Academic journal article European Research Studies

The Pattern Analysis of Family Business Succession: A Study on Medium Scale Family Business in Indonesia

Academic journal article European Research Studies

The Pattern Analysis of Family Business Succession: A Study on Medium Scale Family Business in Indonesia

Article excerpt

1. Introduction

Business organizations have evolved through a series of life cycle and they are conceptually different from one to another (Adizes, 1979; Churchill and Lewis, 1983; Griener, 1972). The life cycle model of family business organizations often goes through a cycle. Their growth (organizational outgrow) has commonly been supported by people with excellent managerial capacity more than by those of the owners' family. These models commonly ignore succession issues and failures that most family businesses concern.

Seen from "total" approach or perspective, family companies consist of subsystems. In this respect, businesses, families, and entrepreneur founders are regarded as entities (Beckhard and Dyer, 1983a; Dyer and Handler, 1994; Thalassinos et al., 2012; Sultanova and Chechina, 2016). Each subsystem has a unique identity and culture, moves through its own life cycles, and has its own subsystem. They are dependent on each other. There will be potentials about competition and conflicts among subsystems or opposition to one another (Tcvetkov et al., 2015). However, it is also possible to have opportunities or alternatives to cooperate and synergize with one to another. Kepner (1983) refers to the "co-evolution" of the family and the company when currently discussing how each affects and get affected by others.

Family company system is relatively stable if each member has been tied to the seniority of their late founders or elder family members. Nevertheless, their system becomes quite unstable when employing professionals in their companies. It is common that conflicts among family members and professionals employed by a family company become unavoidable. Beckhard and Dyer (1983a) show successful adaptation was affected by company conditions (such as state of maturity, health economics) and the dynamics of the family (e.g. family closeness, interdependence among family members, and competition among relative members, and financial conditions of the family members).

Family businesses have provided significant contributions to country's economic growth. Fransisca and Praptiningsh (2014) stated that the family owned businesses were the milestones to the country as well as to the world's economy. In fact, family companies have controlled 80-98% of national businesses and even the world. In China 70% of large enterprises were family-owned (Martin, 2010). In the same way in the United States, 24 million family businesses have absorbed 62% of the workforce and accounts for 64% of (Gross Domestic Product) GDP of the country.

A 90% of 15 million large companies were those dominated by family groups, In India, 16 of the 20 key business sectors and 66% of private sector assets were controlled by family firms. The family business has big impacts on Indonesia's economic condition. Martin (2010) said 61% of the Indonesian companies were worth over US $ 50 million, and 81% of large-scale enterprise belonged to family businesses. A survey in Australia shows that businesses were mostly owned by family-owned companies of the first-generation: 20% of the business was owned by the first successor and not more than 9% by the next successor (Astrachan, 2003). In Indonesia, many big companies were family businesses. In reality, 90% of 15 million companies were dominated by family business groups. However, not more than 3% of the family company could survive as founded in 1932 to 1943, and only 37% of the companies that were built in from 1992 to 2003 could survive until 2007 (Nature and Gunawan, 2007). The results showed that 70% of family businesses did not survive the second generation and 90% would not continue into the 3rd generation (Family Firm Institutee, 2004). Thus maintaining the family business seems to be a very important factor and can be done by regenerating or conducting good succession (Breckova and Havlicek, 2013; Breckova, 2016; Dasanayaka and Sardana, 2015; Firescu and Popescu, 2015; Havlicek et al. …

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