Binkley, Bivens, Highers, Poole, & Walker, 1990). Case study is the best suited ...... late founder, I don't know how the children do not think of their father's legacy.
AN INVESTIGATION INTO THE DECISION MAKING PROCESS IN VENTURE CREATION: A COMPARISON BETWEEN FAMILY BUSINESS AND NON-FAMILY BUSINESS
BY LEILANIE MOHD NOR
THESIS SUBMITTED IN FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITI TUN ABDUL RAZAK 2014
VERIFICATION PAGE I certify that the Board of Examiner met on 28th February, 2014 to conduct the final examination of Leilanie Mohd Nor on her thesis entitled “An Investigation into the Decision Making Process in Venture Creation: A Comparison between Family Business and Non-Family Business” in accordance with the University requirements. The Board recommended that the candidate be awarded the degree of Doctor of Philosophy. The members of the Board of Examiners are follows: Datuk Dr. Ismail Rejab Professor Universiti Tun Abdul Razak (Chairman) Dr. Siri Roland Xavier Associate Professor Universiti Tun Abdul Razak (Internal Examiner) Dr. Mohamed Dahlan Ibrahim Professor Universiti Malaysia Kelantan (External Examiner) This thesis was submitted to the Senate of Universiti Tun Abdul Razak and has been accepted as fulfillment of the requirements for the degree of Doctor of Philosophy. The supervisor is:
Dr. Barjoyai Bardai Professor Universiti Tun Abdul Razak (Supervisor) …………………………. (
)
Dean Graduate School of Business Universiti Tun Abdul Razak
Date:
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UNIVERSITI TUN ABDUL RAZAK
DECLARATION OF COPYRIGHT AND AFFIRMATION OF FAIR USE OF UNPUBLISHED RESEARCH
Copyright @ 2014 by Leilanie Mohd Nor. All rights reserved.
AN INVESTIGATION INTO THE DECISION MAKING PROCESS IN VENTURE CREATION: A COMPARISON BETWEEN FAMILY BUSINESS AND NON-FAMILY BUSINESS No part of this unpublished research may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the copyright holder except as provided below. 1.
Any material contained in or derived from this unpublished research may only be used by others in their writings with due acknowledgement.
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UNIRAZAK or its library will have the right to make and transmit copies (print or electronic) for institutional and academic purposes.
3.
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Affirmed by: Leilanie Mohd Nor
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Abstract of the thesis presented to the Senate of Universiti Tun Abdul Razak in fulfillment of the requirements for the degree of Doctor of Philosophy.
An Investigation into the Decision Making Process in Venture Creation: A Comparison between Family Business and Non-Family Business
By LEILANIE MOHD NOR
ABSTRACT This exploratory study was to investigate the differences between family business and nonfamily business in the decision making process when creating ventures. How, why, and possibly for whom are these decisions made for; and further explored on how different the decision making process is between family business and non-family business. The research involved a deep investigation into three family businesses and compared it with one nonfamily business in several cases of decision making on substantial investments. The interviews were carried out over nine months. The findings of the study proved “why” the patriarch created the ventures. The reasons were not solely for business growth but the priority was for his family, i.e. “what they want for the family, rather than what they get from the business”. The substantial contribution of the study is “how” the mode of new ventures (new venture managed by family managers vs. new venture managed by non-family managers) was decided upon based on the philosophy of the patriarch, his motivation, the speed of decision making process, the level of permissiveness and the perceived trust within the family and employees. This study also contributed in developing an emergent theory and model of the decision making process in venture creation within a family business, therefore, promoting the theoretical development in family business research. The boundary of the research is within the “intangible” component of the resource-based view (RBV) and is limited to the perspectives of the founder in his decision making on venture creation. The emergent theory deserves foremost attention for future theory testing to validate the theory and this would certainly add scholastic value in the field of entrepreneurship, specifically, in the area of family business.
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ACKNOWLEDGMENTS
With utmost sincerity, praise to Allah, the Almighty and the Merciful, for His guidance and stewardship, He has granted me the opportunity and capability to proceed and complete this thesis successfully. This thesis is produced with the assistance and guidance from several people. Hence, I would like to take this opportunity to offer my sincere thanks and gratitude to all of them.
First and foremost, my deepest gratitude to my two supervisors, Professor Dr. Barjoyai Bardai, Universiti Tun Abdul Razak, Malaysia, and Professor Dr. Christian Lechner, Toulouse Business School, France, for their continuous support, warm encouragement and thoughtful guidance. They have tremendously contributed to improving the quality of this thesis and shared their knowledge and wisdom. They were very prompt in giving feedbacks and reviews on the planning, design and progress of this research. I am definitely at awe of their constant support, collegial spirit and endless patience.
I would like to put on record my sincere appreciation and thanks to the faculty, colleagues and staff of the Bank Rakyat School of Business and Entrepreneurship, Universiti Tun Abdul Razak, especially to Prof. Dr. Garry Clayton and Assoc. Prof. Dr. Siri Roland Xavier for their continuous support, encouragement, motivation and constant reminders to me to complete this invaluable journey. I would also like to extend my gratitude to the faculty and staff of the Graduate School of Business, Universiti Tun Abdul Razak, namely Asst. Prof. Dr. Yap Ching Seng for their frequent advise and continuous support and guidance.
Last but not least, I would like to express my sincere appreciation and gratitude to my family for bestowing and offering crucial and tremendous support and encouragement over the years: my parents, Capt. Hj. Mohd Nor bin Abd. Rahman and Hjh. Jamilah Abdullah, my siblings, Asst. Prof. Dr. Rizal and Milanie; my son, Muhammad Emillio Daniel, and my husband, Assoc. Prof. Dr. Mohar Yusof. I am deeply indebted to their support and understanding throughout my doctoral work. The faith and trust that my family has put on me has brought me to where I am today and has given me the strength and encouragement to carry out and complete this study.
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TABLE OF CONTENT
VERIFICATION PAGE………………………………………………………………….. COPYRIGHT PAGE……………………………………………………………………… ABSTRACT………………………………………………………………………………. ACKNOWLEDGEMENT………………………………………………………………… LIST OF TABLES………………………………………………………………………… LIST OF FIGURES………………………………………………………………………..
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CHAPTER 1 .............................................................................................................................. 1 INTRODUCTION ..................................................................................................................... 1 1.0
Introduction to Research Area ......................................................................................... 1
1.1
Background of Research ................................................................................................. 3
1.2
Research Problem ............................................................................................................ 4
1.3
Research Scope and Focus .............................................................................................. 6
1.4
Research Purpose and Objectives.................................................................................... 7
1.5
Research Questions ......................................................................................................... 9
1.6
Research Methodology .................................................................................................. 11
1.7
Significance of the Study .............................................................................................. 11
1.8
Organisation of the Thesis ............................................................................................. 13
1.9
Definition of Terms ....................................................................................................... 15
1.10 Conclusion ..................................................................................................................... 17
CHAPTER 2 ............................................................................................................................ 18 LITERATURE REVIEW ........................................................................................................ 18 2.0
Introduction ................................................................................................................... 18
2.1
Entrepreneurship ........................................................................................................... 19
2.1.1 Business Ownership ...................................................................................................... 20 2.1.2 Portfolio Entrepreneurship ............................................................................................ 20 2.2
Family Business ............................................................................................................ 21
2.3
Decision Making ........................................................................................................... 25
2.3.1 Rationality ..................................................................................................................... 27 2.3.2 Entrepreneurial Cognition ............................................................................................. 28
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2.4
Decision Making Process .............................................................................................. 29
2.5
Family Business and Decision Making ......................................................................... 32
2.6
Entrepreneurial Orientation (EO) .................................................................................. 34
2.7
Resourced-Based View (RBV) ..................................................................................... 34
2.7.1 STEP Research Model................................................................................................... 36 2.8
Family Entrepreneurial Orientation............................................................................... 37
2.8.1 Entrepreneurial Motivation ........................................................................................... 38 2.9
Research Gaps in the Literature .................................................................................... 39
2.10 Conceptual Framework ................................................................................................. 42 2.11 Research Questions ....................................................................................................... 43 2.12 Summary ....................................................................................................................... 44
CHAPTER 3 ............................................................................................................................ 45 RESEARCH METHODOLOGY............................................................................................. 45 3.0
Introduction ................................................................................................................... 45
3.1
Purpose of the Study...................................................................................................... 45
3.2
Qualitative Research...................................................................................................... 46
3.2.1 Case Study ..................................................................................................................... 47 3.3
Case Study Research ..................................................................................................... 49
3.4
Research Design ............................................................................................................ 51
3.4.1 Getting Started ............................................................................................................... 51 3.4.2 Selecting Cases .............................................................................................................. 52 3.4.3 Crafting Instruments and Protocols ............................................................................... 58 3.4.4 Entering the Field .......................................................................................................... 63 3.4.5 Analyzing Data .............................................................................................................. 66 3.4.6 Shaping Propositions ..................................................................................................... 67 3.5
Rigor and Trustworthiness ............................................................................................ 68
3.5.1 Trustworthiness ............................................................................................................. 69 3.6
Scope and Limitation..................................................................................................... 71
3.7
Conclusion ..................................................................................................................... 72
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CHAPTER 4 ............................................................................................................................ 73 DATA ANALYSIS .................................................................................................................. 73 4.0
Introduction ................................................................................................................... 73
4.1
Analyzing within-case data ........................................................................................... 73
4.2
Searching for cross-case comparison ............................................................................ 75
4.2.1 Patriarch......................................................................................................................... 79 4.2.2 Process ........................................................................................................................... 81 4.2.3 Trust............................................................................................................................... 87 4.2.4 Values ............................................................................................................................ 93 4.2.5 Speed ............................................................................................................................. 95 4.2.6 Permissiveness............................................................................................................... 99 4.2.7 Motivation ................................................................................................................... 104 4.2.8 Mode of New Venture ................................................................................................. 111 4.3
Conclusion ................................................................................................................... 116
4.3.1 Proposition 1................................................................................................................ 117 4.3.2 Proposition 2................................................................................................................ 117 4.3.3 Proposition 3................................................................................................................ 118 4.3.4 Proposition 4................................................................................................................ 118
CHAPTER 5 .......................................................................................................................... 119 DISCUSSION AND IMPLICATION ................................................................................... 119 5.0
Introduction ................................................................................................................. 119
5.1
Discussion of Research Questions .............................................................................. 119
5.1.1 Research Question 1 .................................................................................................... 120 5.1.2 Research Question 2 .................................................................................................... 124 5.2
The Emergent Theory .................................................................................................. 131
5.3
Credibility of the Theory ............................................................................................. 134
5.3.1 Part 1: A good (and strong) theoretical contribution in family business research which is reliable and explains the phenomenon of interest. ...................................... 135 5.3.2 Part 2: How to make significant, incremental improvements in current family business theory. ........................................................................................................... 137 5.4
Implication to Practice................................................................................................. 138
5.5
Conclusion ................................................................................................................... 139
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CHAPTER 6 .......................................................................................................................... 141 CONCLUSION ...................................................................................................................... 141 6.0
Introduction ................................................................................................................. 141
6.1
Research Summary ...................................................................................................... 141
6.2
Research Overview...................................................................................................... 143
6.3
Research Contributions ............................................................................................... 144
6.4
Research Limitations ................................................................................................... 146
6.5
Future Research ........................................................................................................... 147
6.6
Conclusion ................................................................................................................... 150
BIBLIOGRAPHY .................................................................................................................. 151 APPENDIX A: Interview Schedule ....................................................................................... 168 APPENDIX B: Interview Protocol Checklist ........................................................................ 172
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LIST OF TABLES
Table 2.1: Key elements with different types of family business definition ........................... 24 Table 2.2: Key literature on family business. .......................................................................... 25 Table 2.3: Key literature on decision making within a family business .................................. 27 Table 2.4: Characteristics of the 3 approaches to making decision by Mintzberg and Westley (2001) ..................................................................................................... 30 Table 2.5: Key literature on decision making process ............................................................. 31 Table 2.6: Key literature on decision making in family business ............................................ 32 Table 3.1: Firms selected for this study ................................................................................... 55 Table 3.2: Selection criterion of firms ..................................................................................... 57 Table 3.3: Grouping of participants ......................................................................................... 59 Table 3.4: Detailed description of the participants .................................................................. 62 Table 3.5: Strategies to enhancing rigor and trustworthiness (Padgett, 1998) ........................ 69 Table 4.1: Summary of theoretical connection for “speed” between constructs ..................... 99 Table 4.2: Summary of theoretical connection for “permissiveness” between constructs .... 104 Table 4.3: Cross-case comparison on the two new ventures – the motivation for finding a place for the family versus the motivation for willingness for growth ........... 105 Table 4.4: Summary of theoretical connection for “motivation” between constructs .......... 111 Table 4.5: Cross-case comparison on the two new ventures – new venture managed by family managers versus new venture managed by non-family managers .......... 112 Table 4.6: Summary of theoretical connection for “mode of new venture” between constructs ............................................................................................................ 116 Table 5.1: Proposition 3 - Motivation ................................................................................... 124 Table 5.2: Summary of theoretical connection constructs for decision making in creating ventures .............................................................................................................. 125
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LIST OF FIGURES
Figure 2.1: Overview of literature review................................................................................ 18 Figure 2.2: Three-circle model of family business .................................................................. 22 Figure 2.3: The STEP Research Model ................................................................................... 37 Figure 2.4: Model of entrepreneurial motivation and the entrepreneurship process ............... 39 Figure 2.5: The landscape of family business outcomes ......................................................... 41 Figure 2.6: Research domains related to the study .................................................................. 42 Figure 2.7: Central Phenomenon : Priori constructs ................................................................ 42 Figure 3.1: Process of building theory from case study research ............................................ 50 Figure 4.1: Raw depiction of the initial emergent theory ........................................................ 77 Figure 4.2: NVivo node distribution with reference to coding ................................................ 79 Figure 4.3: Patriarch laying the foundation at the family level ............................................... 80 Figure 4.4: Cross-case comparison on leadership approach of the patriarch. ......................... 86 Figure 4.5: NVivo text search query for “trust” including synonyms ..................................... 87 Figure 4.6: Trust is built by the patriarch ................................................................................ 88 Figure 4.7: Cross-case comparison on the level trust among families and the level of trust among employees ......................................................................................... 92 Figure 4.8: Cross-case comparison on the relationship between trust and values .................. 95 Figure 4.9: Cross-case comparison on speed in relation to trust in the formation of new ventures ................................................................................................................ 97 Figure 4.10: A depiction of the focal construct of “speed” in venture creation ...................... 98 Figure 4.11: Cross-case comparison on the relationship between permissiveness and trust among families in assisting in decision making ......................................... 100 Figure 4.12: A depiction of the focal construct of “permissiveness” in venture creation ..... 103 Figure 4.13: A depiction of the focal construct of “motivation” in venture creation ............ 110 Figure 4.14: A depiction of the focal construct of “mode of new venture” in venture creation. .............................................................................................................. 115 Figure 5.1: Emergent Theoretical Framework for Family Business Decision Making Process in New Ventures .................................................................................... 132 Figure 5.2: Emergent Theory for the Taxanomy of Family Business Decision Making Process in New Ventures .................................................................................... 133 Figure 5.3: Emergent Theory for the Taxanomy of Family Business Decision Making Process in New Ventures Mapped to the Four Cases ......................................... 134
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CHAPTER 1 INTRODUCTION
1.0 Introduction to Research Area
This introductory chapter establishes the essential elements that shape this study. It begins with an overview of the research scope and context, which is directed on venture creation in large privately-owned family businesses in Malaysia, and the decision making process that led to the venturing in new businesses. Subsequently, this chapter presents a brief background of the study, which then links to the research problems and the gaps in current knowledge. Ultimately, the overall purpose of the study, the specific research objectives and research questions are emphasised. It is imperative to submit that the development of family business research augurs well for economic development and growth of the world’s nations and vice versa.
