Are family businesses important in entrepreneurship - Free Essay Example

Critically discuss the suggestion that  family businesses are not important  to the study of entrepreneurship. Introduction à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 2 Entrepreneurship a Deeper Examination à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.. 4 Conclusion à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢ ‚ ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 6 Bibliography .à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦..à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦.à ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚ ¦ 8 Introduction The notion that family businesses are not relevant in the study of entrepreneurship represents a contention that mathematics is not relevant to accounting. The study of the factors that cause and create entrepreneurship starts with the study of the factors as to why people start businesses a nd that very foundation does not permit the elimination of any segment or sector of classification. In most cases, the decision to start a business involves some sort of family interaction, be it from a marriage perspective, or simply a single adult interfacing with relatives. Not that the foregoing is true in all instances, but it does represent a consideration whereby the elimination of the thought of segmenting family businesses from the field of study represented by entrepreneurship. In a recent study undertaken by the Global Entrepreneurship Monitor, the GEM Global Report indicated that à ¢Ã¢â€š ¬Ã…“One Adult in Eleven is an Entrepreneurà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  (PRNewswire, 2004). The foregoing statistic represents a telling correlation in the depth as well as breathe of entrepreneurship within the human condition. In order to examine the question, the words utilized in the formulation of the postulation need to be first be clarified. The definition of an entrepreneur has been a source of debate among economists, scholars, educators as well as policy makers since t he concept itself was first brought into the human lexicon in the early part of the 17th century. The most accepted definition is generally accepted as that of economist Joseph Schumpeter who stated that it is the à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ carrying out of à ¢Ã¢â€š ¬Ã‚ ¦ enterprise and the individuals à ¢Ã¢â€š ¬Ã‚ ¦.. (who) carry them outà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  he termed entrepreneurs (Carton et al, 1998). Carton et al (1998) have expounded upon the definition provided by Schumpeter to define the entrepreneur as a person that identifies an opportunity and then puts together the needed resources to bring that opportunity into business operation. Equally important to an examination of the question of whether or not family businesses are, or are not important to a study of entrepreneurship is an understanding of what a family business is. This aspect is more complex as it represents a concept as well as business segment that has many variables. As such, it, as well as ent repreneurship shall be further examined and discussed within The following shall seek to examine the relative important of the foregoing with respect to family businesses and entrepreneurship through a study of said businesses as well as the theories and finding associated with examinations conducted to equate the relativity between the two. There are many definitions, or proposed definitions of a family businesses, however, the perspective with respect to the foregoing encompassed those which are the mom and pop shop located in a small town, to global empires such as Ford, Wal-Mart, and Levi Strauss, to name a few. Thus, the determination of which realm the context is in reference to is important in equating the question of entrepreneurship with respect to same. If it is taken to mean a business that is started by a family in whole or in part, meaning entire family participation from the inception, or just one member whereby family members or siblings where/are groomed to run the enterprise, then that is one connotation (Carter, 2000, Pp 155-165). Or, shall it mean an enterprise that is undertaken by a member of a family whereby family members either contribute to the business from the inception or join in later but the enterprise is later handed over to professional managers? If the later is taken into account then utilizing statistics gathered for the United States one would have to correlated that out of the 12.8 million self employed individuals as estimated in 2000 (National Association for the Self-Employed, 2001), fully seventy-four of the foregoing where married thus seemingly representing a quasi or de facto family business. Handler (1989, Pp 257- 276) indicated that the à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ defining the family firm is the first and most obvious challenge facing family business researchersà ¢Ã¢â€š ¬Ã‚ . In 2000, Littunen et al (2000, P. 41) indicated that à ¢Ã¢â€š ¬Ã…“à ¢Ã¢â€š ¬Ã‚ ¦ no widely accepted definition of a family bus inessà ¢Ã¢â€š ¬Ã‚ ¦Ãƒ ¢Ã¢â€š ¬Ã‚  has been categorized. Taking the broad view with regard to what constitutes a family business thus represents the categorization that shall be utilized herein. Another consideration in equating what constitutes a family business is the fact that in starting a business individuals utilize their own savings, then seek assistance and or funds from family members and or relatives, as well as associates and loan institutions (PRNewswire, 2004). But, in order to obtain a field of reference with respect to family business, Hollander et al (1988, Pp 145-164) states that it is broadly defined as a business that is either owned, or controlled or managed by one or more than one family member. A view shared by Hander (1989, Pp 257-276) and Carter, (2000, Pp 155-165). Donckels et al (1991, Pp 149-160) as a result of a study among 1132 small through medium size business enterprises in Europe conducted in eight countries found that they are averse to risk as well as being less oriented towards growth and that they utilized less socio-economic networks as well as being more conservative with regard to strategies when compared against firms that are non-family. The foregoing view is also taken by Daily et al (1993, P 82) who state that professional managed enterprises exhibit growth rates that are faster than family firms, and that they utilize strategies that are more growth oriented. Interestingly, Birkey (1986, Pp 36-43) as well as Ward (1987) state that a family business can only