Family Factors in Small Family Business Growth

Abstract

IntroductionBusiness goals commonly include survival, profit, and growth. In order to survive, a business needs to be profitable to replenish its resources and to grow to avoid stagnation and to keep abreast of competition. Complicating this process, family businesses may add goals such as enhancing family welfare to this equation. Family goals may not be performance-oriented in nature and may take precedence over the business goals of growth or profitability (Chrisman, Chua, and Steier, 2003). For instance, providing employment for less than fully productive family members may be most important to family business leaders.Scholars have recognized the duality of family businesses, referring to the family side and business side of family firms (Stafford, Duncan, Dane, and Winter, 1999) and hypothesizing that the success of such companies lies in the interplay and management of the two components. While the family side is often considered to be full of emotion and perhaps detrimental to the business, instances occur wherein the family may save the business. For example, the family may use personal savings to help the business through a financial crisis (Stafford et al., 1999). Although the business side is important for firm survival, it is not acceptable to sacrifice the family for the good of the business. This reciprocal impact of the family and the business distinguishes family business studies from all others (Sharma, 2004). Both the family and the business must respond to external disturbances. Therefore, if the family is content, the business is successful, and ifthey both respond appropriately to external events, the family business will be successful.Although there are many definitions of family businesses in the literature, we employ the following definition in this study. A family business isgoverned and/or managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families (Chua, Chrisman, and Sharma, 1999, p. 25).The focus of our study is on small family businesses. The Small Business Administration defines small businesses in the U.S. as companies with less than 500 employees (or $7.5 million in average annual sales for many nonmanufacturing industries); however, there are exceptions (SBA, 2015).This study addresses how family factors may affect the business goal of growth in small family firms. Is it true that family involvement limits family firm growth? For instance, family firm leaders may entangle family and business goals and relationships (Kidwell, Eddleston, Cater, and Kellermanns, 2013). Relationship conflict may be detrimental in the family firm (Davis and Harveston, 2001), and family members may feel trapped in their family business (Schultze, Lubatkin, and Dino 2003). Conversely, family involvement may strengthen family firm growth. Family firms are known to: rely on idiosyncratic knowledge to improve firm performance (Bjuggren and Sund, 2001); employ more informal decision making than non-family firms (Daily and Dollinger, 1992); utilize a more centralized decision-making process and less formalized control systems (Morris, Williams, Allen, and Avila, 1997); have greater flexibility in decision making (Poza, Alfred, and Maheshkwari, 1997); make quick decisions when required (Ward, 1997); and respond quickly to their business environment (Dreux, 1990). Therefore, this research was guided by the following question. Why do some small family firms grow and add multiple outlets across a geographic area, while others remain in one location? Although we recognize that many factors, such as family, business, and macro-environmental, affect small family business growth, the focus of our study is on the family factors that lead to company growth. These family factors separate small family businesses from non-family concerns. …