Family businesses are an important segment of the global economy. In the World Competitive Report 2000 produced by the Lausanne Management Centre, 80% of the enterprises around the world are more or less considered family enterprises (Lee & Li, 2009). In addition, Poza (2010) reiterated that globally, family businesses represent an estimated 8098% of all businesses in the world’s free economy, 37% of Fortune 500 firms are familyowned, and family firms generate more than 75% of the Gross Domestic Product (GDP) of most countries outside the United States of America (U.S.A). Recently, The Pearl Initiative and Price Waterhouse Coopers (2012) reported, based on the latter’s global survey of family businesses that many of the largest multinational corporations began as family firms. Further, 90% of the world’s businesses can be defined as family firms, both in developed and emerging markets, and the majority are small and medium-sized enterprises (SMEs).
In a study of fifteen countries (ten in Europe, two in Latin America, one in North America and two in Asia Pacific), Timmons and Spinelli (2007) posited that family businesses account
1
for more than 60% of businesses in the respective economies and they contributed no less than 35% to the GDP. This notion is further supported by Poza (2007; 2010) who advocated that family enterprises employ more than 85% of the working population around the world. In the U.S.A., family enterprises contribute half of the job opportunities. In Germany, family enterprises create 66% of GDP and account for 75% of the total national employment. In Great Britain, the number of employees in family enterprise is 50% of the country’s workforce.
Family enterprises contributed significantly to the GDP of South East Asian nations and the region, with South Korea reaching 48.2%, Taiwan 61.6% and Malaysia 67.2% (Poza, 2007; 2010). This supported Ngui’s (2002) contention that family businesses contributed more than half of the Malaysian GDP. In addition, Yeung (2004) conceived that Chinese family firms dominated the market capitalization of South East Asian nations: Thailand (90%), Singapore (81%), Indonesia (73%), Malaysia (60%), and the Philippines (50%). The Asian Family Businesses Report 2011, which studied on 3,500 publicly listed family businesses in Singapore, South Korea, Taiwan, China, Hong Kong, India, Indonesia, Malaysia, the Philippines, and Thailand, found that between 2000 and 2010, family businesses outperformed non-family controlled firms in seven of the 10 Asian countries observed. Family firms in China, Malaysia, Singapore and South Korea exhibited the strongest outperformance against their local standards.
Nevertheless, when it comes to venture creation, Poza (2007; 2010) suggested that approximately 85% new businesses fail within their first five years of operation and among those that survive; only 30% were successfully transferred to the second generation of the founding-family owners. And the odds get worse in the transition between the second and the third generations, and the third to the fourth generations, when only 12% and 4% of such businesses, respectively, remain in the same family. This phenomenon is also prevalent but many others have shown to be even stronger as they maneuver towards their fourth and fifth generation. How do companies such as the Lee family from China (fifth generation), the Deague family from Australia (into its sixth generation), the Dunn family of U.S.A (into its fifth generation) or even the Frescobaldi family of Italy which dates back to 1300, remains strong up to this day?
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1.1
Background of Research
The headline revealed, “Escada sold to India’s Mittal Group”. In November 2009, Escada, the Munich-based, iconic European luxury fashion was sold to Megha Mittal, daughter-inlaw of India-born billionaire Lakshmi Mittal. His son, Aditya Mittal, was the finance director and president of the family corporation Arcelor Mittal, the world's largest steel firm. Family businesses are stereotypically known for conservative planning and organic expansion which could limit their growth compared to non-family enterprises (Astrachan, 2010), of late, more family businesses are either acquiring or diversifying their businesses, not only to sustain their growth, but also to create wealth for and within the family, and to ultimately continue their business legacy.
Quite similarly in Malaysia, the NAZA Group in July 2009 diversified from the automotive business, as its core business, to property development. Another example is the MOFAZ Group that has constantly diversified into many different businesses in the past 10 years, from automotive, to properties, international and domestic trading, hospitality and services, wellness and wellbeing, and, green technology. Other examples include, Germany’s Merck Group acquiring Millipore Corp. in March 2010; America’s Mars, Inc. taking over Wrigley in October 2008.What then, is the motivation behind family businesses when decisions such as these take place? How, why (and possibly for whom) are these decisions made? How different is the decision making process between family businesses and non-family business?
Past research has demonstrated that family firms perform better and outperform their nonfamily counterparts, in many instances and situations whether or when performance is measured by the bottom line, value creation by the shareholders or in their capacity to create jobs or ventures. This is often attributed to family businesses possessing unique advantages born out of unique and dynamic family and business interaction (Poza, 2010). However, there has been scant and limited research carried out to understand the intricacies of family-owned businesses; this in turn inhibits the development of an integrated theory of family firms (Brice, 2005).
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Dyer (2003) explained that business researchers usually overlook the family dimension even when it strongly exists in the firm they study and he further suggested that a number of research areas would benefit from including variables such as strategy, governance, competitive advantage, organisationculture, social capital/networks, groups/teams, conflict, leadership succession and change. Furthermore, the field of family business needs greater attention and more outlets for theory and research, suggestively and notably because the proportion of family businesses to all other businesses is overwhelming as is the contribution of family businesses to Gross World Product (GWP), employment and employment growth (Astrachan, 2010).
1.2
Research Problem
Even when there is no reservation about the value, position and contribution family businesses make to the Malaysian economy, there is still a paucity of information and studies about the family business landscape in Malaysia, especially in the current period. At the beginning of the 21st century, a business periodical and a consulting firm provided some insights of the landscape. Draim (2001) wrote in a business periodical that likely up to 80% of Malaysian businesses are family-owned. SJGT (2002), a consulting firm, conducted a survey on the attitudes and dynamics of family businesses in Malaysia. Two hundred twenty five companies responded to the nationwide survey consisting 55% small, 35% medium and 10% large scale enterprises.
The findings of the study indicated, among others, that most of the businesses in Malaysia were run by the founder (59%), while 30% were run by the second generation, the majority of whom are children of the founder. Further, a substantial number of respondents (84%) formally plan for their expansion and are addressing globalization (77%) by modernizing facilities, upgrading human resources and forming strategic alliances. In general, the study concluded that the business environment is relatively young and as such there is good potential to learn and grow.
4
Several quantitative studies by researchers studying Malaysian family firms have focused on corporate governance, board composition, ownership structure and firms’ financial performance using secondary and financial data of public-listed companies (Che-Ahmad et al., 2003; Amran & Che-Ahmad, 2011) while a few compared non-family and family firms’ performance of these public-listed companies (Ibrahim et al., 2008; Amran & Che-Ahmad, 2009; Ong & Gan, 2013) mainly because it was conceived that majority (perhaps, close to 80%) of the companies listed on Bursa Malaysia are family-owned (Huei, 2012). This pinpoints a gap in the literature that is the recognition of the dynamics, challenges and complexity of running a family business is different from managing a non-family business. Thus, studies employing qualitative strategies and design are needed to discover and theorise pertinent aspects of family business management, for instance, in decision making.
Family business leaders have their own ways and styles in making decisions. The element of “patriarch” plays a major role as “he” is the founder, the leader, the father, and everyone follows it without questioning it. Their perspectives of decisions and possibly their appetite in taking risks are also different from non-family business leaders. Therefore, a study on the decision making made by entrepreneurs within a family business will enrich the knowledge of mechanisms that drive the companies to participate in the economy, thus creating growth and prosperity for society. With such small survival rate in transgenerational entrepreneurship, it is imperative that one necessity for business survival is the family members’ ability to make sound decisions together (Tisue, 1999).
The search for understanding these differences, the significance and relevance of these differences in explaining the position of family businesses and non-family businesses, and perhaps these criteria, could give a better explanation to the different phenomenon in the family environment, and could guide future business development, more specifically in Malaysia. The ever-changing business environment, the unique make-up of the family, and the lack of research that can tailor to specific situations in the orientation of decision making process, calls for this qualitative study to be attempted and positions it to contribute meaningfully to the body of knowledge. Research in family business management is still at an infancy stage in Malaysia, hence, this study fills the lacuna in the discipline particularly in explaining and theory building the decision making process in venturing into new business.
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1.3
Research Scope and Focus
This study selects companies that venture into new business creations as a diversification strategy. These companies, comprising of family businesses and a non-family business, must be big enough to exhibit sizeable revenue, business growth, and innovativeness in their product or services. As this will be a qualitative grounded theory study, generalization of the results cannot be applied to other businesses because in a grounded theory study, the theory is generated by immersion in the data, as well as by constant comparison and analysis. The task of the researcher is to enable full and transparent description of the analysis so as to enable future researchers to carry on in transferring the results (Charmaz, 2006).
In this study, the main focus is on the entrepreneur, within a business group (Lechner & Leyronas, 2009), and his multiple activities (“portfolio entrepreneurship”) in order to exploit new opportunities and examining his entrepreneurial cognition, how he functions as an entrepreneur, the dynamics of his family environment, and how he makes and arrive at such a decision. In doing so, the entrepreneur needs to be intuitive, creative and able to forecast, as these are essential elements of decision making (Fontela, Guzman, Perez, & Santos, 2006). However, these entrepreneurs are somewhat motivated by what surrounds him, i.e. the family context, therefore, it is also necessary to understand the way the family works as a system, and how this affects the entrepreneurs and the individual family members.
The understanding of the complexity and dynamics of a family business is becoming more prevalent among researchers. Fast decision making is not only seen as necessary but crucial to ensure speed and efficiency in responding to market opportunities and maneuvering through market uncertainties and tumultuous environment. The ability to make creative decisions with the flexibility to lower operational cost could reduce operational risks and achieve rapid growth (Lee & Li, 2009).
Although strategic decisions may be intentionally rational, overall the process of making the decision may be incremental (“logical incrementalism” and the process by fragmentation, constant evaluation, intuition and political behaviour) (Quinn, 1980). Rationality may be said
6
to characterize behaviour that is logical in pursuing goals (Dean & Sharfman, 1993a; 1993b). However, entrepreneurs simply do not have the time to go through a thorough, rational decision making process (Bhuin, 2003). Entrepreneurs often deal with a situation without planning in advance, which decreases the firm performance when confronted with more complex problems (Levander & Raccuia, 2001). Complexity of the environment will lead to increased use of complete planning, but changeability of the environment will lead to less frequent use of rationality (Gelderen, Frese, & Thurik, 2001).
This study uses the cognitive perspective (Matlin, 2002), an emerging perspective within the field of entrepreneurship to understand entrepreneurs in making decisions and solving problems (Sternberg, 1999). Furtherance to that, Mitchell and Busenitz (2002; 2007) defined entrepreneurial cognition as the knowledge structure that people use to make assessments, judgments, or decisions involving opportunity evaluation, venture creation, and growth. Baron described decision making and reasoning, and how people use stored knowledge for making decision and in reasoning about the situation. Baron (2004) suggested that due to these complexities, future researches need to suggest how to simplify decision making and find tactics to have quality decision making.
1.4
Research Purpose and Objectives
This research attempts to explore and investigate the process of and factors that affect decision making by entrepreneurs within three family businesses and a non-family business. It is done so with the intention to understand how the entrepreneurs decide when creating ventures and to compare between family businesses and non-family businesses. Venture creation (as a diversification strategy) is chosen as the outcome variable because there is a unique reason to why and how family businesses are embarking into such a strategy. Among the reasons which differentiate family businesses to non-family businesses predicted at the onset of this research were: 1) the expectation of wealth creation for the family, and within the family; 2) preserving their family legacy.
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Past studies argued that family businesses venture into new businesses with the expectation of wealth creation for the family, and within the family; and preserving their family legacy (Cramton, 1994). As opposed to non-family businesses which focus on maximizing profit to give greater returns to their shareholders. This pattern is not seen in non-family businesses because wealth creation is not the goal of the business owners, neither is legacy, because their names are not tied to the company. Instead, non-family business owners may be concerned with the company's reputation rather than legacy.
Decision specific characteristics influence the decision making process more than any other environmental, organizational and managerial factors (Papadakis, Lioukas, & Chambers, 1998). A lot of the decision making process are controlled by the family patriarch (Lee & Li, 2009). In most cases, the decision making by the founder is likened to the authoritarian style, and everyone follows it without questioning the decision or the process of carrying out the decision (Tisue, 1999). However, other influences may also affect the founder’s decision making, such as his experiences and abilities and the team that backs him up (Wells, 1974); the size of investment, cash out potential, geographic location and product differentiation (Tyebjee & Bruno, 1984); and knowledge and personal psychology (values) (Harris, 1998). Nonetheless, one cannot separate the entrepreneur from the family context because the contribution of the family members and the significance of the family dynamics; and despite the ideology of individualism, entrepreneurs belong to households that are emotional and economic units (Cramton, 1994).
