different underlying motivations, goals, and aspirations affecting their decision making.

But supporting family firms is not about reducing taxes as a consequence of lobby actions of huge family firms and wealthy families as the main European political policy is doing to favour family businesses. Policy-makers, by doing their job, have to recognize the family business role in the economic and social environment to tailor policies to increase the positive side of family businesses while reducing the negative ones. What regions and family businesses need in Bavaria, Andalucía, Central America and Bangalore is completely different and it is not related to reducing taxes. For instance, Can the long tradition of family firms recover the economic dynamic of North Rhine-Westphalia (Germany) beyond the coal and steel industry and the complacency of having hidden champions? Can the new generation of family members in the North Rhine-Westphalia region maintain the leadership of their firms as their fathers and mothers have been able to do so far? Are members or wealthy family firms agents of innovation or just mere wealth managers of their fortune?

On the other hand, family members cannot avoid their link between family name and firm as an identity footprint that requires caring for the family business image. It is not the philanthropic actions which make family firms socially responsible, but how family firms economically and socially interact with other actors within geographic places to leverage regional processes such as social interactions, learning processes, and information exchange. By doing this, family firms contribute to the improvement of the economic and social conditions favouring positive externalities such as innovation, entrepreneurship, efficiency and internationalization. Therefore, the best family firms can do for sustaining regional development is playing their linking role among family, market, and society. When one of these links is broken, family firms lose their intrinsic sense as it happened in some Latino American countries where family businesses extend their network into the political arena with the intention to sustain monopolies avoiding free market, competence, and innovation.

There is no magic recipe for owner-managers and policy-makers to tell them what to do to foster economic growth and development, but we start knowing that we have to be aware of who family firms are, what they are doing in our close environment, and how they are interacting with other players and institutions. Family firms are not the next miracle for economic growth but they have been and they will continue to be part of our economic and social life.

Family Business in Emerging, Developing, and Transitional Economies. The relevance of context

The aim of this special track is to increase the understanding of family firms in developing, emerging, and transitional economies.


Welter, F. (Institut für Mittelstandsforschung, Germany)

Ramachandran, K.  (Indian School of Business, India)

Discua Cruz, A. (Lancaster University, UK)

Fang, H. (Mississippi State University, USA)

Basco, R. (Witten/Herdecke University, Germany)

Currently, the vast majority of family business studies have mostly focused on developed economies (e.g. North America and Europe). Moreover, theories in the family business literature are often developed based on particular points of view (e.g. Anglo-American) and tested in developed economies. This limits our understanding of family firms around the world as the contexts where they have been founded, developed and operated may differ substantially. Therefore the validity, reliability and applicability of existing theories may be questioned. While recent studies have attempted to resolve this issue by focusing on culture in terms of its effects on family entrepreneurial behavior and family firm heterogeneity, (e.g. Discua Cruz and Howorth, 2008; Gupta and Levenburg, 2010; Rosa et al., 2014) and by relating family firms and their geographical context (Basco, 2015), we still know little about family businesses in developing, emerging and transitional economies.

Family firms are ubiquitous and yet unique (Howorth et al., 2010). They are heterogeneous in terms of behavior and performance (Basco, 2013). Yet, the diverse and often complex contexts in which they dwell are largely overlooked (Gupta et al., 2008). Recent studies prompt researchers to look closely at the heterogeneous nature of context (e.g. historical, institutional, spatial, and social contexts) in which family firms dwell, as it influences the genesis, development and continuity of family firms (Wright et al., 2014). There is a need to concentrate on contextualizing theory (theories in context) and/or theorize about context (theories of context) (Whetten, 2009) in family business research. Studies that acknowledge and explore unique contexts would contribute significantly to the family business field (Smallbone and Welter, 2001; Welter, 2011). This track encourages studies that acknowledge and explore family businesses in developing, emerging and transitional economies.

                The main goal of the Family Business in Emerging, Developing, and Transition Economies[i] track is to encourage the presentation of studies in such unique contexts related, but not limited, to:

  • Traditional familybusiness research topics (such as succession, management, corporate governance, and ownership among other) but contextualizing the study in emerging, developing and transition economies.
  • The economic and social impact of family businesses in emerging, developing and transition economies.
  • The origin and evolution of family businesses in emerging, developing, and transition economies.
  • Historical, sociological and anthropological perspectives to study family businesses in emerging, developing, and transition economies.
  • Cooperation and/or competitive dynamics of family businesses in emerging, developing, and transition economies.
  • The role of government policies in the start-up, development or death of family businesses in emerging, developing and transition economies.
  • The applicability of mainstream theories in understanding familybusiness behavior in emerging, developing and transition economies.
  • Strategies adopted by family businesses to counteract/compromise/obey institutional isomorphism in emerging, developing and transition economies.
  • Corporate entrepreneurship and innovation in familybusiness in emerging, developing, and transition economies.
  • Familybusiness (economic and non-economic) performances in emerging, developing, and transition economies.
  • Internationalization of family businesses in emerging, developing, and transition economies.
  • Comparative studies considering differences and similarities between family businesses in developed and developing countries or among developing countries.
  • Family businesses, familybusiness groups and family elites in emerging, developing, and transition economies.
  • Cultural aspects that frame family and familybusiness values, norms, and ethics in emerging, developing, and transition economies.
  • The impact of the context on shaping familybusiness management and governance practices in emerging, developing, and transition economies.

