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Advantages and disadvantages of family businesses

Advantages and disadvantages of family businesses

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Family businesses represent the majority of companies and are an important source for the generation of jobs in most countries. Longevity is very important for the family businesses and for economies as a whole. Succession is one of the most difficult decisions for the family business, and one of the most important. When business leadership transit...

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... features include: simultaneous roles, identity feeling, long history, emotional involvement and confusion, specific vocabulary, knowing each-other and shared privacy and the importance of family business. All of these features are presented in Table 8. Source: Tagiuri and Davis (1996, p. 207) Family businesses in the last decade are seen as vital and economically significant business entities. ...

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... Other papers that examine trends in family business [38,48] have suggested that the desire for involvement and success depends on family support and communication about the new business. Other studies found that the desire to take over the family business was influenced by several variables such as the age of the business, the way it is run, its complexity, its financial performance and the time required to take over the business [49]. ...
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The main objective of the research is to analyze the factors which influence the intention to start an intergenerational family business in a developing economy, highlighting the measures that can be implemented by decision-makers to stimulate these initiatives. PLS-SEM was used to analyze the data issued from 200 valid questionnaires. The survey was applied to 950 individuals from Romania. We focused on four variables: the closeness to family members, the financial support expected from family, the independence of individuals regarding the intention to start their own business and the intention to form partnerships with family members. All the hypotheses were validated, according to the final results. Thus, closeness to family members has a direct and positive impact on both the financial support expected from the family and the intention to form intergenerational family businesses. There is also a direct correlation between the financial support received from family and the intention to have partnerships with family members. Individuals who are closer to their families are not interested in developing independent businesses. There are several studies on family businesses in Romania, but there is no research analyzing the impact of closeness to family on the intention to develop an intergenerational family business. The study is useful for the decision-makers who can create national strategies in order to stimulate families to develop their own businesses.
... Family business research has long been dominated by a focus on internal aspects, such as the interplay between family relationships and the family firm, in order to theorise on what makes family firms unique (Gomez-Mejia et al., 2007;Habbershon et al., 2003;Ramadani and Hoy, 2015), though this interplay has not always been adequately connected to business outcomes (Sharma et al., 1997). Owner families tend to influence both the strategic vision and goals as well as the strategic management process (Ramadani and Hoy, 2015;Sharma et al., 1997). ...
... Family business research has long been dominated by a focus on internal aspects, such as the interplay between family relationships and the family firm, in order to theorise on what makes family firms unique (Gomez-Mejia et al., 2007;Habbershon et al., 2003;Ramadani and Hoy, 2015), though this interplay has not always been adequately connected to business outcomes (Sharma et al., 1997). Owner families tend to influence both the strategic vision and goals as well as the strategic management process (Ramadani and Hoy, 2015;Sharma et al., 1997). The competitive advantage of family firms, characterised, i.a. by superior customer loyalty from long-term relationships, is often explained by this family influence and depends on the family's continuity and commitment to the business (Frank et al., 2012). ...
... The integration of the two systems in the family business system gives rise to hybrid identities that complicate the organisational identification of its members through competing identity claims. In this family business system, decisions arise as compromises between contradictory family and business principles, which are often suboptimal from a traditional managerial perspective focusing on economic returns (Ramadani and Hoy, 2015). How much a member identifies with the family business system influences her level of commitment towards it (Foreman and Whetten, 2002). ...
... According to the Rinvest Institute (2015) study, Kosovo's economy is dominated by family businesses (FBs). These businesses provide a special contribution to gross domestic production, employment, innovation, export and so on (Cadbury, 2000;Fattoum and Fayolle, 2009;Hacker and Dowling, 2012;Kellermanns et al., 2008;Ramadani and Hoy, 2015). FB differs from other businesses because the resources and skills in business management are primarily carried out through the interactions of family members (Habbershon et al., 2003). ...