Therefore, what motivates entrepreneurs to decide on such strategies? Aldrich and Zimmers (1986), and, Caroll and Mosakowski (1987) described that entrepreneurial activity can be conceptualized as a function of opportunity structures and motivated entrepreneurs with access to the resources (Shane, Locke, & Collins, 2003). And there are different levels of motivation as the entrepreneur is influenced not only by his perception of risk but also evaluating the opportunity (Shane & Ventakamaran, 2000).
The idea behind the family firm research is that the family could be the critical variable that must be explored (Astrachan, 2003; Dyer, 2003; Habbershon, Williams, & MacMillan, 2003;
8
Rogoff & Heck, 2003; Zahra, 2003). In identifying what this “critical variable” is, Habbershon et al. (2003) introduced a new perspective called “familiness” which describes unique, inseparable, and synergistic resources and capabilities emerging from family involvement and interactions. To further discover and explain the family as the critical variable, this study explores into why and how family business owners reason and make decisions when they create ventures.
Predicting that the reason and how family firms make decisions are different compared to non-family firms, this study intends to examine these differences and why they are different when these entrepreneurs embark on diversification strategies, i.e. creating ventures. In addition, this study intends to investigate the family dynamics prevalent among family businesses. This study also intend to examine potential factors, which comprise of family resource pool, industry, family life stage and family involvement, and how these causes relate to innovativeness in the firms’ decision making process.
The above research purpose suggests the following research objectives: 1) To identify the process of and factors that affect decision making by entrepreneurs. 2) To understand how these entrepreneurs decide what actions to take when these entrepreneurs embark on diversification strategies, i.e. creating ventures.
1.5
Research Questions
There is limited family business literature that explores on decision making process and what may be the factors that influence the entrepreneurs to come to such a decision, and taking internal factors of resource-based view (RBV), i.e. family domain into the context of the study. In embarking to investigate this phenomenon, the research questions for this study are:
9
1. How do family business owners make their decisions when they create ventures? i.
What is the decision making process when the founder/CEO is creating ventures?
ii.
Who does the founder/CEO consult in the decision making process when creating ventures?
iii.
What are the founder/CEO’s priorities in creating ventures?
iv.
What are the references to which the founder/CEO will seek when he needs more information pertaining to venture creations?
v.
What are the resources required by the founder/CEO during the decision making process of creating ventures?
vi.
What does the founder/CEO do when there is a disagreement during the decision making process of creating ventures?
vii.
How is the commitment level of family and employees during the decision making process of creating ventures?
2. What is the difference between family business and non-family business in their decision making process in creating ventures? i.
How different is the decision making process in creating ventures between family business and non-family business?
ii.
Why is there a difference between family business and non-family business in their decision making process in creating ventures?
These two central research questions guide the study in understanding the process of decision making, the reasons to making decisions in creating ventures among entrepreneurs within the family business and non-family business as well as uncovering the differences and dynamics as to how and why family businesses decide on the actions taken when venturing into new businesses.
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1.6
Research Methodology
The research utilizes the case study approach, with three family businesses and a non-family business selected based on: 1) Annual sales turnover 2) Innovativeness towards products or process 3) Transgenerational entrepreneurship
Even though the three family businesses and the non-family business are in different industries, the common characteristics between them are in terms of their annual revenues, i.e. more than RM100 million, that they exhibit business growth and innovativeness in their product or services. In addition, these companies have embarked on venture creation as a diversification strategy. In the case of the three family businesses, they were set up in 1970s and family members in the second generation are involved in the business.
The method of gathering primary data was by way of one-to-one interview using a combination of semi-structured and open-ended questions. Further information was also collected via observation of the day-to-day practices and examination of documents. The collected data was collated, organized, transcribed and analyzed by the researcher. In doing so, the research needed to classify, sort and arrange information, examine relationships in the data, and combined analysis with linking, shaping, searching and modeling. A detailed explanation of the research methodology is provided in Chapter 3.
1.7
Significance of the Study
It is important to explore this decision making process to understand the difference between family businesses to non-family businesses when venturing into new business. A research by Miller and Le Breton-Miller (2005) found that family businesses have shown a higher return on investment, have greater value, are operated more efficiently, and carry less debt
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compared to non-family businesses (McConaughy, Matthews, & Failko, 2001). In another study that was done by Lee (2006), of family businesses in the S&P 500, it showed higher profit margins and higher reinvestment of revenues compared to non-family businesses.
It is also equally important to understand the dynamics of family businesses and their decision making process in venturing into new businesses, the factors involved and reasons to why such a decision is made. Further, this research distinguishes itself from other studies by reconnoitering the family domain and perspective as well as uncovering emerging themes, patterns and relationships within the initial conceptual framework, in addition to probing and scrutinizing the decision making process by the person who is at the helm of the business.
Questions were raised (refer to the Interview Schedule in Appendix A) such as what are the factors contributing to such decision making? Why does he make such a decision, the reasons to it? Who is involved in making such decisions? Who does he consult with when making such a decision? What motivates him to make such a decision? How was the decision made? Why does he make such decisions? Based on the qualitative data and answers gathered and the use of the case study approach, the researcher is able to develop and construct a theory. The developed and emerging theory is subsequently used to explain the difference between family businesses and non-family businesses.
The direction of this study is opportune and answers the calling addressed by a recent study published in the Family Business Review’s 25th anniversary, whereby the authors encouraged researchers to investigate both the business and family domain for a distinctive and more complete understanding of family enterprises (Yu, Lumpkin, Sorenson, & Brigham, 2012). This research can benefit and assist the leadership of these family businesses, their families and stakeholders to appreciate and recognize the factors and processes involved in decision making that can enhance the development of new businesses. Other major stakeholders of this research are the public, policy makers, industry practitioners, family businesses and their future generations, family business advisors and consultants, as well as educators and trainers who are involved in teaching family business courses and conduct training programmes for family businesses.
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Further, findings and theory built from this study will help family businesses and business organizations to realise the influence family domain, perspective, resources and dynamics has in enriching economic value, organisational growth, profitability, sustainability and wealth creation of the family businesses as well as its impact on the external environment and the national economy as a whole by increasing productivity, improving best practices, creating ventures and enhancing international competitiveness, and, vehemently contributing to the growth and development of the economy and society.
1.8
Organisation of the Thesis
The thesis is organised into six chapters. The first two chapters address the background of the study with regards to the research scope and context of the study, the literature and development of the background and focal theories, and the conceptual framework. The remaining chapters present the empirical research, covering the aspects of methodology, analysis, discussion and conclusion.
Chapter 1: Introduction This introductory chapter provides an opening vignette of this study, by discussing the background of the study and the importance of the topic as it explains the problem statement and highlights the research questions. The first chapter declares the objectives while focusing on the issue and presents clear insight into the study’s organization.
Chapter 2: Literature Review This chapter presents the theoretical background by means of a review of the relevant literature. The chapter establishes the boundary for the research as well as placing theories and the initial conceptual framework for the research questions. In addition, the research gaps addressed by the study were considered and positioning of the study was highlighted within the relevant body of knowledge and literature.
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Chapter 3: Research Methodology Chapter three is concerned with the research methodology, the methodology justification and description of the research process and methods used in this study. It presents, in detail, the rationale for adopting the qualitative research method and processes related to data collection and instrumentation in order to attain data validity and reliability.
Chapter 4: Data Analysis Chapter four focuses on the qualitative results of data collection and analysis of twelve personal, individual interviews. The analytical process that includes coding, constant comparison method and the naming of patterns, concepts and categories as well as data saturation is shown and elaborated. The research gathers rich data sufficient to answer both research questions and to ground the theoretical contribution.
Chapter 5: Discussion and Implication Chapter five presents the answers to the research questions, drawing upon the overall data analysis and research findings. The chapter also examines the implication of the findings for theory and practice.
Chapter 6: Conclusion This chapter provides an overall summary of the thesis. Subsequently, the research contributions, research limitations, future research directions, suggestions for further research and overall conclusion are presented.
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1.9
Definition of Terms
There are multiple ways in defining a family business. A study by Chrisman, Chua and Sharma (1996), found twenty one different definitions of a family business out of the two hundred fifty journal articles which they reviewed. Clearly, there are some problems in defining what a family business is, however, family business researchers have come to a consensus of what kind of elements are important in family business definitions (Brunaker, 1996; Westhead & Cowling, 1998). The most common element in family business definition is family ownership, which requires a prerequisite that the family owns 50% of more of the shares (Fenton-O’Creevy, Abbas Gelides, & Davies, 1989). Another element which is deemed important is family involvement in the management of the business. And if the family is actively involved in the management of the business, it is a family business (Daily & Dollinger, 1992).
However, family business researchers tend to favour most the definition where both the ownership and the management elements are present, i.e. the definition that states that one or more families should hold a certain amount of controlling power, and that the family members should have an influence on the management function of the business (Donnelley, 1964; Rosenblatt, deMik, Anderson, & Johnson, 1985; Reynolds, 1995).
Of late, in defining family business, the family business researchers are focusing on two important elements, i.e. the intention to transfer the business to the next generation, and the statement by owners and managers that they themselves perceive the business as a family business (Brunaker, 1996). And some researchers regards that the willingness to transfer the family business to the next generation as one of the key aspects in family business definitions (Ward, 1987).
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The referral for family business text book, Family Business (Poza, 2007) adopted an inclusive theoretical definition of a family business that focuses on the vision, intention, and behaviour, vis-à-vis succession, of the owner: 1) ownership control (15% or higher) by two or more members of a family or a partnership of families; 2) strategic influence by family members on the management of the firm, whether by being active in management, by continuing to shape the culture, by serving as advisors or board members, or by being active shareholders; 3) concern for family relationship; and 4) the dream (possibilities) of continuity across generations.
Other terms which are used in this study are: i.
Chief Operating Officer The leader who shares the responsibilities and leadership of the firm, and is at the helm of the business.
ii.
Diversification strategy Diversification strategy is expanding firms' operations by adding markets, products, services, or stages of production to the existing business. The purpose of diversification is to allow the company to enter lines of business that are different from current operations.
iii.
Entrepreneur The original founder of the business, and if the founder has passed away:
iv.
-
For family business, it is the present CEO, (i.e. the next generation in-line)
-
For non-family business, it is the present CEO.
New Venture New venture is a complex and multidimensional phenomenon in developing and launching a new business.
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v.
Portfolio entrepreneurship Portfolio entrepreneurship, or also known as business groups, is the activity of an entrepreneur simultaneously owning and engaging in several businesses and starting new ventures, a process where entrepreneurial diversification occurs.
vi.
Theory In terms of grounded theory study, theory is defined in many ways, an empirical observation, a category, a predisposition, an explication of a process, a relationship between variables, an explanation, an abstract understanding, and a description (Charmaz, 2006).
1.10 Conclusion
This first chapter has presented an overview of the research. The background, research problem, research scope and focus, research objectives and research questions were described and elaborated. Then, the research contents and definition of terms were outlined. This chapter aims at acquainting the readers with the holistic picture before elaborating on the research theme in the subsequent chapters.
A deeper discussion regarding the theoretical background by means of a review of the relevant literature is presented in the subsequent chapter. The review is divided into three main components, (a) setting the boundary; (b) setting theories and framework for research questions; (c) methodology justification.
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CHAPTER 2 LITERATURE REVIEW
2.0 Introduction
This chapter examines the literature to develop the priori constructs for this study.
Though the grounded theory recommends that literature review is completed at the beginning of the study, as is the norm for most scholarly research (Charmaz, 2006), the challenge, however, is for the researcher to think critically, and not have preconceived beliefs. Alternatively, Glaser and Strauss (1967) suggested that as part of theory formation, the literature review is carried out after data collection has begun, so as to prevent preconceived ideas.
In this study, the literature review is carried out before data collection, as it is necessary to understand family business issues, outline what is known of family business, highlight the gaps in knowledge of family business decision making, and focus the study on the new business. This literature review is organized in three portions, as shown in Figure 2.1.
Figure 2.1: Overview of literature review
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1) Set boundaries for the study: The introduction of what entrepreneur is and how he contributes to the economy. The literature review then goes into the history of family business as a scholarly domain, followed by the theoretical foundations of family business. Then, general decision making, including how entrepreneurs think through the lenses of rationality and entrepreneurial cognition. Finally, the literature narrows down to decision making process in family businesses.
2) Set theories and framework for research questions: The literature review focuses on entrepreneurial orientation (EO) as the base of setting the framework to the research questions through the lenses at the firm level. This is subsequently followed with the understanding of what motivates the entrepreneur when he sets up a new venture. Then, looking within the firm, the theory of resourcebased view (RBV) is highlighted to understand the internal factors that are advantageous to the firm; one which is much studied by the Successful Transgenerational Entrepreneurship Practices (STEP) research. Finally, the literature drills down on family entrepreneurial orientation (FEO) to focus on the family level to understand the elements and dynamics of the family.
3) Methodology justification: The literature review shows the justification of case study approach and the methods undertaken to conduct a qualitative research.
2.1
Entrepreneurship
Richard Cantillion (1680-1734) who, in 1975 was credited for being the first to introduce the term “entreprendre”, which means, “to undertake”. The term later evolved from the function that the individual undertakes to the individual himself. In 1934, Schumpeter defined entrepreneurship as “carrying out new combinations”, which see the entrepreneur as someone who seeks opportunities for profits and by doing so; he comes out with new opportunities by innovating (Jones & Wadhwani, 2006).
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Frank Knight (1921) defined entrepreneurship as someone who is able to successfully predict the future. Knight’s intuitive entrepreneur initiated the early notion of entrepreneurial thinking and the pivotal role of information that later became the essential elements in the cognitive perspective of entrepreneurship and venture creation (McMullen & Sherperd, 2006). It was in the late 1990’s that researchers had begun to look at entrepreneurial thinking, entrepreneurial research domain, that comes from the cognitive stream. In a landmark journal article, Mitchell, Busenitz and Lant (2002) defined entrepreneurial cognition as “the knowledge structures that people used to make assessments, judgments or decisions involving opportunity evaluation and venture creation and growth”.
Debicki et al. (2009) posited that the field of family business significantly overlaps that of entrepreneurship and this is evidenced in the relative importance over time of family business studies in the two most important academic journals on entrepreneurship, namely Entrepreneurship Theory and Practice and the Journal of Business Venturing (De Massis et al., 2012).
2.1.1 Business Ownership Family businesses and non-family businesses make up the sphere for habitual entrepreneurs. The term “portfolio entrepreneurs” and serial entrepreneurs were further explored by Ucbasaran, Westhead, Wright and Flores (2009). They suggested that experience needs to be considered when looking at an entrepreneur's prior business ownership(s); whether past experience(s) is associated with business failure and whether this business ownership experience is acquired sequentially (i.e., sequential entrepreneurs or serial entrepreneurs) or concurrently (i.e., portfolio entrepreneurs).
