Academic journal article International Journal of Entrepreneurship

A Framework of Family Business Professionalization

Academic journal article International Journal of Entrepreneurship

A Framework of Family Business Professionalization

Article excerpt

INTRODUCTION

Despite of family business ubiquity (Astrachan & Shanker, 2003; La Porta et al., 1999) and more of two decades of research efforts the investigation of this entity is still early in its development. Continuity and renewal have been mentioned as the reason d'etre of family businesses in their pursuit of longevity. To achieve sustainable business performance and harmonious family relationships, family firms should transition toward more formal structure and processes as growth and succession occur. The most popular concept in the literature to describe this transformation is professionalization that has emerged as an important topic (Zahra & Filatotchev, 2004). The family business literature that stems from both academics and practitioners has stressed the need of professionalization. However, professionalizing has been identified as a key challenge for family businesses as many family firms are neither willing nor able to advance a professionalization agenda (Stewart & Hitt, 2012).

RESEARCH QUESTION

This conceptual paper investigates the following research question: How do professionalization needs of a family business evolve as it moves along its life cycles? The goal is to identify the professionalization priorities for each stage of the life cycle. The complexity stems from the overlapping of family, ownership, and business sub-systems. For example, some of the business professionalization priorities might be seen as threats to the family's socio-emotional wealth. The focus of the paper is on closely held entrepreneurial family businesses. The family business definition used in this paper comes from Kelly et al. (2000). According to this definition, a family business has significant family ownership, significant family involvement in management, and the expectation that control and leadership will be passed to future generations. To answer the research question and to develop the conceptual framework of family firm professionalization, the paper draws on the organizational life cycle theory (Churchill & Lewis, 1983; O'Rand & Krecker, 1990), and the theoretical and empirical perspectives on family business professionalization. These findings are supported by empirical evidence based mainly on secondary sources as a result of an extensive literature review. From an academic perspective, the aim of the proposed framework is to advance the investigation of an important family business topic that has been identified by scholars as an area where additional progress is needed. From a practitioner' perspective, the framework would potentially guide family firms on implementing a professionalizing strategy with corresponding steps across different life cycle stages. For a company it would be beneficial to be prepared to cope with the challenges ahead as every stage of the organizational life-cycle brings along a new entity that deals with different business, ownership, and family issues.

THE ORGANIZATIONAL LIFE-CYCLE CONCEPT

Life cycle is among the most popular concepts in social sciences (O'Rand & Krecker, 1990). The organizational life cycle concept focuses on the evolution of business from a growth perspective. It defines the evolution of an organization through a sequence of stages that moves the company from a start-up to a mature and larger company. The organizational life-cycle theory was initiated within the economics literature (Penrose, 1959; Rostow, 1960), as inspired and borrowed from biology, and further refined by business researchers starting with Chandler (1962) as the pioneer of the organizational life cycle concept, and continuing with numerous others such as Greiner (1972), Adizes (1979), Kimberly & Miles (1980), Churchill & Lewis (1983) and Kazanjian (1988). As a result, a vast array of models that spread between three (Smith et al., 1985) and ten stages (Adizes, 1979) was developed. While there is little agreement on the number of stages, the models share many common characteristics on the evolution of the business as a sequence of predictable stages and on the nature of various stages (Dodge et al. …

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