Academic journal article Journal of Small Business Strategy

Founder Influence in Family Businesses: Analyzing Combined Data from Six Diverse Countries

Academic journal article Journal of Small Business Strategy

Founder Influence in Family Businesses: Analyzing Combined Data from Six Diverse Countries

Article excerpt

ABSTRACT

This study analyzed a combined sample of 593 family businesses in the United States, Croatia, Egypt, France, India and Kuwait to determine how the influence of the founder(s) relates to certain important family business managerial characteristics. Statistical analyses indicated that founder influence has significant correlations with the percentage of non-family managers, the use of a "team-management" style of management, the formulation of specific succession plans, time spent in strategic management activities, consideration of going public, and the use of equity rather than debt financing. These findings provide partial support to the few earlier writings and studies involving founder influence in family firms. The implications of these findings for family business owner/managers and for consultants to family businesses are provided, and suggestions for future research are presented.

Keywords: founder influence, business founder, family business, family firm

INTRODUCTION

In almost all countries, families are central to the ownership and management of the majority of businesses (Dennis, 2003). Within the U.S. economy, family businesses comprise an estimated 80% to 90% of the total 15 million businesses (Carsrud, 1994; Kets de Vries, 1993; Poza, 2007.). They contribute more than 50% of the total Gross National Product (McCann, Leon-Guerrero, & Haley, 1997), 50% of employment (Morris, Williams, Allen, & Avila, 1997), and have higher total annual sales than non-family businesses (Chaganti & Schneer, 1994). Furthermore, it is estimated that about one-third of all Fortune 500 firms are family controlled (Carsrud, 1994; Poza, 2007), one-third of S&P 500 companies have founding families involved in management (Weber & Lavelle, 2003), and about 60 percent of all publicly traded companies remain under family influence (Poza, 2007).

The objective of this study was to investigate family businesses with regard to the degree to which the influence of the founder impacts current and subsequent management. How does the influence of the founder (or of multiple founders) relate to the managerial characteristics of that firm? There is limited prior research to answer this question, and researchers have found mixed results (Packalen, 2007). This study expands this area of investigation, and aids in our understanding of which important family business managerial characteristics are and are not influenced by the founder in family businesses, both during the founder's active role in the firm and in subsequent years.

Furthermore, there has been growing interest in studying family businesses in a multinational context (Carney, 2007; Graves & Thomas, 2008; Oviatt & McDougall, 2005). In answering the question, "where should entrepreneurial research go in the future," Bruton, Ahlstrom, and Obloj stated the need for greater use of multicountry samples and to research multiple nations (2008, p. 7). This study contributes to the literature as it meets these two criteria. This development of multinational family business research will help to move this field toward maturity.

Thus, this current study is important in that it brings new empirical research to this limited area of research, the issue of founder influence in family business management, and that it does so in a multinational context. Furthermore, the results of this research are not only of value to small business and entrepreneurship educators and researchers, but are also of value to consultants to family businesses and to family business owner/managers themselves, both of whom may gain insight into the impact of founder influence in family businesses.

FOUNDER INFLUENCE IN FAMILY FIRMS

The impact of founder influence has been found to be a central component and major factor in influencing the behavior of family businesses (Davis & Harveston, 1999; Kelly, Athanassiou & Crittenden, 2000). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.