Enterprise and Small Business Principles
Family and enterprise
Throughout history the institutions of family and economy have always been broadly interrelated. In pre-industrial societies, for example, ‘family’ and ‘working’ life were highly integrated and the family unit was seen as important for imposing some control over daily tasks. The family unit was also seen as a valuable source of labour - a place where traditional values and skills were passed on to the next generation of workers. According to Kanter (1989a, referring to the work of Hareven, 1975, and Nelson, 1975), ‘it was the family system that made possible the transition from pre-industrial to industrial ways of life. . . The family was an important work unit in city factories in England. . . Spinners in textile mills chose their wives, children and near relatives as assistants. .. [and] children entering the factory at eight or nine worked for their fathers, perpetuating the old system of authority and the traditional values of parents training children for occupations’ (1989a: 79). Similar patterns are present in developing or transition economies where the family unit is (at best) seen as a vehicle for stimulating enterprise and initiative or (at worst) a resource to be exploited for enterprise profitability.
It is not surprising, therefore, that in Western Europe, the US and the Far East, many studies have reported the close relationship between work, family and small business development. Indeed, there is now a well-established literature concerned with examining notions of family - what it means in different cultures, and how families are sustained through social structures and psychological/social reproduction patterns or processes. As such, the study of families has a long history and tradition with roots not only in sociology and psychology but also social anthropology with its interest in communities, clans and kinship patterns, and economic history with its attention to family dynasties and their contribution to economic growth (Crossick et al., 1996; Muller, 1996; Grell, 1996; Hareven, 1975; Nelson, 1975; Kanter, 1989; Cookson, 1997). But, in spite of this multi-disciplinary interest, it is rare to see interpretivist analyses that focus specifically on peoples’ whole lives and the relationality between peoples’ enterprise activities and their family relations. It is possible to argue, therefore, that there is still considerable authority and relevance in the argument put by Kanter (1989: 77) that ‘the specific transactions linking the institutions of “economy” and “family” as “connected organizers” of experience and systems of social relations’, whilst not ignored, provide scope for further study.
In the sections that follow in this chapter, a review of the different approaches that have been utilised to examine the link between family relationships and enterprise is provided. It is argued, however, that while many studies report on the interrelationship between family and enterprise, the relationality between peoples’ whole lives, family lives, their biography and orientations to enterprise or work could be brought more fully to the surface and made more explicit in research accounts. The chapter concludes with a discussion of the value of interpretivist ideas and narrative analysis for investigating the relationality of family and enterprise issues. Finally, some potential research themes and topics for further inquiry are presented.
11.3 Family and business: an overview of key approaches
The broad relationship between family relations and work issues has, as referred to above, been widely studied from various perspectives. In this section an overview is given of the ways in which family and business, in particular, are interlinked and reported in research studies.
The relationship between family and business is frequently examined in the context of businesses defined as ‘family firms’. The specific ways in which one might define a family firm are discussed more fully below. But, broadly speaking, the notion of ‘family’ in society refers to groups of people bound together by blood and marriage ties (Muncie and Sapsford, 1997) and can include the traditional nuclear form of family, extended families, kin groups and single-parent families. Business activity becomes related to family issues when family members are involved in the business in some way. This involvement can be in the form of a managerial role and/or it could be through the ownership of shares in a business. Given that the notion of family is complex - because of its different compositions, forms and meanings - so, also, is the complexity of family business forms. The monolithic concept of ‘family business’ cannot adequately describe the complexity of family-business practice (Holland and Boulton, 1984: 16). As these writers argue, the family-business relationship changes according to the structure and size of the business.
In its loosest form, family firms can be businesses where family members (such as spouses or siblings) do not have a formal role in the business but are involved ‘at the periphery’ by providing support of some kind. In these situations, the family unit often provides social capital (trust, network contacts and tacit knowledge) and emotional resources to support the business. Individuals can draw upon this social capital in the pursuit of economic advancement (Boissevain, 1974), whether this be to take advantage of unpaid flexible sources of labour, overcome market/environment obstacles, acquire emotional support or provide a safe retreat from the trials of business activity (Ram, 1994b: 51). This is because the family unit is a ‘social organisation of production’ - producing and reproducing an accumulation of mutual obligations amongst members which builds cooperation, solidarity, mutual dependence and further obligation’ (Sanders and Nee, 1996: 233). To take account of the informal role of family resources, the ‘household’ is sometimes taken as the central unit of analysis (Whatmore, 1991; Wheel ock and Oughton, 1996). Other researchers examine the complex nature of business-family relationship (Holland and Boulton, 1984; Gibb et al., 1994; Wheelock and Baines, 1998; Poutziouris and Chittenden, 1996). Further studies consider how family ties and networks have contributed to the economic development of regions and European industries (Weidenbaum, 1996; Heuberger and Gutwein, 1997; Brogger and Gilmore, 1997; Muller, 1996; Lombardini, 1996).