We believe that this special track at EURAM (European Academy of Management) will make several contributions to family business research. First, by contextualizing family businesses we may have a better understanding of the diversity of family firms across contexts (e.g. historical, temporal, institutional, special and social). Second, by contextualizing borrowed theories (agency theory, institutional theory, institutional logics, etc.), we may validate, extend or contrast mainstream theories in the family business field. More importantly, we may be able to contextualize existing theories in the family business literature aiming to improve the validity, reliability and applicability in diverse settings. Finally, by theorizing about the effects of context on family firms we expect to generate the discussions that could lead to a generic Theory of Context useful for family business studies.

A workshop about “contextualizing family firms” will take place in EURAM 2016. The objectives of this workshop will focus on awareness, theories, methods and existing works that highlight the relevance of context in the study of family firms.

 

To submit your paper to the EURAM 2016 Conference – Deadline 12th January 2016


References

Basco, R. (2013), “The family’s effect on family firm performance: A model testing the demographic and essence approaches”, Journal of Family Business Strategy, Vol. 4 No. 1, pp. 42–66.

Basco, R. (2015), “Family Business and Regional Development. A theoretical model of regional familiness”, Journal of Family Business Strategy, No. Forthcoming.

Discua Cruz, A. and Howorth, C. (2008), “Family business in Honduras: Applicability of agency and stewardship theories”, in Gupta, V., Levenburg, N., Moore, L., Motwani, J. and Schwarz, T. (Eds.),Culturally-sensitive models of family business in Latin America, Hyderabad: ICFAI University Press, pp. 222–243.

Gupta, V. and Levenburg, N. (2010), “A Thematic Analysis of Cultural Variations in Family Businesses: The CASE Project”, Family Business Review, Vol. 23 No. 2, pp. 155–169.

Gupta, V., Levenburg, N., Moore, L., Motwani, J. and Schwarz, T. V. (2008), Culturally-sensitive models of family business in Germanic Europe., ICFA University Press, Hyderabad, India.

Howorth, C., Rose, M., Hamilton, E. and Westhead, P. (2010), “Family firm diversity and development: An introduction”, International Small Business Journal, Vol. 28 No. 5, pp. 437–451.

Rosa, P., Howorth, C. and Discua Cruz, A. (2014), “Habitual and portfolio entrepreneurship and the family in business”, in Melin, L., Nordqvist, M. and Sharma, P. (Eds.),The SAGE Family Business Handbook, Sage, London.

Smallbone, D. and Welter, F. (2001), “The distinctiveness of entrepreneurship in transition economies”, Small Business Economics, Vol. 16 No. 4, pp. 249–262.

Welter, F. (2011), “Contextualizing Entrepreneurship—Conceptual Challenges and Ways Forward”, Entrepreneurship Theory and Practice, Blackwell Publishing Inc, Vol. 35 No. 1, pp. 165–184.

Whetten, D.A. (2009), “An Examination of the Interface between Context and Theory Applied to the Study of Chinese Organizations”, Management and Organization Review, Vol. 5 No. 1, pp. 29–55.

Wright, M., Chrisman, J.J., Chua, J.H. and Steier, L.P. (2014), “Family Enterprise and Context”, Entrepreneurship Theory and Practice, Vol. 38 No. 6, pp. 1247–1260.

[i] The International Monetary Fund’ list of developing countries is used to determine the countries that fall within such category: World Economic Outlook – 2014

The ‘Achilles Heel’ of Family and Non-family Firms. Nepotism, Cronyism and Ideologism

By Rodrigo Basco, Ph.D.

Rodrigo1One of the main problems in a family firm is usually linked to human resources: attracting and retaining employees. Although family and non-family employees tend to be very committed to the fate of the company, it is difficult to escape from the vicious circle of relatives working there. As members of the family are part of the company, they would rarely be replaced.  They are likely to get the managerial positions, preventing -sometimes more competent- third parties from accessing the better positions in the organization and they tend to entrench the acquired knowledge and follow cultural traditions, making it difficult to make changes when the business requires them.

The family business is influenced by nepotism: the preference to employ family or friends regardless of merit for the position. What matters the most is loyalty. This is one of the Achilles heels of family firms: the best and most qualified do not access to positions of responsibility: family first and only then, the other faithful employees.

However, nepotism is not an exclusive practice of family firms; cronyism is also an Achilles heel in non-family firms. My experience shows that the dominant group in non-family firms favours certain employees who are friends or at least loyal to their superiors. It is funny to see how inept employees are appointed to positions of responsibility, projecting the image of the directors, as family successors do with their own family members (e.g. children imitating parents and extending their shadow).

Nepotism and cronyism are practices that can be found in public enterprises too, where ideologism is the key to encourage and promote employees. Sometimes that ideologism comes from the right, other times it comes from the left, other times it is simply family corruption. For example, in a country from Latin America, e.g. Argentina, over 50 percent of senators hire their relatives –a remarkable practice of family capitalism or Pujol case en Catalonia.

The practices of nepotism, cronyism and ideologism tend to be very effective for firms or organizations in the short term because they unite the group; there is a shared vision, clear game rules – though of dubious morality, solidarity and commitment. These features make up for the knowledge that is neglected by not promoting the most qualified people. But the positive effect only lasts for a limited period of time. These practices make the company, organization or public institution stagnant, and their knowledge, limited. Resources are locked-in. In the medium term, in this context, organizations will be less efficient, less innovative and will lose all its ability to be competitive.

Under the culture of nepotism, cronyism and/or ideologism, in the medium term, it is likely that there will be a revolt of elected troops. New leaders will choose their own relatives or friends to give a new but short boost to the organization. Vicious circle…

In the family business, the children want to take their parents’ place (ownership and management) to favour their immediate family, preventing the rest of the family from taking over the reins. In non-family businesses, people want to be the finger that chooses other friends and so they try to undermine the power of the management above them. At public institutions ideologism and family corruption survive until the next elections, and then the newly appointed elected officials may continue the same practices.

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