Abstract
Family businesses, with no apparent heir, face the risk of discontinuity. While a number of family businesses rely heavily on non-family employees, the role of non-family employees in the continuity of family businesses is under-researched. The workers’ co-operative model offers one way to address this gap as it represents a model whereby non-family employees gain a stake in ownership whilst the family remains involved. In practice, conversion to ensure continuity is actively promoted in a number of countries. In this paper, the authors explore the role of the workers’ co-operative model as one possible solution to succession difficulties facing family firms. Based on the reported experiences in a number of countries, we identify the motivations behind conversion, the barriers faced and the benefits accruing. We find that, in theory, the worker co-operative model merits the attention of family business scholars as a means of securing continuity and survival of family business. We explore the factors that appear to aid or hinder successful conversions in practice and we make recommendations to policy-makers surrounding the supports required to encourage and facilitate successful conversion.
Highlights
This paper extends the dialogue on the applicability of co-operative research to family business research as introduced by Goel (2013) and expanded by Karhu (2015) and Goel and Roessl (2015) by proposing conversion to workers’ co-operatives as one solution to the succession difficulties family businesses encounter
A “Family Firm Transfer” (FFT) initiative targeted at family owned businesses with a potential difficulty transferring the business to the generation and devised to facilitate employee buy-outs was introduced in Ireland in the 1990s by the state-run Co-operative Development Unit (CDU)2 (Carroll, 2005)
Underpinning the Family Firm Transfer policy initiative was the belief that small and mediumsized enterprises in Ireland needed strengthening, including the need to ensure the continuity of family businesses at risk due to succession problems (Carroll, 2005)
Summary
This paper extends the dialogue on the applicability of co-operative research to family business research as introduced by Goel (2013) and expanded by Karhu (2015) and Goel and Roessl (2015) by proposing conversion to workers’ co-operatives as one solution to the succession difficulties family businesses encounter. A “Family Firm Transfer” (FFT) initiative targeted at family owned businesses with a potential difficulty transferring the business to the generation and devised to facilitate employee buy-outs was introduced in Ireland in the 1990s by the state-run Co-operative Development Unit (CDU) (Carroll, 2005). The rationale behind the initiative was that the model could prove advantageous to non-family employees, as the family remained involved in the business post-transfer allowing nonfamily employees to retain and have access to idiosyncratic knowledge family members may possess. As the family members remain active in the business, they are motivated to transfer skills and tacit knowledge to non-family employees. Advantages to non-family employees were seen to include improved income and status (Carroll, 2005)
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