... FB differs from other businesses because the resources and skills in business management are primarily carried out through the interactions of family members (Habbershon et al., 2003). The majority of studies about FB are focussed on family firms' sustainable longevity and ability to generate innovation (Ahmad et al., 2020), involvement of women in the FB (Campopiano et al., 2017;Ratten et al., 2017), integrated entrepreneurship models focussing on family, community and ethnic capital (Dana et al., 2020), technology, performance of FB (Alberti and Pizzurno, 2013) and succession planning in family business (Handler, 1994;Harveston et al., 1997;Kamei and Dana, 2012;Ramadani and Hoy, 2015;Ramadani et al., 2017b;Shuklev and Ramadani, 2012;Tatoglu et al., 2008). ...
... FBs should not be perceived only as small businesses, as today in the world we have FBs that have internationalized their activities and are highly recognizable corporations such as: Ford Motors, Toyota Motors, Walmart, Samsung Electronics (Ahmad et al., 2020). Ramadani and Successors' motivation and innovation capabilities Hoy (2015) list some distinguishing features between family and non-family business: size, growth, industry, funding, ownership, strategy, age, performance and cultural values. ...
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Purpose This study aims to investigate the second-generation successors’ motives to join family businesses and their ability to generate innovation within them. Design/methodology/approach A qualitative methodology is used in this study. Data were collected through structured interview with the second-generation representatives, where the data obtained helped us to come to the results and answer the research questions of the study. A total of 15 interviews were conducted. Findings The findings of this study show that the second generation is motivated to continue the family business, cases show that successors since childhood have been oriented towards building an entrepreneurial mindset and also after entering the family business have generated innovation. Originality/value The study will bring theoretical implications to the family business literature, providing scientific evidence for the second generation of family businesses, from an emerging country such as Kosovo. As Kosovo is an emerging country, the study will contribute to the literature, suggesting other studies by emerging countries in this way to see the similarities and differences.
... Among the above criteria, ownership has been one of the most used variables for defining a family firm (Ramadani and Hoy 2015). However, in order to achieve our research objectives, our study also considers family involvement in management as a relevant variable. ...
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This paper analyzes the relationship between family involvement and a firm’s growth. Family businesses present unique features, which make them different from other companies. Therefore, their desire to achieve long-term growth and/or survival could be motivated by different reasons from those of non-family firms. One of the possible strategic alternatives to guarantee these long-term objectives is the internationalization strategy. The empirical study carried out is quantitative research based on the partial least squares (PLS) methodology. The study population comprises Spanish wine and olive oil production companies. Our results show how economic reasons account for the relationship between family involvement in the business and achievement of their growth. Likewise, we find that, depending on their international propensity as moderating variable, the mediation effect of the underlying business economic motivations is total for non-international firms, whereas that effect is a partial one if the firms have become international.
... The paper's contribution is twofold. First, our study "bridges" the gap of contextual studies in a new under-explored domain (e.g., the Arab world) showing how women's entrepreneurship in developing countries cannot be seriously studied without considering the family environment (Caputo et al., 2016;Cetindamar et al., 2012;Essers and Benschop, 2009;Mehtap et al., 2017;Ramadani and Hoy, 2015). Second, the study reinforces the assumption that social/institutional elements also have a major impact on the business as well as family-related matters (Gray and Finley-Hervey, 2005;Gupta et al., 2011;Petrolo et al., 2018;Stough et al., 2015). ...
... This situation is another reason why, for an Arab woman, the family environment is a crucial element to turn attention to (Gray and Finley-Hervey, 2005). Beyond this, there are also strong calls (e.g., Fahed-Sreih and Djoundourian, 2006;Ramadani and Hoy, 2015) for contextualization studies that encompass both the family business and entrepreneurship fields (e.g., Cetindamar et al., 2012;Welter, 2011) concerning regional factors (Gupta et al., 2011;Welsh and Raven, 2006). ...
