Abstract
In this paper, we outline how the divorce of the main owner-manager of a family-owned SME impacts the family business system. Divorce not only represents a pronounced family failure, but it can also be a highly stressful condition for the family members involved. To date, the impact of divorce on family businesses remains understudied, despite rates of divorce as high as 50% in some countries. Drawing on almost a decade of experience with engaged scholarship at the interface between divorce and family businesses, we selected four typical case studies to illustrate different coping strategies and show how divorce can change the strategic outlook of the family business system in SMEs by altering the commitment of the owner family to maintain the business in the family as well as ensuring the business continuation per se. Moreover, we exemplify how legal ownership regulations can shape family businesses' strategic scope after divorce by impacting the financial situation. We integrate these findings into a model of family business system adaptation.
Highlights
A key characteristic of family business is the intertwined and reciprocal relationship between the family and the business they own, aiming for both a profitable business and family harmony (Sharma, 2004)
Thereafter, we further analyse these differences in relation to the legal contracts they had in place prior to the divorce and the financial repercussions related to these different legal solutions
Our findings contribute to the family business literature by illuminating the impact of divorce on the family business system
Summary
A key characteristic of family business is the intertwined and reciprocal relationship between the family and the business they own, aiming for both a profitable business and family harmony (Sharma, 2004). Such harmony is not easy to achieve – studies point toward different types of conflict typical for family firms, such as clashes deriving from the overlap between family and business cultures, (e.g., Harvey and Evans, 1994) or during transgenerational succession processes, (e.g., De Massis et al, 2008; Ramadani et al, 2017a, 2017b). The sustainability of any family business depends on its ability to respond and adapt to changes in either the family or the business component of the family business system when these changes occur (Olson et al, 2013)
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