2.1.2 Portfolio Entrepreneurship Portfolio entrepreneurship emerges with the realisation that an entrepreneur owns more than one business (Birley & Westhead, 1993) and continues to create ventures within his business group. Portfolio entrepreneurship is also defined as the discovery and exploitation of two or
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more business opportunities (Wiklund & Shepherd, 2008). There are several reasons to why entrepreneurs embark on such strategy, which may include growth aspiration, wealth and risk diversification, value maximisation and providing career opportunities to family members (Ram, 1994). Portfolio entrepreneurship is regarded as the resultant of creative entrepreneurial activity (Rosa, 1998) through entrepreneurial diversification, however, it is not to be mistaken with
strategic diversification, of which, the ultimate goal is for
maximizing managerial efficiency (Fry, 1998).
This then, takes it to an interesting turn because portfolio entrepreneurship is especially prevalent in family firms due to decisions made in a dynamic family context, time horizon of family firms (Zellweger, 2007) that opens up the opportunity to various ventures being created within the family web to generate income and stability for their families. Sieger et al. (2011) used a resource-based perspective to explain the process through which portfolio entrepreneurship develops in family firms. By analyzing four in-depth, longitudinal family firm case studies from Europe and Latin America, they identified six distinct resource categories that are relevant to the portfolio entrepreneurship process.
The above reviewed literature clearly supports the notion that portfolio entrepreneurship is prevalently dominant in family firms. However, it also opens up uncharted territories which call for the need of this study to further investigate the phenomena and to fully understand the process of decision making when family firms embark in creating ventures.
2.2
Family Business
Wakefield (1995) indicated that family firms originate from any business activity. However, researchers have come up with many different definitions, either looking at the individual level, i.e. individual founder (Kelly, Athanassiou, & Crittenden, 2000), and the next generation member (Eckrich & Loughead, 1996) or the group level, i.e. conflict among family members (Kellermanns & Eddleston, 2006), and succession in business (Cadieux, Lorrain, & Hugron, 2002). However, of late, researchers are becoming more interested in the
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field of family business, hence, there is a clearer line separating between family business and non-family business. The line separating a firm which is clearly a family firm as opposed to those which are clearly not is now easier to draw. The ones in between, i.e. the grey area, is one which is hard for researchers to shade (Westhead & Cowling, 1998).
Tagiuri and Davis (1982/1996) created the three-circle model of family business, which has become the “primary conceptual model” for family business studies (Gersick, Lansberg, Desjardins, & Dunn, 1999). The model represents family business as consisting three complex and overlapping subsystems of ownership, family, and business. See Figure 2.2 below.
Figure 2.2: Three-circle model of family business
Source: Tagiuri and John A. Davis (1982) “Bivalent Attributes of the Family Firms”
Habbershon, Williams and Macmillan (2003) presented a new model detailing the interaction of family, business and management, which they referred to as the unified systems perspectives. Instead of three interrelated and overlapping cycles, the unified systems theory shows that the family, business, individuals and their actions and outcomes are one interrelated continuous circle. It is this unique nature of family business that makes the current research worthy of study. Gersick et al. (1997) suggested that in order to understand the complexities of a family business, it is important to understand its governance and systems.
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Poza (2007; 2010) adopted an inclusive theoretical definition of a family business that focuses on the vision, intention, and behaviour, vis-à-vis succession, of the owner: (a) ownership control (15% or higher) by two or more members of a family or a partnership of families; (b) Strategic influence by family members on the management of the firm, whether by being active in management, by continuing to shape the culture, by serving as advisors or board members, or by being active shareholders; (c) concern for family relationship; and (d) the dream (possibilities) of continuity across generations.
Anderson and Reeb (2003) found that family firms listed in the S&P 500 whose firms are influenced by the founding family, tend to outperform their counterparts. In the STEP (2008) report, it was found that more than 60% businesses worldwide are family-owned and 85% of these businesses are well established companies. Family-owned businesses such as the LG Group from Korea, Bosch Group from Germany, L’oreal Group from France, Tata Enterprise from India, Cheung Kong from HK-China, Asian Pacific Buildings Corporation from Australia are examples of large and successful businesses located around the globe and are common brands we can associate ourselves with.
In delving into the lifespan of family businesses, many researchers found that they are often relatively short, as only a limited number survives the transition to the second generation, and hardly one-third even into the third (Beckhard & Dyer, 1983; Shanker & Astrachan, 1996; Neubauer & Lank, 1998; Paisner, 1999). Dyer (2003; 2006) found that the field of management studies has paid insufficient attention to the family firms’ unique theoretical and practical problems so far and further reiterated in 2006 that due to this high importance of family firms, academia has finally recently begun to recognize their necessity as a research object (Chrisman, Steier, & Chua, 2006).
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Table 2.1: Key elements with different types of family business definition Key Element
Definition
Majority ownership
A family can easily control a business with less than 50% of the votes if the ownership structure is fragmented.
Management involvement
Families can own 100% of their companies and they can make all the major decisions, although some non-family member is the CEO of the company.
Ownership and management
Ownership of a certain portion of the business; and holding a management position within the business.
At least two generations involved
At least, one child of the founder is involved in the running of the business.
Succession intentions
The owner has the intention to transfer the business to the next generation.
Family members define the business
Family members have the opportunity to state their opinions about the family business.
Table 2.1 above indicates the key elements in the definition of family business. In summary, the definition of family business looks into what kind of elements is important (Brunaker, 1996; Westhead, & Cowling, 1998). The two elements that seemed to be important are the intention to transfer the business to the next generation, and the statement by owners and managers that they themselves perceive the business as a family business (Brunaker, 1996). And some researchers regards that the willingness to transfer the family business to the next generation as one of the key aspects in family business definitions (Ward, 1987). Based on the above, the key literature on family business is depicted in Table 2.2.
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Table 2.2: Key literature on family business. Date
Author
Research Finding
1995
Wakefield
Family business is said to be originating from any business activity.
1982/ 1996
Tagiuri & Davis
Created the three-circle mode of family business – became the “primary conceptual model for family business studies. (a) Ownership; (b) Business; (c) Family.
1997
Gersick et al.
Two-thirds of all enterprises worldwide is family owned and/or managed
1983 1996 1998 1999
Beckhard & Dyer Shanker & Astrachan Neubauer & Lank Paisner
The life span of family firms is however often relatively short, as only a limited number survives the transition to the second generation, and hardly one-third even into the third.
2003
Dyer
The field of management studies has paid insufficient attention the family firms’ unique theoretical and practical problems so far.
2003
Habbershon, Williams, & Macmillan
Presented a new model detailing the interaction of family, business, and managament =unified systems perspectives. => Their actions and outcomes are inter-related continuous circle.
2006
Dyer
Due to this high importance of family firms, academia has finally recently begun to recognize their necessity as a research object (Chrisman et al., 2006).
De Massis et al. (2012) conducted an annotated bibliography of two hundred thirty eight journal papers and found six most commonly used criteria that have been employed in quantitative empirical studies to define family business. These criteria include ownership, management, directorship, self-identification, multiple generations and intra-family succession intention. It was also concluded that debate is still open but researchers are converging toward a multi-faceted and flexible view of family businesses. However, the methods for distinguishing family from non-family firms are becoming more rigorous.
2.3
Decision Making
Decision making is used by those from various disciplines, for example, economist use it on rational models to analyze choice behavior; mathematicians and statisticians use it for
25
modeling techniques; organizational theorist, sociologists and social psychologist use it to study behavioral aspects of decision making; and psychologists use it to focus on cognitive behavior (Miller, Dickson, & Wilson, 1996). In the area of strategic management, Fiol and O’Connor (2003) explored on the cognitions of individuals and decision makers involving strategy formulation and implementation.
Decision making is the act which marks out the businessman from all those who collaborate with him in production (Shackle, 1966). Historically, corporate America’s decision making is modeled from the military decision making. Hence, the authoritarian style of leadership where decision is made by the founder and no one questions the decision or the process of carrying out the decision (Tisue, 1999). However, as an entrepreneur, he does not merely live in the context of the present, he needs be able to sense and have the foresight because the implications of the decisions he make today will only be realized tomorrow (Thaler, 2000).
Alvarez and Busenitz (2001) explored the coordinating role of entrepreneurship on the collection and use of organization knowledge that leads to heterogeneous outputs and, ultimately, to a firm’s competitive advantage. This substantiates the capability of the entrepreneur, his behaviour, the way he thinks and the way he makes his decision in using and leveraging on the available resources, does impact the organization performance. Mitchell (2002) defined entrepreneurial cognition as “the knowledge structures that people used to make assessments, judgements or decisions involving opportunity evaluation and venture creation and growth”. The above literature is depicted in Table 2.3:
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Table 2.3: Key literature on decision making within a family business Date
Author
Research Finding
1966
Shackle
Decision making is the act which marks out the businessman from all those who collaborate with him in production
2000
Thaler
An entrepreneur do not merely live in the context of the present, he needs be able to sense and have the foresight because the implications of the decisions he makes today will only be realized tomorrow.
Sarasvathy
Entrepreneurs think effectually; they believe in a yet-to-be-made future that can substantially be shaped by human action; and they realize that to the extent that this human action can control the future, they need not expend energies trying to predict it. In fact, to the extent that the future is shaped by human action, it is not much use trying to predict it – it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.
2001
Alvarez & Busenitz
Alvarez and Busenitz (2001) explored the coordinating role of entrepreneurship on the collection and use of organization knowledge that leads to heterogeneous outputs and, ultimately, to a firm’s competitive advantage. This substantiate that the capability of the entrepreneur, his behaviour, the way he thinks and the way he makes his decision in using and leveraging on the available resources, does impact the organization performance.
2002; 2004; 2007
Mitchell et al.
Defined entrepreneurial cognition as “the knowledge structures that people used to make assessments, judgements or decisions involving opportunity evaluation and venture creation and growth”.
2001; 2003
2.3.1 Rationality Rationality may be said to characterize behaviour that is logical in pursuing goals (Dean & Sharfman, 1993a; 1993b). Although strategic decisions may be intentionally rational, overall the process of making the decision may be incremental as Quinn (1980) described it as a “logical incrementalism” and the process by fragmentation, constant evaluation, intuition and political behaviour.
It is assumed that individuals are rational decision makers, where they follow step-by-step process, which is logical and linear, in order to arrive at an optimal solution that maximises their utility (Miller et al., 1996), in support of Schendel and Hofer’s (1979) idea that strategic decision making is an intentional and rational activity whereby managers consciously allocate
27
a firm’s resources to ensure its long term survival potential (Stubbart, 1989). Furthermore, Olson and Broker (1995) explained that the strategy process focuses on the formulation and implementation of the strategic decision, and is connected to formal planning (detailed business plan elaboration).
However, entrepreneurs tend to have tight deadlines and the entrepreneurs simply do not have the time to go through a thorough, rational decision making process (Bhuian et al., 2005). Papadakis, Lioukas and Chambers (1998) observed that strategic decisions for new business investments and marketing type seem to be subject to a less comprehensive analysis than strategic decisions on capital investment and internal reorganisation. Entrepreneurs often deal with a situation without planning in advance, which decreases the firm performance when confronting with more complex problems (Levander & Raccuia, 2001). However, as the going gets tough, and environment becomes too complex to comprehend, entrepreneurs will tend to use complete planning, but when the environment tend to change too rapidly, the entrepreneurs will lead to less frequent use of rationality (Gelderen et al., 2001).
Observations of entrepreneurs in various countries (U.S.A, U.K., Canada, Hong Kong, New Zealand and Singapore), Cunningham, Gerrard, Schoch and Chung (2002) showed that there is a kind of logic that is neither functionally nor substantially rational, and thus, concluded that there is a way of thinking and decision making that might be appropriate in creatively making decisions in highly turbulent environment, which is known as “the new economy”. Elbanna and Child (2007) developed and tested an integrated model of strategic decisionmaking rationality and identified decision-specific, environmental and firm characteristics as influences on the rationality of decision processes. It was also suggested that national setting extensively affect the influence of environmental characteristics on strategic decision-making processes.
2.3.2 Entrepreneurial Cognition Entrepreneurial cognition (Mitchell et al., 2002; 2004; 2007) is defined as the knowledge structure that people use to make assessments, judgments or decisions involving opportunity
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evaluation, and venture creation and growth. Over the years, researchers continue to understand “how do entrepreneurs think”, what makes them better entrepreneurs compared to others. And thus, the interest by researchers were moving towards understanding the structure (whether heuristic or systematic thinking) and how the entrepreneurs process the information to come up with better decisions.
The research done by Baron (2004) focused on entrepreneurial process, where he asked three basic questions, i.e. (1) Why do some persons but not others choose to become entrepreneurs? (2) Why do some persons but not others recognize opportunities for new products or services that can be profitably exploited? (3) Why are some entrepreneurs so much more successful than others? It is at this point that Baron’s work serves as a nucleus for other researchers to explore in the area of entrepreneurial cognition, a way of thinking and behaving.
2.4
Decision Making Process
Mintzberg, Raisinghani and Theoret (1976) introduced the decision making structure and described it by seven elements, comprising three central phases’ (identification, development and selection), three sets of ‘supporting routines’ (decision control, decision communication and political) and six sets of ‘dynamic factors’ (interrupt, scheduling delays, timing delays and speedups, feedback delays, comprehension cycles and failure recycles). The general model describes the interrelationships among them and the decision processes studied are shown to fall into seven types of ‘path configurations’. Three decision stimuli sit in a continuum, namely ‘opportunities’ (voluntary decisions to improve a secure position) at one end, ‘crises’ (decision responses to intense pressures) at the other and ‘problems’ in the middle; each capable of integrating or moving along the continuum.
Further research on the decision making process which was conducted by Mullins and Foriani (2000) proposed a model to show that whilst strategic decisions are immensely complex and dynamic, it is possible to give them conceptual structuring. Mintzberg later
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revised his viewpoint and continued his research on decision making process with Westley, in 2001. In their studies, they did not deny the rational approach, however, they defended the thesis that the conventional rationality is not anymore the only advisable way to determine the course of action. They came up with three approaches, i.e. good decisions are the output of careful analytical thinking combined with two other possible ‘ingredients’ of decisionmaking, namely intuition and pro-active behaviour (see Table 2.4).