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Women-owned businesses represent a significant segment of the contemporary economy upon a global basis. However, women entrepreneurs still experience more obstacles than men depending on cultural context; for example, research on the Arab world concerning the interaction between women entrepreneurs and their families remains under-developed. Consequently, we ground our study upon an enhanced framework of agency theory, which includes family altruism. We examined the relationships between business-family interface (BFI) enrichment components and the performance of firms headed by female entrepreneurs women in Jordan and Sudan. Specifically, we investigated if and how the country level of political and social stability moderates these relationships. The findings suggest that the relationship between the family-related objective factor (family financial support) and the performance of firms headed by female entrepreneurs is not affected by the country’s political and social stability context. Conversely, the family-related subjective factor (family moral support) is affected by this context. Our study bridges the gap in contextual studies on the Arab world concerning the success of women-owned businesses and confirms how institutional elements affect business in addition to family-related matters. Implications for future research and public policy are discussed.
... Entrepreneurial small-family firms place more emphasis on family issues and family unity than on the market or financial aspects of the firm (Habbershon et al., 2003;Randerson et al., 2016). The general definition of a family business covers any business in which the bulk of the ownership or control lies in a family, and in which two or more family members are involved directly (Ramadani and Hoy, 2015). Research on family business has proliferated in the last decades, while most publications refer to the governance form (Rovelli et al., 2021) rather than to the family as a form of social support. ...
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Purpose To better understand the emergence of small-scale entrepreneurial firms in the under-researched transition economy of Cuba. Design/methodology/approach Given the scarcity of reliable publicly available information and restrictions on private data collection in Cuba, in-depth interviews were conducted with a panel of small-scale entrepreneurs at three different points in time. Evolutions are analyzed over this period. Findings Family can overcome institutional constraints by helping the entrepreneur deal with market and social obstacles. Despite the absence of a supportive entrepreneurial ecosystem, these new entrepreneurs and their families have been able to transform longstanding passive attitudes into positive steps to set up new small-scale ventures in a country facing unprecedented internal and external challenges. Originality/value A new conceptual model of family support for entrepreneurship in transition economies is presented. The findings lend weight to institutional theory on overcoming constraints in emerging markets and extend the theory of family entrepreneurship to new transition economies.
... The author described an entrepreneurial spirit of first entrepreneurs of modern BiH in this region, and how they grew and developed an entrepreneurial culture from desperate business activities into the present entrepreneurship landscape. Moreover, several research studies have been conducted on Balkan region's transitional economies, discussing family businesses in the region (Dana and Ramadani, 2015;Ratten et al., 2017;Ramadani and Hoy, 2015;Rexhepi et al., 2017). Recently, Palalic (2017) and Palalic and Durakovic (2018) delivered new evidence on "gazelles and mice", stressing the importance of leadership in achieving better business performance. ...
Article
Purpose –The aim of this study is to investigate a mediation role of leadership over business performance and socioemotional wealth, within two Bosnian family businesses. This research purpose brings interesting highlights regarding how family businesses embedded the role of leadership that it might have a tremendous influence on business performance while tuning the socioemotional wealth. Design/methodology/approach – This study is based on qualitative research methodology. The sample is collected based on a purposive sampling method as in most qualitative studies. As the instrument for data collection is concerned, in-person-semi-structured interview has been employed with the owner-manager of each particular-family firm. Thus, two case studies were conducted and analyzed. Findings – The research contributes both to the theory and the practice. From the theoretical perspective, it contributes to the theoretical knowledge of leadership as an important role in relationship between the socioemotional wealth and business performance. The practical contribution of this research could be summed up in the sense that business owners should seek to employ positive leadership vibes to create a good socioemotional wealth so that would be positively reflected in overall business performance of a family business. Other findings are further discussed. Originality/value – Scarce empirical research offers mixed results while theoretical propositions that organizational governance (leadership) plays an important role in this relationship, is somehow neglected. Hence, this is the first empirical study on this particular that investigates this topic in Bosnia and Herzegovina (BiH), even in the Balkan region. Keywords: Socioemotional wealth, Family business, Family firm, Leadership style, Business performance, Bosnia and Herzegovina, Balkan region
... Kuratko and Welsch (2004) assert that succession relates to anxiety where it is related to family firm loss of identity, death and legacy concerns and loss of power. Although the succession process takes time (Ramadani and Hoy, 2015;Ward, 1987), founders who do not plan for succession create a vacuum and may result in leaving subsequent successors with no direction to follow (Baron and Lachenauer, 2017;Muna and Khoury, 2012). White et al. (2004) emphasise the difficulty of the succession planning process and explain how each family firm is unique based on the familial relationships. ...