be assumed as such when there is a transfer of ownership and thus managerial involvement to the next generation as an intended aspect of its operation. In terms of the equating the level or levels of entrepreneurship that family businesses employ and or utilize, the question also has many variables. The research findings as reported by the study conducted by the GEM Global Report (PRNewswire, 2004) indicates that it takes an entrepreneurial spirit to start up an enterprise and attributes this to one adult in eleven as having this trait. Thus, a further examination of what consists the entrepreneurial level in terms is required. Entrepreneurship a Deeper Examination Given the broad definition of entrepreneurs as provided by Schumpeter (Carton et al, 1998), an refined by Carton et al (1998) to mean that the entrepreneur as a person that identifies an opportunity and then puts together the needed resources to bring that opportunity into business operation, the observations reached in the GEM Global Report (PRNewswire, 2004) has validity. Kautz (1999) stated that entrepreneurs have the ability to take a unique business idea and develop it, either by working as a member of a team, or individually, utilizing others, who also has the capacity to multi task and take on the various functions required in differing levels of capability. A distinction within the context of entrepreneur has been indicated by Richman (1997) who states that t he amateur entrepreneur is basically locally oriented, independent, tends to be self-reliant and utilizes an unorthodox business methodology. He states that the professional entrepreneur is characterized by being global in his view, has poses innovative as well as inquisitive attributes with a career oriented vent and is prepared to implement as well as carry through ideas and strategies developed. Some of the preceding can be attributed to family business, although it is a small percentage of the whole. Such examples have been illustrated in naming Ford, Wal-Mart, and Levi Strauss. Thus, the contributory aspects that individuals who comprise family businesses with respect to entrepreneurship can not be discounted as it represents a creative activity with new examples emerging all of the time. The context of the family business engages a more complex mixture of entrepreneurship in that the family structure itself is a variable included in the process. The foregoing also calls to mind those instances whereby an large enterprise is owned by family interests whose influence and appointment of a board constitutes a family business even though they are removed from the day to day operational aspects. The foregoing also applies to any instances whereby the influence of the originating family through the Board, holding companies or the like is a factor. The entrepreneurial enterprise represents a business seeking opportunities to profit from and grow and as such they are constantly on this quest through new products, services and market nuances as they develop (Churchill et al, 1994, p. 17). This culture generates a continued cycle in terms of renewal and examination of the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s products, goods or services, and thus the firm is always seeking to further expand and guard against stagnation. The process of entrepreneurship represents the seizing and or creating of an opportunity and pursuing it without regard as to whether there are the need ed resources or processes on hand (Low et al, 1988, Pp 139-161). The popular conception of entrepreneurship entails the individual who begins a new venture and sees to its growth, eventually resulting in its merger or sale or public offering. Such examples are noted by Bill Gates of Microsoft, Sam Walton of Wal-Mart, and Phil Knight of Nike. The fact is that entrepreneurs have a significantly different vision, and methodology than non-entrepreneurs and is illustrated by a number of studies conducted by Sashkin (1987, Pp 19-28) as well as Westley et al (1989, Pp 17-32) which discerned that entrepreneurs have the following general attributes in common; Vision, which is connected to a strategic emphasis, Vision that entails the implementation of communications as well as successful integration, Adaptation that is proactive and reveals innovation as well as a flexible response to conditions, The ability to detail and formalize an approach, Being able to generalize difficult aspects and weave through the complexities to arrive at solutions, The focus of profit orientation that is concerned with achieving positive financial results, And the understanding that risk taking is an integral aspect The preceding are attributes that can be found in all sizes and manner of family business enterprises. Conclusion The suggestion that family business are not important to the study of entrepreneurship represents a broad, complex and sweeping context that seemingly is based in the vision that such enterprises are small, local and run or operated by a few family members. The view does not take into account the potential for future growth and success as provided by numerous business examples whereby such modest beginnings lead to greater things. The notion of limiting the field of reference with respect to the question does not take into account the creativity, innovativeness and ingenuity that is the human condition. Denton et al (1989, Pp 67-69) as well as Hornaday (1992, Pp 12 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 23) see entrepreneurs as risk takers who represent the driving force of new as well as established ventures regardless of their size or complexity. Given Schumpeterà ¢Ã¢â€š ¬Ã¢â€ž ¢s (Carton et al, 1998) broad definition of entrepreneurship as later refined by Carton et al (1998) to mean a person that identifies an opportunity and then puts together the needed resources to bring that opportunity into business operation, discounting any segment that contributes to our understanding of the process might seemingly overlook an important context or contribution that furthers our understanding Bibliography Birkey, S. (1986). Succession in the family firm: The inheritorà ¢Ã¢â€š ¬Ã¢â€ž ¢s view. Vol. 3, Issue 3. Journal of Small Business Management. Carter, Sara, Jones-Evans, Dylan (2000) Enterprise and Small Business. Prentice Hall. ISBN: 0201398524 Carton, R.B, Hofer, C.W., Meeks, M.D. (1998). The Entrepreneur and Entrepreneurship Operational Definitions of their Role in Society. https://www.sbaer.uca.edu/Research/1998/ICSB/k004.htm. Assessed 08-03-06 Churchill, N., Muzyka, D. (1994). 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