Table 2.4 : Characteristics of the 3 approaches to making decision by Mintzberg and Westley (2001) “Thinking First” (rational) features the qualities of Science Planning The verbal Facts define -> diagnose -> design -> decide Ready reviewed path
“Seeing First” (intuitive) features the qualities of
Arts Visioning The visual Ideas preparation -> incubation -> illumination -> verification. subconscious manner of decision-making, which requires a significant amount of prior experience
“Doing First” (action-oriented) features the qualities of Crafts Venturing, Learning The visceral Experiences enactment -> selection -> retention If rationality is helpless and strategic vision is not present. This approach is advisable when the situation is novel and confusing, and things need to be worked out.
Source: Mintzberg and W estley (2001) “Decision making: It’s not what you think”
Additionally, Lee and Li (2009) also suggested that formalization of professional management system should be developed with objectivity and rationality in decision-making. The set-up of scientific decision-making mechanism would help to reduce risk and failure in the decision making process. Factors effecting decision making mechanism are mainly structural elements including leadership, organization to employee profile, and procedural elements ranging from decision making procedure, decision making methods to communication and information transfer. Therefore, it is suggested that, besides having the board, there should be another platform to facilitate decision making, i.e. the Family Representative Committee.
Wells (1974) observed that an entrepreneur’s abilities and those of the entrepreneurial team are decisive in the strategic decision-making process: their background, previous experience
30
and level of commitment. In making decisions, it was found that size of the investment, the cash out potential, the geographic location and the product differentiation as most influential for the strategic choice (Tyebjee & Bruno, 1984). The research which was carried out by Harris (1998) found that the decision making process focuses the attention on factors like: time available for making the decision, cost involved with alternative solutions, availability of resources, knowledge and personal psychology (values).
It was also found that entrepreneurs use the approach of concentrating on the most difficult, most unclear, and most important point first. Only after solving this first critical point further steps are planned (Frese, Gelderen, & Ombach, 2000). Table 2.5 below summarises the literature on decision making process.
Table 2.5: Key literature on decision making process Date
Author
Research Finding
1974
Wells
Entrepreneur’s abilities and those of the entrepreneurial team are decisive in the strategic decision-making process: their background, previous experience and level of commitment.
1984
Tyebjee & Bruno
Size of the investment, the cash out potential, the geographic location and the product differentiation as most influential for the strategic choice.
1998
Harris
Focuses the attention on factors like: time available for making the decision, cost involved with alternative solutions, availability of resources, knowledge and personal psychology (values).
1998
Papadakis et al.
Decision specific characteristics influence the decision-making process more than any other environmental, organisational, or managerial factor.
2000
Frese et al.
Entrepreneurs use the approach of concentrating on the most difficult, most unclear, and most important point first. Only after solving this first critical point further steps are planned.
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2.5
Family Business and Decision Making
In most family businesses, there is a prevalent leadership style, i.e. authoritarian decision making, whereby decision is made by the founder, i.e. the father, and no one questions his decision or the process of carrying out that decision (Tisue, 1999). However, there are many definitions to explain what decision making is in the context of a family business. Thus, due to their dissatisfaction with existing definitions, several authors have recently shifted their approach to identifying the “essence” of a family firm, e.g. through the question of the family’s influence in strategic decision making (Davis & Tagiuri, 1989; Handler, 1989; Shanker & Astrachan, 1996).
Table 2.6: Key literature on decision making in family business Date
Author
Research Finding
1989 1989 1996
Davis & Tagiuri Handler Shanker & Astrachan
Due to their dissatisfaction with existing definitions, several authors have recently shifted their approach to identifying the “essence” of a family firm, e.g. through the question of the family’s influence in strategic decision making.
1999
Tisue
Authoritarian style, decision making by the founder, i.e. the father; and everyone follows it without questioning the decision or the process of carrying out the decision.
2003
Astrachan Dyer Habbershon et al. Rogoff & Heck Zahra
The idea behind is that the family could be the critical variable in family firm research.
2003
Habbershon et al.
Introduced a new perspective called “familiness” which describes unique, inseparable, and synergistic resources and capabilities emerging from family involvement and interactions.
Alderson
Decisions by consensus were seen in decision areas that affected not simply the company, but rather the family as a whole (especially in major divestment or acquisition that financially affected the firm, and thus the family; or a decision that affected the family’s standing with the community.
2009
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Historically, the concept of decision making is made by only one person, i.e. the business owner, with little or no input from other (Gersick, Davis, Hampton, & Lansberg, 1997), However as time moved on, the dynamics of a family-owned business becomes complex and in surviving through the course of times, it is crucial to make effective decision making (Tisue, 1999).
In later studies by various researchers, (Astrachan, 2003; Dyer, 2003; Habbershon et al., 2003; Rogoff & Heck, 2003; Zahra, 2003), it was concluded that there could be a common idea behind this and that the family could be the critical variable in family firm research. In identifying what this “critical variable” is, Habbershon, Williams and Macmillan (2003) introduced a new perspective called “familiness” which describes unique, inseparable, and synergistic resources and capabilities emerging from family involvement and interactions. Alderson (2009) reported that decisions by consensus were seen in decision areas that affected not simply the company, but rather the family as a whole (especially in major divestment or acquisition that financially affected the firm, and thus the family; or a decision that affected the family’s standing with the community. The literature above is depicted in Table 2.6.
Examining literature on family business and decision making in Malaysia, Jamaluddin and Dickie (2011) employed a qualitative case study approach to interview owners and family members of ten different Malay small family businesses in order to investigate business and family related decisions for business growth among Malay small family businesses. They suggested that in the Malay culture, family members participate in family discussions as a precursor to final decisions being made by the father or family elders; a decision-making style known as pseudo-participative. The research identified four antecedents of business growth i.e. finance and technology (business-related decisions) and employment and support (family-related decisions), for the small family businesses to move from a position of survival to one of growth.
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2.6
Entrepreneurial Orientation (EO)
EO is a firm level construct that is closely linked to strategic management and the strategic decision making process (Covin & Slevin, 1991). Lumpkin and Dess (1996) explored the constructs of EO and defined a firm’s EO as its propensity to act autonomously, innovate, take risks, and act proactively when confronted with market opportunities. They also concluded that EO is a process construct and concerns the methods, practices and decision making styles managers’ use. Aloulou and Fayolle (2005) explored a firm’s strategic orientation, and concluded that it involves capturing specific entrepreneurial aspects of decision making styles, methods and practices. Habberson et al. (2003) introduced the EO framework that provides five established constructs to explore as antecedents to entrepreneurial performance – pro-activeness, innovativeness, autonomy, riskiness, and aggressiveness.
Further research pushed for the need to look beyond the firm level construct because of the rising interest by scholars on portfolio entrepreneurship, in turn, focused on team and group level constructs (Scott & Rosa, 1996). And a study conducted by Zellweger, Nason and Nordqvist (2011) found that scholars who inched into family business exploring entrepreneurship were focused only on firm level phenomena such as risk-taking, innovativeness, pro-activeness, competitive aggressiveness, autonomy, internationalization or long term entrepreneurial strategies.
2.7
Resourced-Based View (RBV)
The RBV of the firm argues that firms are able to outperform others if they can develop valuable resources or capabilities which cannot be easily imitated or substituted by its competitors (Barney, 1991; Teece, Pisano, & Shuen, 1997). The RBV can contribute to investigating how family firms identify and develop distinct unique capabilities, and how those might be transferred (e.g. during business succession) to new owners and structures (Habbershon & Williams, 1999). Further studies carried out in 1999 to 2003 prove that the
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connection between family and business may lead to unique advantages in the acquisition of resources. An appropriate method for doing that is to assess the family influence on the resources of an organization (Haynes, Walker, Rowe, & Hong, 1999). Family ties may provide an advantage in opportunity identification due to a higher willingness to share information with each other between members of the same family (Barney, Clark, & Alvarez, 2002).
Thus, family influence, which is defined as “familiness” is one of the main inputs in the system as a way to assess family influence on performance outcomes (Aldrich & Cliff, 2003; Stewart, 2003). Sirmon and Hitt (2003) applied the RBV to family firms, and distinguish between five sources of so called “family firm capital”: human, social, survivability, patient, and governance structures. The authors argue that family firms acquire, bundle and leverage their resources differently to non-family firms. However, Nordqvist (2005) concluded that not all firms have unique resources, and it is possible to survive without them. It can thus also be argued that not all family firms have such a “familiness” capability which is unique and inseparable, and lead to a competitive advantage. Further, Pearson et al. (2008) offered a theory of “familiness” and its dimensions based on a social capital theory perspective.
In a review of twenty five influential articles in shaping family business research, Chrisman et al. (2010) postulated that studying family businesses from a strategic management perspective is fruitful and that such a perspective must start with an explicit acknowledgement of the importance of the involvement, non-economic goals, vision and culture of the family in the firm in determining family firm behaviour. A family’s involvement and its influence on a firm seem to be sources of unique entrepreneurial opportunities as well as distinctive advantages and disadvantages, depending on the individuals who participate and the family structure.
Based on research from 1996 to 2010, De Massis et al. (2012) pinpointed two streams of literature supporting the contention that family firms have advantages and disadvantages from the close interaction between the family and the business. The first has come from the efforts to develop theoretical explanations for such advantages and disadvantages and
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embedding family business research within a number of theories. The second stream has attempted to identify and systematically classify resources resulting from family influences and interactions that are potential sources of competitive advantages and disadvantages. Danes et al. (2009) presented a classification of family capital composing human, social and financial capital and found family capital significantly contributing to achievements and sustainability of family firms.
2.7.1 STEP Research Model The STEP Research Model, redefined in 2008 by the STEP Project, as described in Figure 2.3, is used to explore on corporate entrepreneurship study in the context of the family form of business organizations (versus a family business studies).
In this study, focus is drawn to the decision making process, which is derived from the element of “familiness” described here as a resource pool, i.e. RBV theory. Looking at who makes what decisions and how they are made is a critical part of strategy development and execution. Decision making is also tied to family and governance practices and structures. Noting how family influences decision practices to create an advantage (e.g. streamlined decisions) or constraint (e.g. disenfranchising certain family members from the process) highlights the speed, quality and commitment of decision-making.
As described in Figure 2.3 below, the mediating influences are: a) Cultural – this refers to the ethnic or country cultural influences; b) Environment – this refers to the externalities of the economy, region, country etc; c) Industry – this refers to the specific factors related to the industry or industries of the business group;
However, the uniqueness of family business, whereby it may influence “families”, two additional mediating influences are included (as suggested by the STEP model).
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d) Family life stage – this refers to the generation and development of the family and business; e) Family involvement – this refers to the role family members play in ownership and or management of the group.
Figure 2.3: The STEP Research Model
Source: STEP (2007) Research Model
This exploratory study allows us to investigate the mediating influences within entrepreneurial orientation and resource pools (RBV). In doing so, it will also address the issue of speed, quality and commitment of decision making when creating ventures.
2.8
Family Entrepreneurial Orientation
The notion of FEO, a family orientation (interdependency, loyalty, security, stability and tradition) was introduced by Martin and Lumpkin (2003) and contrasted it to entrepreneurial orientation (EO) at the firm level. They suggested that family orientation will overtake the entrepreneurial orientation as the family firm is passed on to the next generations. Steier
37
(2007) in a longitudinal study of organizational creation and evolution of a technology-based start-up clarified the substantial role of family and familial ties in the venture creation process.
In an empirical study of four hundred forty nine small and medium-sized companies in Spain, Casillas and Moreno (2010) analyse the influence of family involvement as a moderating variable on the relationship between EO and company growth. The hierarchical regression analysis found an influence on growth is born from the interaction between innovativeness and family involvement and the interaction between risk-taking and family involvement. Zellweger et al. (2011) argued that across time, families exhibit a significant level of entrepreneurial activity, in terms of rearrangements of the portfolio of activities through founding activity, mergers, acquisition and even divestments. As such, they conceptualized the term called, “family entrepreneurial orientation” and defined as the attitudes and mindsets of families to engage in entrepreneurial activity.
2.8.1 Entrepreneurial Motivation Shane, Scott and Collin (2003) suggested how human motivations might influence the entrepreneurial process and how at each stage of the process, the level, inclusion of or exclusion of some or all of the motivation may matter, or change, to the entrepreneur. See Figure 2.4 below:
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Figure 2.4: Model of entrepreneurial motivation and the entrepreneurship process
Source: Shane, Scott and Collin (2003) “Entrepreneurial motivation”
In exploring motivation and the entrepreneurial process, this study hopes to better understand entrepreneurial cognition and the entrepreneurs’ decision making process, and would be able to identify how differently or similarly decisions are made between family businesses and non-family businesses, especially in the context of EO, FEO, the motivations behind their prowess in building their family business empire for growth and sustainability, and beyond.
2.9
Research Gaps in the Literature
From the preceding literature review, this study has identified areas of potential importance especially with regards to the domains and development of family business research and the decision making process in venture creation. In this section, this study highlights the gaps in the literature that deserve greater attention in research and studies on entrepreneurship in a family business setting.
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1) There is limited family business literature that explores on decision making process and what may be the factors that influence the entrepreneurs to come to such a decision, and taking the dynamics of the family in business into the context of the study, more specifically in this case, the context of large privately-owned family businesses in their second generation.
2) Little or limited research done on family business and its relationship to decision making. In Malaysia, even though there is growing attention and interest on family business research but thus far, there seem to be only one study related to family business and decision-making. However, the scope and focus of this particular study was on business and family related decisions for business growth among Malay small family businesses (Jamaluddin & Dickie, 2011).
3) No research has been done to compare the decision making process in creating ventures between family businesses and non-family businesses. This contention is supported by De Massis et al. (2012) who researched the relative coverage of family business research topics by categorizing two hundred fifteen articles according to strategic management topics classification framework. It was noted that the resources and competitive advantage category occupied a significant portion of the literature as a primary topic in sixteen articles and a secondary topic in twenty two articles with the RBV serving as the reference framework. In addition, entrepreneurship and innovation is the primary topic in thirteen articles and secondary topic in eleven articles. Nevertheless, there was not any mention on the topic of decision making process in creating ventures between family businesses and non-family businesses, in particular.
