Academic journal article Journal of Business and Entrepreneurship

Generational Business Relationships: Inherited Advantages and Hindrances in Family Operated Businesses

Academic journal article Journal of Business and Entrepreneurship

Generational Business Relationships: Inherited Advantages and Hindrances in Family Operated Businesses

Article excerpt

ABSTRACT

One overlooked area in the study of business relationships is within and between small businesses, particularly in family businesses passed from generation to generation. The authors delineate the advantages and hindrances of this intimate level of relationship marketing and develop a conceptual framework involving strong ties, common corporate cultures, and the presence of highly idiosyncratic investments. Insights gained from case studies suggest that generational business relationships differ markedly from other relationships.

INTRODUCTION

Beginning in the 1980's, academic researchers began their odyssey toward understanding long-term business relationships (Anderson & Narus, 1984; Dwyer, Schurr & Oh 1987; Frazier, Spekman, & O'Neil, 1988; MacNeil 1980; Varadarajan & Rajaratnam, 1986). To complete our understanding, it is important to explore the full spectrum of naturally occurring relationships between organizations. Toward that end, we introduce the concept of generational business relationships, those preexisting relationships inherited along with the business, in family-run businesses.

Relationship research has focused on inter-organizational groups that can be characterized according to several variables, including structure, industry, strength, quality, and length of association (Crosby, Evans, & Cowles, 1990; Dabholkar, Johanson, & Cathey, 1994; Dwyer, Shurr, & Oh, 1987; Young, Gilbert, & Mclntyre! 1996; Ring & Van de Ven, 1992). While the length of the association between relational members has been studied in past research, this research has mainly focused on long-term orientation, rather than how long the partners had conducted business together (Dwyer, Schurr, & Oh, 1987; Gundlach, Achrol, & Mentzer, 1995; Kalwani & Narayandas, 1995). No study has focused on generational relationships that are inherited from one generation of managers to the next. Generational relationships may not be common in many of the relationships previously studied, but they appear relatively common in the context of family-owned businesses because managers' have grown up with the business and have tendencies to use partners familiar to them.

Abundant evidence supports potential advantages of long-term relationships, including lower operating costs, greater sales, and higher customer satisfaction (Hakansson, 1989; Mohr & Spekman, 1994; Morgan & Hunt, 1994; Webster, 1992). However, attaining these goals is not easy, and up to 70% of all business relationships fail to reach their potential (Brown and Pattinson, 1995). Such a high failure rate makes it appealing to study long-term relationships where additional factors critical for their success might be detected. Developing a clear understanding of how these extremely long-term relationships function might uncover elements of these relationships that limit the potential success for one or both parties.

This paper examines generational relationships. Using a case analysis approach, examples given by key informants within three family-owned businesses are presented. These examples show some of the advantages that these businesses encountered, postulating on their contribution to the long-run success of these ventures. They also indicate some hindrances that these businesses have had to overcome. The cases give insight into ways businesses sometime suffer with both internal and external sub-optimal relationships. The following discussion develops the conceptual foundation upon which this research was focused. The case methodology is then presented and followed by a discussion of each of the three cases researched in this project. The authors provide a summary and discussion for future research.

CONCEPTUAL DEVELOPMENT

Nature of Long-Term Relationships

The shape of the organization has changed substantially from the hierarchical structure characteristic of large organizations prior to and into the 1980's. …

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