In its more complex form, family businesses are those that have several family members involved in owning and managing a business. The complexity of family ownership and management is intensified in businesses that have passed from one generation to another. Building on Barry’s (1989) categorisations, Litz (1995) identifies nine categories of family firms that are derived from two structural considerations: ownership and managerial control. In its more complex form, a family business is one where family members own and manage the business. But also, the Litz typology takes account of firms that have non-family ownership and where family managers are involved in the day-to-day management (e. g. in a situation where a business has gone public, or been sold to new owners, but where family members are still involved in senior management positions). This could also work the other way round where family members own a company but are not involved in managing the business (e. g. in situations where succession is planned and the family owners are either looking to keep shares in the business without having the responsibility of day-to-day management, or where the owners are planning to retire or sell the business in which case they may introduce a manager - director designate and/or initiate a management buy-out).
What is useful about the Litz (1995) framework is that it acknowledges that ownership and management structure is not static in that it can evolve from one ‘type’ to another. It takes account of a whole range of family-business related situations in between the looser and more formal definitions. This framing draws attention to the ‘intentionality’ within the business (i. e. to become, remain, erode or displace family involvement). In addition, it provides for analysis of the behavioural aspects of family firms (Chua et al., 1999) and the ways in which family relations ‘scale up’ to influence outcomes such as business success, failure, strategy and operations (Astrachan et al., 2002). It also highlights the problems, obstacles and opportunities involved as businesses make judgements about pre-family, family, adaptive family or post-family involvement (Holland and Boulton, 1984) as they move through a range of family and business lifecycles (Dyer and Handler, 1994; Gersick et al., 1997).
In broad terms, therefore, taking account of all types of family involvement, family businesses (large and small) can be estimated to comprise between 15 and 81% of all businesses in Europe and the US (Westhead et al., 1997; 2002). If, however, a more formal quantitative definition of family business is adopted, a more precise understanding of the extent of family firms within a particular economy can be achieved. Westhead et al. (2002) offer seven categories of family firms. Where businesses are defined as those in which 50% or more of the ordinary voting shares are owned by members of the largest family group related by blood or marriage and where one or more of the management team are drawn from the family, in addition to the business being perceived by the chief executive as a family firm then they report that 62.1% of their research sample constitute family businesses. If an inter-generational transition is added to the definitional criteria, then the number of family firms sampled in the Westhead et al. study is reduced to 28.6%.
Either way, family businesses constitute a substantial empirical phenomenon. And, perhaps not surprisingly, an extensive literature has evolved over the last 30-40 years concerned with emphasising the ‘specialness’ and ‘distinctiveness’ of family firms. Dyer and Sanchez (1998) and Chrisman et al. (2003) provide reviews of the range of topics published about family firms. Dyer and Sanchez (1998) argue that until the mid 1980s the field was focused largely on succession issues, and they claim that it remained ‘shallow’ in terms of theoretical rigour and systematic analysis. Since then, interpersonal family and business dynamics, firm performance, consulting to family firms, and gender and ethnicity in family firms have received more attention. In their ‘strategic reflection’ on the field, Chrisman et al. (2003) identified that topics had widened to include economic performance (15%), firm governance (10%), resources/competitive advantage and conflict (6% each), entrepreneurship/innovation, culture, goals/strategy formulation (5% each), internationalisation (3%), and professionalisation of the family firm (2%). (The figures in brackets represent the number of articles published on this topic between 1996 and 2003.) Most authors agreed that more ‘rigorous’ empirical studies began to emerge with a trend towards greater experimentation, a wider variety of analytical tools and efforts in theory building, and less emphasis on descriptive anecdotal accounts (Bird et al., 2002; Chrisman et al., 2003a; Chrisman et al., 2003b).
In the following section a strategic overview is provided of how the relationship between family and enterprise/business has been reported on and developed over the last 30 years. It is to this that the discussion now turns.
