There have been enormous interests on entrepreneurship development because of its contributions to economic advancement. A very crucial aspect of entrepreneurship is the existence of family business. It has to be emphasized that family businesses have become an integral part of any economy – developed or developing.
Many family businesses are generational enterprises, particularly in the developed world. And not all family enterprises are in the SME category. Many are quite big or are multinational corporations. It is estimated that close to 40% of fortune 500 companies are family businesses. Some of the world’s 10 biggest family-run businesses includes Wall Mart (Currently the biggest multinational corporation in the world). Tata Group, Ford, Marriot, Samsung, just to mention a few.
Family businesses made America what it is today. This country has the biggest economy in the world. She also has the highest number of millionaires, billionaires and multinational corporations in the world. They have also played similar roles- development wise. In the other advanced nations and the newly industrialised countries. If properly harnessed, family enterprises can assist Nigeria to attain the much desired economic cum technological development.
Concept Of Family Business
The concept of family business has been described differently by various scholars to connote businesses owned and managed by family members. “Family business is defined as a company that two or more members of the same family own or generate together or in succession”. Longenecker, Moore, Petty and Palich (2006)
The above implies that businesses owned and managed by members of the same family are better understood by the extent to which such members are involved in the business.
On the other hand, Sarborough (2014) defines a family business as ‘one that includes two or more members of a family with financial control of the company’. This definition emphasizes the aspect of financial control to underscore the ownership of the business.
Sharma and Hoy (2010) describes family business as ‘organisational entities in which either the individuals who established or acquired as the firm or their descendants subsequently influence the strategic decisions and decisions and life course of the firm, leading to success or failure of the business.
Drawing from the above, we can link the various definitions to establish why Kuratko (2014) sums the essence of family business in these words: “Family Businesses have become a stronger focus of research. The economic and social contributions of entrepreneurs with family businesses have shown to make immensely disproportionate contributions to job creation, innovation and economic renewal”.
Series of researchers have lauded the role which family business have played in contributing to the economic development of the most economies of the world. It is also very important to note that, such family businesses have often competed with and surpassed non-family business in performance ranking.
All over the world, cases abound where notable business that started with a family concept grew over the years to be business names that competed favourably with other non-family businesses. In 2009, a list of five major family businesses that made the top five on a list of 100 included, Wall Mart Stores Inc, Ford Motor Company, Kech Industries Inc, V Carlson, Cargill Inc. and so on.
These firms have an array of features, which characterises family control of ownership, either at strategic position or family involvement for at least two generations (Sharma & Hoy 2010).
In Nigeria, family businesses that have survived such generational progression include Ekene Dili Chukwu Transport Company, The IBRU’s, The Dantata’s, The Abiola’s, Honeywell Group, Lemaco Group of Companies, etc. These businesses interests include financial services, shipping, airlines insurance, manufacturing, education, oil and gas among others.
The Three Circle Model
This model provides an explanation of the roles conflict inherent in family businesses as it concerns values, goals and actions of principally, the family, the ownership and the business. Hence, this model explains the overlapping roles of family-owned businesses from three perspectives: Family, Ownership and Management.
Advantages Of Family Business
Several benefits are associated with family businesses, they include:
1.) Strength Of Family Relationship
Most family business develop their motivation to grow from the strength of their relationship of family ties that often bond members through both rough and smooth tide. It is often the case that during the rough tide, non-family members would opt to seek for greener pasture options.
2.) Willingness To Pool Funds
The Willingness to forfeit their income through espirit de corp to pool resources for the business is readily achieved. Such sacrifices and commitment are easily made by family members more than outsiders.
3.) Ease Of Familiness
The familiness of most family businesses are easily and strongly emphasized through mediums like high Ethical standards, strong commitment to business as characterised in the families.
4.) Founder’s Reputation
The reputation of the founder of the business often drives the other family members in the organization to greater achievement or serves as a benchmark for performance of such businesses.
Other advantages as listed by Shirman and Hitt (2003) and cited by Longenecker et al (2006) include:
5.) Firm-Specific Knowledge
Family business often have an advantage of specific knowledge shared by the firm and enhanced by the trust displayed by members.
6.) Shared Social Networks
Family members often share their networks within the business and this strengthens the businesses’ future performance.
7.) Preservation Of Family Reputation
It is easy for family members to exhibit higher commitment and caution to preserve the reputation and integrity of the business.
8.) A Focus On Long-run
Family members easily take on planning from a long range perspective than other managers who prefer yearly or quarterly results.
9.) Reduced Cost Of Control
The enormity of control is often reduced due to the fact that family members operate on reliable degree of trust, hence, the issue of monetary or systems design mechanism to check excesses is often minimal.
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Disadvantages Of Family Business
- Balancing the interest of family members and that of non-family members is often difficult.
- In most cases, family interest often beclouds objectivity.
- Non family members often require a greater amount of effort to get them committed
- The lack of familiness.
Challenges Of Family Business
Despite its seeming ease of start-off preference, family businesses are faced with some bundle of challenges as research over the years has established. Notable among them according to Onuoha (2016) include:
- Unincorporated enterprises
- Lack of succession plan
- Unawareness of government policies
- High operational costs
- Financial constraints
- Poor infrastructures
- Multiple taxes
- Lack of known core values
- Poor retirement programme
- Mortality rate
- Socio-cultural attitudes
- Technological dependence
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