To promote theoretical development in family business research, Yu et al. (2012) identified three hundred twenty seven dependent/outcome variables used in two hundred fifty seven empirical family business studies in 1998-2009. The study developed a numerical taxonomy with seven clusters i.e. performance, strategy, social and economic impact, governance,
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succession, family business roles, and family dynamics. Figure 2.5 depicts the landscape of family business outcomes.
Figure 2.5: The landscape of family business outcomes
Source: Y u, Lumpkin, Sorenson and Brigham (2012) “The Landscape of family business outcomes”
This research on decision making process in venture creation finds support from Yu et al.’s (2012) study because it was advocated that, among others, family dynamics make the family business domain unique and family-specific topics deserve more attention. As such, this study views its attempt and position within the decision making, RBV and entrepreneurship literature comparing between large privately-owned family businesses and non-family businesses as depicted in the diagram below in Figure 2.6.
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Figure 2.6: Research domains related to the study
Source: Author’s own interpretation
2.10 Conceptual Framework
The literature review in the preceding sections raises the need to look beyond the firm level, and explore the family domain and perspective to fully understand the intricacies of the family, in order to unravel how and why decisions are made in venture creations. The conceptual framework as described in Figure 2.7, and research questions are illustrated below:
Figure 2.7 : Central Phenomenon : Priori constructs
Source: Author’s own interpretation
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The priori constructs above (Figure 2.7) depicts that both family businesses and non-family business are affected by the changes in the environment, culture and also the industry. However, family businesses are also influenced by family life stage (refers to the generation and development of the family and business; and family involvement). Hence, when the leader makes a decision to venture into a new business, as part of a diversification strategy, the motivation that pushes the leader in influencing his entrepreneurial process, and taking into consideration his family as stakeholders.
By virtue of the entrepreneur’s expectation for creating wealth for his family and preserving the family legacy as the top priority in his mind, this study suggests that the process of decision making in new venture for family businesses is different from non-family businesses.
2.11 Research Questions
There is limited family business literature that explores on decision making process and what may be the factors that influence the entrepreneurs to come to such a decision, and taking family dynamics into the context of the study. In embarking to investigate this phenomenon, the research questions for this study are:
1. How do family business owners make their decisions when they create ventures? i.
What is the decision making process when the founder/CEO is creating ventures?
ii.
Who does the founder/CEO consult in the decision making process when creating ventures?
iii.
What are the founder/CEO’s priorities in creating ventures?
iv.
What are the references to which the founder/CEO will seek when he needs more information pertaining to venture creations?
v.
What are the resources required by the founder/CEO during the decision making process of creating ventures?
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vi.
What does the founder/CEO do when there is a disagreement during the decision making process of creating ventures?
vii.
How is the commitment level of family and employees during the decision making process of creating ventures?
2. What is the difference between family business and non-family business in their decision making process in creating ventures? i.
How different is the decision making process in creating ventures between family business and non-family business?
ii.
Why is there a difference between family business and non-family business in their decision making process in creating ventures?
2.12 Summary
Taken together, the above discussions enabled the researcher to understand family business issues, frame what is known of family business, feature the gaps in knowledge of family business decision making, and the reasons behind creating these ventures. As suspected there is still limited literature and research in relation to decision making process in venture creation within family businesses. By building on past studies on family business, decision making, RBV and entrepreneurship, especially EO and FEO, this study intends to uncover and conduct an in-depth analysis of family dynamics and challenges. Two research questions shape and guide the theory building process. The next chapter discusses the methodological approach taken in addressing the aims of the study.
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CHAPTER 3 RESEARCH METHODOLOGY
3.0 Introduction
This chapter describes the methodology and procedures used in this study. This study primarily uses the case study research approach propagated by Eisenhardt (1989). This methodology supports the researcher’s readings on cases related to entrepreneurial thinking, decision making and family business, and the literature review, shows that most of the methodologies carried out by the researchers are done through case studies. Further, there is increasing usage of case studies in family business research through the influence of innovative programmes such as Babson College’s STEP Project for Family Enterprising (Chenail, 2009). It is also noted that a case study has to be carefully done to ensure that the objectives are met, and that, to maximize what can be learn and taking into consideration the time available for the research.
3.1
Purpose of the Study
The purpose of this exploratory, case study approach is to examine potential reasons (or causes), which comprise of family resource pool, industry, family life stage and family involvement, and how these causes relate to innovativeness in the firms’ decision making process.
Hence, following are the objectives of the study: 1) To identify the process of and factors that affect decision making by entrepreneurs. 2) To understand how these entrepreneurs decide what actions to take when these entrepreneurs embark on diversification strategies, i.e. new ventures.
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In doing so, this study will further examine if there are differences between family business and non-family business, how different it is between them, and why are they different when these entrepreneurs embark on diversification strategies, such as new ventures.
3.2
Qualitative Research
Qualitative methodology is described as the best strategy for “discovery, exploring a new area, developing hypotheses” (Miles & Huberman, 1994). In this study, an in-depth interview approach (Patton, 1990), by way of “guided” conversation is utilised with the participants. It consists of semi-structured interviews guided by the use of open-ended questions developed to ensure consistency, while encouraging flexibility for a free flowing, conversational dialogue between the interviewer and the interviewee. This is to allow deep knowledge and understanding of family business decision making, which is ultimately, the strength of a qualitative research. By doing so, the qualitative research interview will explore the “individual perception of a social unit”, and gaining an individual’s account of the development of a phenomenon (Robson, 2002).
Upon further readings on cases related to entrepreneurial cognition, decision making and family business, the literature review shows that most of the methodologies carried out by the researchers are done through case studies. Sarasvathy (2004), suggested that when one is investigating more than the entrepreneurs motivation, i.e. “plunge decision”, whereby issues such as emotional endurance, strength, efficacy of spousal, familial, friendship ties and sheer physical energy, one must do qualitative analysis. These are only some issues highlighted by Sarasvathy, however, the complexity and dynamics of a family business goes beyond what was highlighted.
However, there are two side to research strategies, one which works on large scale hypothesis testing research (requires random sampling), and the other, works on using rich empirical data (e.g. naturalistic inquiry), which emphasizes thick narrative descriptions but less interested in generating testable and generalisable theory (Eisenhardt, 1989). Perhaps a fair
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explanation to understanding case study by research and building theories from case studies is to be mindful of the many unfamiliar terms (especially by young researchers) such as grounded theory building, qualitative research, theory building from cases, and naturalistic inquiry.
Glaser and Strauss (1967) introduced a prescribed formula for the process of building theory from case study research. A detailed comparative method for developing grounded theory was then detailed out by Strauss in 1987. The method was designed behind continuous comparison of data and theory which starts as early as the data collection process itself. On the other hand, Yin (1981, 1984) described the design of case study research, while Miles and Huberman (1984) suggested a series of procedures for analyzing qualitative data. Eisenhardt (1989) highlighted the confusion that surrounds the distinction among qualitative data, inductive logic, and case study research. She also highlighted that central inductive process and the role of literature lack clarity when building theory from cases.
Therefore, based on the influences above, the researcher has employed the process outlined by Eisenhardt (1989) because it fits the purpose of this study, i.e. building theory from cases by using a hybrid approach of deduction of past literature to build prior constructs and inductive approach when analysis is made on these cases as the themes emerge to create the emergent theory.
3.2.1 Case Study The case study approach according to Yin (1989) is to “investigate the contemporary within its real life context; when the boundaries between the phenomenon and the context are not clearly evident; and in which multiple sources of evident are used. The use of case study is to develop critical thinking and it gives a holistic understanding of the cultural system (Alvarez, Binkley, Bivens, Highers, Poole, & Walker, 1990). Case study is the best suited in this study to answer the question of “why and how” whenever the researcher is not having control of the event.
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Eisenhardt (1989) also described that the case study approach is a research strategy which focuses on understanding the dynamics present within a single setting, whilst Yin (1984) suggested that it can be employed on multiple level of analysis. Further, Yin (1994) suggested that research case design can either be single-case design or multiple-case design. Robson (2002) indicated that multiple-case design is appropriate for making analytical generalizations from a sample of cases; and he further concluded that the evidence gained from multiple cases is usually more extensive and the results obtained from the cases are therefore more compelling (Robson, 2002; Yin, 1994).
Stake (1994) advised that when choosing a site for a study, “the primary criterion is the opportunity to learn. Stake further added that, “qualitative study is characterized by the main researcher spending substantial time, on site, personally in contact with activities and operations of the case, reflecting, revising meanings of what is going on”. Bachor (2000) pointed out that case study is a convenient and meaningful technique to take a snap shot of what is being observed. And he further explained that case studies also appeal to people because they have what might be termed as ‘face-value credibility’.
In this study, the researcher also understands the richness, depth and dynamics of family business researches, hence, multiple approaches such as observation on site, interviews, conversations during social gatherings with the founders, family members and non-family members, data collected in past researches, public-content articles found, and other relevant documentation were collected, to provide stringer substantiation of construct and hypotheses and to promote high level of synergy (Eisenhardt, 1989).
Therefore, the researcher is employing the roadmap suggested by Eisenhardt (1989) as a guide to this case study research. The researcher also understands that the case study design will need to highlight detailed examination on the phenomenon (Wiersma, 2005).
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3.3
Case Study Research
The challenge of phenomenon-driven research question is for the researcher to build parameters around the research in terms of the importance of the phenomenon and the lack of plausible existing theory. The research questions need to be broadly scoped to give the researcher more flexibility, hence, allowing theory-building research using cases to answer research questions that address “how” and “why”. In contrary, a theory-driven research questions need to be tightly scoped around the existing theory (Lee, Mitchell, & Sabylinski, 1999), and then show how inductive theory building is necessary.
Bingham and Eisenhardt (2006) justified the use of a phenomenon-driven research questions when their study based on what executives learn when they engage in a repeated organisational process (in their study, internationalisation) by observing that learning is a ubiquitous process, and yet the vast empirical literature on learning ignores the content of what is actually learned.
In this study, the research questions (as described at paragraph 3.4.1) are broadly scoped to give the researcher more room to address the importance of the phenomenon, the lack of viable theory and empirical evidence. Moreover, since it is a theory-building approach that is deeply embedded in rich empirical data, building theory from cases is likely to produce theory that is accurate, interesting, and testable (Eisenhardt, 2007). Thus, using this dual approach, of inductive and the mainstream deductive research, theory building from cases certainly complements each other, hence, of late, making it an attractive and promising method of research.
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Figure 3.1: Process of building theory from case study research
Source: Kathleen Eisenhardt (1989) “Building Research Through Case Study Research”
Furthermore, Reay and Whetten (2011) explained the theoretical contribution in family business research, i.e. first and foremost, a good (strong) theory must reliably explain a phenomenon of interest; therefore, it must answer the following questions: (a) What are the key factors that are critical to the explanation of the phenomenon of interest? (b) How are these key factors related to each other? (c) Why does this representation of the phenomenon deserve to be considered credible? (d) What are the conditions under which we should expect the predictions of the theory to hold true? Secondly, the next question to address is how to make significant, incremental improvements in current family business theory. It was suggested that researchers should: (a) clarify the focal construct and (a minimum number of) key variables; (b) use the research question to organize and guide the theoretical contribution; and (c) reconsider the argument and theory development.
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Taking the preceding opinions into consideration and putting them into practice, the case study research approach was the ideal choice for this study, i.e. using phenomenon-driven research questions to building theories. It is also noted that a case study has to be carefully done to ensure that the objectives are met, and that, to maximize what can be learnt and taking into consideration the time available for the research.
3.4
Research Design
Eisenhardt (1989) recommended case study researchers to follow the roadmap as described above in Figure 3.1. This roadmap describes the six steps to the process of building theory from case study research. The following paragraphs explain the six steps undertaken in this study.
3.4.1 Getting Started As described in chapter 2 (paragraph 2.10), the priori constructs are the founder, his motivation and new venture. This is done to ensure that this study focuses its effort on these constructs to provide better grounding and at the same time, to retain a theoretical flexible research.
In line with this, the following research questions for this study are developed based on the phenomenon of interest:
1. How do family business owners make their decisions when they create ventures? i.
What is the decision making process when the founder/CEO is creating ventures?
ii.
Who does the founder/CEO consult in the decision making process when creating ventures?
iii.
What are the founder/CEO’s priorities in creating ventures?
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iv.
What are the references to which the founder/CEO will seek when he needs more information pertaining to venture creations?
v.
What are the resources required by the founder/CEO during the decision making process of creating ventures?
vi.
What does the founder/CEO do when there is a disagreement during the decision making process of creating ventures?
vii.
How is the commitment level of family and employees during the decision making process of creating ventures?
2. What is the difference between family business and non-family business in their decision making process in creating ventures? i.
How different is the decision making process in creating ventures between family business and non-family business?
ii.
Why is there a difference between family business and non-family business in their decision making process in creating ventures?
These two research questions will seek to understand the process of decision making, the reasons to making decisions in venturing into new business among entrepreneurs within the family business and non-family business. And suggesting that there is a difference as to how and why these entrepreneurs decide on the actions to be taken when venturing into new businesses.
3.4.2 Selecting Cases The cases selected for this study are chosen to ensure the effort drawn from this activity is theoretically useful cases, i.e. those that replicate or extend theory by filling conceptual categories. As Pettigrew (1988) illustrated, it makes sense to work within the limited number of cases where the process is “transparently observable”. Thus, the goal of theoretical sampling is to choose cases which are likely to replicate or extend the emergent theory.
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The three family businesses are HD Letrik, Purple Skies and EuroFast; whilst the non-family business is Mulder-XF.
The first case, HD Letrik was founded in 1977 by Shukri Hassan, who had since passed away in 1992. HD Letrik started off as an electrical and wiring company in a small shop in Shah Alam, Selangor. The ownership of the company is held 50% by Shukri Hassan’s family, and the remaining 50% is held by the Shukri Hassan’s co-founder, Chong Lai Eng. Over the years, HD Letrik had improved itself and even secured large projects to light up the North Klang Valley Highway, the KLIA Elite Highway and also lighting maintenance for several palaces and hospitals. At the time of this study, the company is run by the founder’s eldest son (present CEO), Ahmad Shukri, and the revenue was recorded at RM210 million in 2011 and employs 180 employees. Ahmad has four siblings, a younger brother, and three younger sisters.