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This paper contributes to the family business literature by exploring the link between trans-generational succession and socio emotional wealth (SEW) from an institutional perspective. It examines the neglected role of the macro environment in the formation of SEW. A single case study of a family firm is investigated. The firm has successfully experienced trans-generational succession in Palestine, an 'extreme context' that is underrepresented in the current literature. Findings are drawn based on the utilisation of an exploratory inductive research approach. Results reveal that having an 'opportunistic entrepreneurship' style is a driving force in exploiting the macro environmental challenges which exist where family firms operate. Along with adopting micro mechanisms at an organisational level, a collective nature of SEW characterised by strong family identification was formed. The paper concludes by presenting a fresh perspective of constructive trans-generational succession of family firms operating in volatile environments and exhibiting resilience to uncontrollable challenges.
... The family business is the most critical contributor to wealth creation and employment, which plays a vital role in most countries' economic development (Ramadani & Hoy, 2015). Senegović et al. (2015) mentioned that about 80 to 90% of worldwide private companies are family businesses. ...
... These definitions vary based on different combinations of ownership and management. Ramadani & Hoy (2015) defined a family business as a firm where one or more family members are part of the board of directors; the company ownership and control are also in the family's hands. Machek & Votavova (2015) stated that family business has three characteristics: a family member owns most of its shares, the controlling right, decision of share distribution, and final decisions are taken by the family members. ...
... Although being risk-averse compared to nonfamily firms (Zaefarian et al., 2016;Menendez-Requejo, 2005), internationalisation became a crucial strategy (Fern andez and Nieto, 2005), especially for guaranteeing survival and growth (Hashi and Krasniqi, 2011;Kontinen and Ojala, 2012a;Yuliansyah et al., 2016;Krasniqi and Branch, 2020). Switching from a domestic into an international operated company is challenging, as family firms face various barriers (Gallo and Pont, 1996;Fern andez and Nieto, 2005;Kontinen and Ojala, 2010;Ramadani and Hoy, 2015). Therefore, in this context, social networks are of crucial importance in overcoming barriers to internationalisation. ...
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Purpose – The purpose of this study is to examine the impact of family firms’ types of social networks on internationalisation. By investigating the mechanisms and the process and complexity regarding the operation, function and impact of social networks, this paper aims to gain insights and understand the dynamism concerning the content, and process as well as build rich and detailed construct analysis. Design/methodology/approach – This study used a qualitative case study as a research strategy to examine the impact of social networks on family firm internationalisation. A qualitative research strategy was used as the impact of networking relations and structure is challenging to be measured statistically. Findings – The findings suggest that family firm internationalisation was gradual and characterised by an incremental learning process. This process facilitated the networking relations and structures that helped firms improve their quality, product diversification and set competitive prices. Research limitations/implications – This study’s first limitation is that it focused mainly on low technology manufacturing firms. This paper recommends examining how high technology firms maximise social networks. Secondly, this paper examined family firms; therefore, this paper recommends comparing and contrasting networking relations and family and nonfamily firms’ social structure. Thirdly, being limited only to social networks, this study did not focus on the impact of ownership; this paper suggests future studies to examine family ownership and involvement in firm internationalisation. Originality/value – Understanding how firms’ social network types influence family firms’ internationalisation in a transition economy is critical to ensuring family businesses’ expansion. This study explains how family firms use social networks to internationalise, extending the current understanding of family business literature in transition economies. It also provides implications for policymakers and family firms managers for improving the growth prospects of family businesses.