Family inertia as a barrier to digital technology adaptation by small Philippine family businesses

Abstract

Family businesses across the globe dominate economies and it is expected that they too would be leaders in digital technology adaptation. Yet, the rate by which family firms adapt digital technology differs depending on many factors that include firm size and culture. While some research indicated that larger sized family firms had the capacity and capability to be a digital innovator compared to smaller sized family firms, other research indicated the reverse. This has turned the attention to organizational culture. It has been found that the inclination of firms, regardless of size, to adapt digital technology was affected by the level of tightness or control the business leader had on the decision-making process. Family business leaders who were not exposed to new knowledge and who possessed a controlling nature, resisted change, even if their next generation family member introduced digital improvements. The resistance is called family inertia and is more often seen in small-sized family firms. Thus, even if a family firm had the financial resources to invest in digital technology, the presence of family inertia impeded such investment. To illustrate the phenomenon, this chapter looks at the case of two small-sized family firms based in the Philippines. It captures the story of two next generation family members who had first-hand experience of how family inertia is exemplified. The over-powering nature of the older generation family members has led the heirs apparent to question whether the family firm was a viable option for them given the circumstances. If that feeling of helplessness by next generation family members is widespread among family firms across the globe, then the longevity of family firms is put at risk. Consequently, family business leaders may have to gain new knowledge and rethink their decision making to process so as to manage family inertia.