The second case, Purple Skies was founded in 1977 by Hassan Ali, together with his elder brother, Hamid Ali and a cousin, Nazir Azamat. From the humble beginning of their first office set up in Taman Tun Dr. Ismail, Purple Skies is now Malaysia’s largest publisher and printer, with their Purple Skies Complex sprawling over 9.5 hectare of land in Shah Alam. Its popular magazines – 35 at last count – have 50% of the national magazine market. It also publishes more than 200 Malay language books per year by local authors. A national newspaper with 8 different regional pullout sections is Purple Skies’s most significant recent contribution to Malaysia’s media market. The company is moving rapidly into digital media while maintaining, as well, a printing services business which is the largest in the country and is also the firm’s largest revenue generator. From fashions and family to sports and current events, Malay language readers often turn to Purple Skies publications for their information. Purple Skies’ reach extends widely into the homes of the Islamic population of Malaysia – 61% of the country’s total population of about 29 million. At the time of this study, Purple Skies’ revenue is RM420 million and employs 1,400 employees. Purple Skies has about fifteen family members working in the organization, with three of the second generation holding top management posts.
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The third case, Euro Fast was founded in 1978 by Manan Nor, who is an automotive enthusiast. Manan started his career as a sale person for an FMCG (Fast Moving Consumer Goods) Swiss company. Manan was in-charged of several accounts of key retailers, and realized that he was good at convincing others to buy those products. His love for cars and knack for properties led him to buying lands, which now houses his main headquarter and his current (and biggest property development projects). At the time of this study, Euro Fast registered RM600 million in revenue, and employs 600 employees in the automotive, trading, and property industries. Manan Nor is the sole owner of this business, and together with his three sons, they each have their own task in managing Euro Fast with a strong presence in Malaysia, and also in Europe, especially in United Kingdom, Spain, Germany and also the Middle East.
Mulder-XF, the forth case, is a non-family business, was founded in 1989 by four friends. Among the four of them, the key founder, Rashid Khan, had envisioned Mulder-XF as the next Alta-Vista of Malaysia (the ultimate internet search engine in the early 90s). Mulder-XF key activities involves IT services and solutions. In 2002, Mulder-XF started to gain momentum by securing a major contract with the Malaysian Public Sector in upgrading the 160 government websites and portals. By 2010, it had successfully delivered what was promised to the Malaysian government, and had since moved on to explore the Middle East market whilst expanding their IT solution offerings. At the time of this study, Mulder-XF makes a revenue of RM170 million and employs 450 employees.
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Following are the three family businesses and one non-family business are described below in Table 3.1.
Table 3.1: Firms selected for this study Type of firm / Description Firms Industry Revenues (2011) Year Founded Ownership
Family Business
Non-Family Business
HD Letrik
Purple Skies
Euro Fast
Mulder-XF
Mechanical and Electrical Engineering
Media, Entertainment & Publishing
Automotive, Trading, & Properties
IT solutions
RM 210 million
RM 420 million
RM 600 million
RM 170 million
1979
1977
1978
1989
50% owned by the family
100% owned by the family Directors, CEO, Heads of Division, Middle Management
100% owned by the family Directors, CEO, Heads of Division, Middle Management
100% owned by 4 partners
Family Involvement
Directors, CEO, Deputy GM
Family Generation No. of employees
2nd
2nd
2nd
NIL
180
1400
600
450
NIL
Additionally, the researcher also has professional relationships with all four firms through past research projects. For the three family businesses, the research done on the STEP project has given the researcher an in-depth understanding of these three family businesses. The research on HD Letrik started in 2009, Purple Skies in 2010, and Euro Fast in 2011. The researcher has also been studying and writing cases for Mulder-XF since 2008, a project undertaken by the Universiti Tun Abdul Razak Case Writers Club (UCWC).
Family businesses within the STEP Malaysia project are studied for its capabilities and possibilities for business growth, innovativeness and transgenerational entrepreneurship. For the non-family business, the firm is selected based on similar possibilities of business growth, performance and size criterion of that of the family businesses.
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The three family businesses and one non-family business were selected based on: 1) Annual sales turnover 2) Innovativeness towards products or process 3) Transgenerational entrepreneurship. (Note: With the exception of the non-family business, where item no.3 is excluded.)
Therefore, these firms from various industries were selected based on its annual revenue, i.e. more than RM100 million. HD Letrik’s revenue as of 2011 is recorded at RM210 million, Purple Skies at RM430 million, Euro Fast at RM600 million and Mulder-FX at RM170 million.
All four firms have exhibited business growth, and innovativeness in their product or services. And these firms have embarked on venture creation as a diversification strategy.
For example, HD Letrik had started to equip GPS in their vehicles in 2010, and by 2011 had started to move towards green technology, whilst embarking on two new ventures in the past three years, i.e. a solar technology business, and cleaning liquid manufacturing. Purple Skies had started to digitize print media beginning 2011 and had also invested heavily on state-ofthe-art printing machines in its quest to stay ahead of the printing business. In the past three years, Purple Skies had ventured into setting up a driving school and also a flagship bookstore.
Euro Fast leveraged its strength in property and trading by diversifying into developing lands for commercial use and offering halal food especially in the United Kingdom through its new ventures. Whilst Mulder-XF embarked into offering new IT platforms and web designs to their existing and new customer through state-of-the-art technology in meeting customers’ demands.
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Through all these effort demonstrated by these four firms, the key common variable is continuous growth through innovativeness in the way they do business, i.e. via their product offering and/or processes. Additionally, the three family firms demonstrates the intention to pass the baton over to the next generations, hence, there is transgenerational entrepreneurship potential.
The interview questions are open-ended questions to fit the purpose of this research (refer to the Interview Schedule in Appendix A), and carried out on the founder or the existing CEO for all the four firms. However, for HD Letrik, Purple Skies and Euro Fast, the interviews were carried out with two other people, i.e. one is a family member in the management level position, and another is a non-family member in the management level position. For MulderXF, two employees in the management level position were interviewed.
Therefore, the selection of the cases meets the criterions set forth in the study. These criterions are demonstrated below in Table 3.2:
Table 3.2: Selection criterion of firms Type of firm / Description Firms
Non-Family Business
Family Business HD Letrik
Purple Skies
Industry
Mechanical and Electrical Engineering
Media, Entertainment & Publishing
Automotive, Trading, & Properties
IT solutions
Sales turnover (2011)
RM 210 million
RM 420 million
RM 600 million
RM 170 million
Innovativeness towards products or services
Using GPS in the vehicles; and moving into green technology.
Diversifying into property and Halal food businesses
Using state-of the art technology in meeting customers’ demands
Transgenerational entrepreneurship Ventures created in the past 3 years
2nd generation passing on to 3rdgeneration 1. Solar 2. Cleaning liquid
Digitalizing the print media; and using start of the art printing technology. 1st generation passing on to 2ndgeneration 1. Driving school 2. Bookstore
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Euro Fast
1st generation passing on to 2ndgeneration 1. Food/Beverage 2. Property
Mulder-XF
NIL 1. IT platform 2. Website design
3.4.3 Crafting Instruments and Protocols Eisenhardt (1989) suggested that a multiple approach in gathering data is recommended for case study research. The rationale behind this is to allow triangulation which will provide stronger substantiation for theory building.
Therefore, understanding the richness, depth and dynamics of family business, the researcher has planned for a multiple approach, such as observation on site, interviews with different groups of respondents, conversations during social gatherings with the founders, family members and non-family members, data collected in past researches, public-content articles found, and other relevant documentation, were collected, to provide stringer substantiation of construct to promote high level of synergy (Eisenhardt, 1989).
3.4.3.1 Survey Instrument For the case study, the questionnaire was developed and designed by the researcher to ensure information that the literature review indicated was missing, was included in the questionnaire with the intention to seek and create the desired new knowledge. The survey was also formulated to unravel entrepreneurial cognition, and understanding how decision making is made in the context of the family-owned business and non-family business. (refer to Appendix A: Interview Schedule, and Appendix B: Interview Protocol Checklist)
3.4.3.2 Theoretical Sampling Participants are chosen according to the criterion of the study, however, they must also be able to add knowledge and contribute to the developing of the theory (Creswell, 1994). To achieve this, the researcher interviewed a total of twelve people over the course of two months, i.e. January – February, 2012. The focal point of this study is to understand family business decision making process by the founder when he embarks in creating ventures. All founders of the four firms were interviewed, with the exception of HD Letrik because the founder had passed away in 1992, therefore, the eldest son of the founder, who is the present Chief Executive Officer (CEO) was interviewed.
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For each firm, the researcher proposed the plan to the founders / CEOs to interview two other respondents with the capacity to add knowledge and contribute towards the findings as suggested by Creswell (1994). The researcher explained to the founders / CEOs of these three groups as described below in Table 3.3:
Table 3.3: Grouping of participants Type of firm / Description Firms
HD Letrik
Respondent: Group 1 Respondent: Group 2 Respondent: Group 3
Non-Family Business
Family Business
CEO (1st son of the founder) Family member in management level Non-family member / management level
Purple Skies
Euro Fast
Mulder-XF
Founder
Founder
Founder
Family member in management level
Family member in management level
Employee
Non-family member / management level
Non-family member / management level
Employee
The reasons to having the participants grouped in three are to classify them into: 1) Group 1: The founder’s / CEO’s intention and reasons to what and why such decision was made for the new ventures, including the process of decision making that took place within the family and the business. 2) Group 2: A family member’s perception (with management capacity) of what the founder’s intention and reasons to what and why such decision was made for new ventures, including the process of decision making that took place within the family and the business. 3) Group3: A non-family member’s perception (with management capacity) of what the founder’s intention and reasons to what and why such decision was made for new ventures, including the process of decision making that took place within the family and the business. (Note: the exception for the non-family business, where Group 2 and Group 3 are both employees with management capacity)
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3.4.3.3 Recruitment and Request for Participation The researcher is an academician affiliated to Universiti Tun Abdul Razak, and the Lead Researcher for the STEP Malaysia National Team, since 2009, having written cases on several family businesses and non-family businesses in Malaysia. She has good contacts and rapport with all the four firms which made this process manageable and accomplished within the timeframe.
In the month of September 2011, a courtesy visit was made at the offices of, and followed by sending official letters to all the four firms. Emails were also sent to the founders / CEOs in November 2011 to remind them of the upcoming study which was to be conducted between January to February 2012. This was conveniently done because the researcher had built a rapport with all the 4 firms. In December 2011, the researcher made a visit to HD Letrik and Purple Skies, to discuss on the selection for respondents in Group 2 and Group 3. The criteria, identification and selection were discussed during the meeting, and the respondents in Group 2 and Group 3 were duly informed by their respective founders / CEOs (refer to Table 3.4).
Euro Fast and Mulder-XF were informed via email in December 2011 of the need to have respondents in Group 2 and Group 3, and they were given a guideline for the criteria, identification and selection. Both Euro Fast and Mulder-XF responded within 3 weeks (after several reminders sent to them). By January 2012, list of names and dates for interviews were scheduled to take place within the month of January – February, 2012. All interviews took place at the offices of the respondents, with the exception of Ahmad Shukri, CEO of HD Letrik, whereby the interview was conducted at his home.
3.4.3.4 Study Population The founder / CEO is the main focal point to gather information through a series of interviews using a semi-structured questionnaire using open ended questions. Additionally, request to observe the day-to-day activities within the organization’s premises including the consent to refer to selected documents and information is vital in ensuring that the study not only concentrate on the entrepreneur, his family, but also on the environment he is in.
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According to Ritchie and Louise (2003), the characteristics of the population should be used as the basis of selection in order to make them suitable for small scale and in-depth studies. The results are not meant to be statistically representative, thus, units are selected to reflect the particular features of the sampled population (Par, 2008). The challenge is to determine what the unit of analysis (case) is. The case is defined by Miles and Huberman (1994) as, “a phenomenon of some sort occurring in a bounded context. The case is, “in effect, your unit of analysis” (Baxter & Jack, 2008). Therefore, the unit of analysis is the case where the entrepreneur and his decision making process of creating ventures, i.e. family owned businesses and non-family businesses, from these three groups, a total of twelve respondents were selected.
The selection of the remaining eight respondents from Group 2 and Group 3 were decided based on the existing knowledge that the researcher has on these four firms, and with prior discussion with the founders / present CEOs, the respondents were identified and they were informed accordingly. The details of the respondents in all three groups for each firm are shown below in Table 3.4:
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Table 3.4: Detailed description of the participants Type of firm / Description Firms Respondent: Group 1 Name Age (in 2012) Position / Title
Years of experience
HD Letrik CEO (1st son of the founder) Ahmad Shukri 45 CEO Became the CEO at the age of 26 when the founder passed away in 1992.
Purple Skies
Euro Fast
Mulder-XF
Founder
Founder
Founder
Hassan Ali 65 Founder / CEO Founded the company in 1977 while at the university, at the age of 23, with his brother and cousin.
Manan Nor 67 Founder / Chairman
Rashid Khan 41 Founder / CEO
Founded the company in 1978 after working with a multinational for 11 years.
Founded the company in 1989 with 3 friends.
Bachelor of Arts
MBA
Respondent: Group 2 Name Age (in 2012)
Bach. Of Science in Electrical Engineering Cousin of the CEO / Employee Rosli Sharif 48
Position / Title
General Manager
Executive Director (Digital Division)
Years of experience
Joined the company in 2008, after working in the construction industry for 16 years in multinational companies.
Highest level of education
Highest level of education
Non-Family Business
Family Business
Bachelor of Science in Economics
3rd Son of the Founder / Employee Malik Nor 27 Vice President (Automotive Division)
Zamani Zailan 45 Vice President (Operations Division)
Joined the company in 1996, after working for 2 years in the IT industry.
Joined the company in 2009, after graduation.
Joined the company in 2009.
Bach. Of Science in Civil Engineering
Bachelor of Science in Information Technology
Bachelor of Business Studies
Bachelor of Science in Computer Science
Respondent: Group 3 Name Age (in 2012)
Non-family member / Employee Jamilah Kosnan 45
Non-family member / Employee Melissa Chong 52
Position / Title
Head of Accounts Department
COO (Printing Division)
Joined the company in 1989.
Joined the company in 1981. Bachelor of Business Administration
Years of experience Highest level of education
Bachelor of Accounting
Nephew of the Founder / Employee Shamsul Bahrin 39
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Non-family member / Employee Aidil Sidek 40 Head of Group Communications Department Joined the company in 2008. Bachelor of Law
Employee
Employee Danial Hakim 46 COO (Group) Joined the company in 2003. MBA
3.4.4 Entering the Field Patton (1990) suggested an in-depth interview approach (refer to Appendix A), where semistructured questions using open ended-questions. By doing so, it not only provides consistency in the way the interviewed was conducted, but also to encourage the flow of conversations with the respondents. Eisenhardt (1989) reiterated that overlapping data analysis with data collection not only gives the researcher a head start in analyzing the data, more importantly, allow researchers to take advantage of flexible data collection. She further confirmed that that the key feature of theory-building in case research is the freedom to make adjustments during the data collection process. These adjustments can add value as themes emerge and have a better understanding of the uniqueness of each case.
At times, during the interview sessions, the researcher admitted that the conversations did get steered off. Some of these inputs do add richness to the data and at times, the researcher did probe further to understand the underlying concerns of the respondents. However, there were also times where the conversation gets off-track, and the researcher tactfully maneuvered it back by rephrasing and reminding them of the main objective of the study.
The researcher clearly remembers the interview with Rosli Sharif of HDLetrik, was one of the interviews which requires the most steering back to course by reminding him of the question. In this one example where Rosli spoke for more than three minutes on other issues, the researcher had to interject by saying, So, if we go back to focusing on the solar business in Sabah and the cleaning liquid…………” this tactful steering was necessary to remind Rosli that we needed to get back on course and to focus on the two ventures which were created by Ahmad.
The researcher had also gathered secondary data from the company’s website and frequently browses through information on the history, news, and events of these four firms by way of public domains such as online newspapers and magazines, and also follows these four firms by way of social media, i.e. Facebook and Tweeter. The researcher believes that by being abreast with these four firms, a deeper understanding of the firms’ direction, culture, values and aspiration can be understood in a more meaningful manner. This strategy helped the
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researcher to probe and identify with the respondent better while conducting the interview, and also when the researcher was analyzing the data.
As much as possible, the researcher also engaged in accepting invitations from the four firms in attending social or corporate gatherings. This was deemed important to the researcher as it gives an up-close-and-personal view of the family and the business, taking opportunities to observe day-to-day situations within the context of social interaction and business transactions, among family members and employees.
The transcribed data was collated and carefully organized by the researcher via having physical paper files to store the sheets of papers used during the interviews, and folders to store audio files arranged according to cases. Transcribing was carried out by using NVivo, a software which could help researchers to classify, sort and arrange information, examine relationships in the data, and combine analysis with linking, shaping, searching and modeling. However, it is important to state that transcribing the audio files assisted by the use of NVivo was merely an inch of the battle in analyzing the data.
3.4.4.1 Interviewing Personal interviewing sessions took place at the offices of the respondents except that of Ahmad Shukri of HD Letrik, which was done at his home.
All the respondents had earlier requested for a copy of the survey sent to them. The researcher obliged and emailed them the survey two weeks prior to the appointment dates. However, on the day of the interview session, the researcher noted that only Aidil Sidek of Euro Fast read the survey thoroughly beforehand, and he ended by saying, “I hope I have covered all in 40 minutes?” And the researcher noted by saying, “This is the easiest, the most structured interview. Thank you”. However, Aidil went on to go through all the questions again by summarizing what he had said in the past 40 minutes, adding another 15 minutes to the interview time.
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For each interview session, the researcher started with a brief introduction to the respondents on the purpose and objective of the interview. For respondents in Group 2 and Group 3, the respondents were also informed of the earlier interviews which the researcher has had with their respective founder / CEO.
The most challenging interview was with Melissa Chong of Purple Skies. She needed a lot of reassurance that she will not be implicated for what she was about to say, nor was she that easy to let her thoughts flow freely. Having interviewed Melissa Chong for the second time (the first was in August 2010 for the STEP project) and had personally spoken to her in a social context numerous times, the researcher was aware of such challenge and was prepared to handle this interview with Melissa Chong. It is to note that Melissa has worked with Purple Skies for almost thirty years, climbing her way up the ladder from being Hassan’s secretary, and then, she left for New Zealand in the mid-90s to pursue her tertiary education. Upon her return, Hassan offered her re-employment and she agreed because she believes Hassan is a (in her own words) “a different breed of Malay”. Today, as the Chief Operating Officer (Printing Division), she is one of Hassan’s most trusted employees, assigned to monitor the company’s procurement, especially on purchasing of raw materials such as papers and inks.
Each interview ran between 40 minutes to 90 minutes. All the interview sessions were digitally recorded.
3.4.4.2 Pre-Study A pre-study was carried out with Ahmad Shukri of HD Letrik to test the validity of the interview guide and the method of administration for the personal interviews, including data collection, and the management of the data and information. Ahmad Shukri was selected as the pre-study test because the researcher is most comfortable with him, having attended high school with his wife. Ahmad was also the most easy to set appointments with, by way of the researcher’s relationship with Ahmad’s wife. The pre-study was held at Ahmad’s residential home and the interview lasted for 80 minutes.
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The purpose of the pre-study was to test the effectiveness of the interview guide and to ensure all the questions could be covered in the promised 90-minutes time, and in doing so with Ahmad in 80 minutes, reassured the researcher that the promised 90 minutes was achievable.
3.4.5 Analyzing Data In building theory from case studies, one of the most important factors is analyzing the vast amount of data collated. It is a difficult, tedious effort, many a times; little emphasis is placed to neither the process of data analysis nor the expectation of analyzing these data. The challenge is of course, how you convince other of your findings over a 20-minute presentation against the 250-pages of interview scripts which you have analyzed.
3.4.5.1 Within-case analysis Eisenhardt (1989) suggested that one key step is within-case analysis. It is important to do so because of the staggering volume of data, described by Pettigrew (1988) that there is an everpresent danger of “death by data asphyxiation”. There are many ways for a researcher to understand, examine and become intimately familiar with each case as a stand-alone entity, for example by way of developing teaching cases (Quinn, 1980), preparing transcripts of team meetings (Gersick, 1988), or using tabular displays and graphs (Leonard-Barton, 1988).
Moreover, Eisenhardt (1989) further explained that an overlapping of data collection and analysis is a common occurrence in the process of conducting case study research, allowing the researcher to take advantage of the opportunity to improve data collection methods. “The main resource was the phenomenological interviews, and the responses from the interviews which we conducted with the respondents. All these data sets were analyzed by the data driven, inductive, hybrid approach to thematic analysis as outlined by Boyatsiz (1998). “A theme is a pattern found in the information that at the minimum describes and organises possible observations, or at the maximum interprets aspects of the phenomenon” (Boyatzis, 1998, p. 4).
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3.4.5.2 Cross-case patterns Using the approach suggested by Eisenhardt (1989), the cross-case comparison is a tactic of choosing categories or dimensions, and then looking for within-group similarities coupled with intergroup differences. This tactic allows the researcher to look beyond first impressions and look for evidences, similarities, differences, and relationships from various angles.
Eisenhardt (1989) further explained that dimensions can be suggested by the research problem or by existing literature, or the researcher can simply choose some dimensions. A second tactic is to select pairs of cases and then to list the similarities and differences between each pair. This tactic forces the researcher to look for subtle similarities and differences between cases. These two tactics were duly employed in this study.
3.4.6 Shaping Propositions Themes, concepts, and even relationships between and among constructs may begin to emerge during and upon completion of the within-case analysis and the various cross-case pattern analyses. The process of shaping propositions is the sharpening of constructs. This is a two-part process involving (1) refining the definition of the construct and (2) building evidence which measures the construct in each case (Eisenhardt, 1989). To accomplish this, it requires constant comparison between data and constructs to ensure the evidence converges on a single, well-defined construct. Secondly, is to systematically compare the emergent theme with each case in order to assess how well or poorly it fits the case data.
Baxter and Jack (2008) noted that propositions are helpful in any case study, but they are not always present. When a case study proposal includes specific propositions it increases the likelihood that the researcher will be able to place limits on the scope of the study and increase the feasibility of completing the project. The more a study contains specific propositions, the more it will stay within feasible limits. So where do the propositions come from? Propositions may come from the literature, personal/professional experience, theories, and/or generalizations based on empirical data.
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A pattern or replication of cases is built based on logic across the cases is the desired outcome of this process as it will confirm, extend and sharpen the theory. Additionally, iterative tabulation is best shown in a tabular form, graphs or diagram, as this would further sharpen constructs definition, validity and measurability. Lastly, internal validity is achieved when the ‘why” questions behind relationships is evident and unleashed.
The core idea is to compare theory and data-iterating toward a theory which closely fits the data. A close fit is important to building good theory because it takes advantage of the new insights possible from the data and yields an empirically valid theory (Eisenhardt, 1989).
3.5
Rigor and Trustworthiness
So, how does one ensure that a rigorous case study is being carried out? Guided by Baxter and Jack (2008), the researcher was careful that once the case has been determined and the boundaries placed on the case, it was also important to consider the additional components required for designing and implementing a rigorous case study. Baxter and Jack (2008) further suggest that these should include: (a) propositions (which may or may not be present) (Yin, 2003; Miles & Huberman, 1994); (b) the application of a conceptual framework (Miles & Huberman); (c) development of the research questions (generally “how” and/or “why” questions); (d) the logic linking data to propositions; and (e) the criteria for interpreting findings (Yin, 2003). These guidelines were in line with how the researcher had carried out the study (as per the guideline suggested by Eisenhardt).
Additionally, Padgett (1998) suggested six strategies to enhance rigor in qualitative research. These strategies provided the researcher with a check and balance to maintain satisfactory standards in qualitative research. The following are the six strategies outlines by Padgett (1998):
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1. 2. 3. 4. 5. 6.
Prolonged engagement Triangulation Peer debriefing and support Member checking Negative case analysis Auditing
These strategies are not necessary neither exhaustive nor mutually exclusive, however, they are commonly used by researcher as it provides a good guideline to enhance rigor and trustworthiness, hence ensures quality control in qualitative research (refer to Table 3.5 below). Therefore, in this study, the researcher employed all six of the strategies prescribed above as suggested by Padgett to ensure rigor in this qualitative research (activities carried out are described at paragraphs 3.4.4, 3.4.5, and 3.4.6)
3.5.1 Trustworthiness Padgett (1998) also provided how these six strategies will enhance trustworthiness (see Table 3.5 below).Trustworthiness is achieved by the credibility of the matter. In ensuring that the study is credible, the researcher needs to bring the readers to a level which gives them the confidence on the findings, hence, the aligning it to the strategies outlined by Padgett below:
Table 3.5: Strategies to enhancing rigor and trustworthiness (Padgett, 1998) Strategy
Reactivity
Researcher Bias
Respondent Bias
Prolonged Engagement
(+)
(-)
(+)
Triangulation
(+)
(+)
(+)
Peer Debriefing / Support
(0)
(+)
(0)
Member Checking
(+)
(+)
(+)
Negative Case Analysis
(0)
(+)
(0)
Audit Trail
(0)
(+)
(0)
Where: (+) : Positive effect in reducing threat (-) : Negative effect in reducing threat (0) : No effect Source: Qualitative Methods in Social Work Research: Challenges and Rewards by Deborah Padgett (1998)
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With regard to prolonged engagement, the researcher, as described in (paragraph 3.4.2 above) has professional relationships with all four firms through past research projects on average of four years and had done several interviews for different research objectives. Prolonged engagement helps to reduce the tendency for lying or dishonest answers because of the relationships and trust built between the parties.
Triangulation was also performed in this study, as the researcher had delved and source from multiple sources through multiple methods, interviews with key respondents, observation on non-participants at their work place (even during formal social functions), observation of the workplace, document reviews, articles in the press, their websites and social media accounts (as described above in paragraph 3.4.4).
As per peer debriefing and support, the researcher had during the course of this research presented, since 2010 to numerous local doctoral workshops, two international doctoral workshop which focuses on family business and several academic meetings through the researcher’s affiliation with the STEP research, and FERC, where part findings of this research have been presented both within the Asia Pacific region, and also the Americas and Europe. Though some may say that peer debriefing does have a danger to “group think”, then again, one that is totally unsupportive would defeat the purpose of the main contention for “peer debriefing and support”. Regardless, having support among peers within the family business scholars do certainly add rigor and enhance trustworthiness of this research.
Member checking is done to check the accuracy of facts and observations, which took place as data collection and into the process of data analysis. It is regarded as one of the most important strategy to enhance rigor and trustworthiness. In doing so, the researcher is able to confirm and reduce biasness on the findings, by double-checking with the respondents or by observation of site after the interview and/or during transcribing, and/or during the data analysis. In this research, the research had done several member checking activities, especially while the researcher was back in Malaysia after the transcribing process. In addition, when such activity is carried out, it also strengthens the relationship between the researcher and the respondents because the respondents will appreciate the researcher’s
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confirmation towards accuracy of the data. Member checking also provides validation of the data.
With regard to negative case analysis, this strategy is used in the quest for verification (Padgett, 1998). In this research, the negative case analysis was carried out after the data analysis process leading to findings (see Chapter 4 below). This process not only alleviates credibility of the findings but also allows verification of the findings. This technique was carried out while confirming cross-case patterns (see paragraph 4.2 below), i.e. examining whether the constructs of the emergent themes were applicable in all the cases. When there are no negative cases, then the analysis was considered complete.
Audit trail is referred to the process of documenting every step taken in conducting this research, from data collection, to data analysis which ultimately leads to findings. The main objective of an audit trail is to allow another researcher to embark on similar research using similar methodology by replicating or enhancing these steps, in the quest of scholastic endeavor and knowledge sharing. Audit trail is also regarded as a meta-strategy in enhancing rigor (Padgett, 1998) as in documents the other strategies, i.e. prolonged engagement, triangulation, peer debriefing / support, member checking and negative case analysis, used where it is appropriate.
3.6
Scope and Limitation
The unique, complex nature of family business made the topic worthy of scholarly investigation, though there may be several limitations to it, namely: 1) Focus on new venture as a move towards diversification. 2) Focus on the “intangible” component of the RBV. The research is limited to the perspectives of the founder / CEO (at the helm of the business), as he is the decision maker for the business when venturing into new business. The study
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examines at a single point of time, and focuses on decisions made while or after a decision is made when venturing into a new business.
3.7
Conclusion
Understanding the reasons and assessing the decision making process among entrepreneurs and its comparison among the decision makers of family businesses and non-family businesses will add richness to the area of family business. This study provides a better understanding on how family dynamics may (or may not) affect the decision making process in venturing into new business. In this chapter, the researcher discusses the research design of the study, and, describes how the study has been implemented to develop a theory of decision making process in family businesses when it comes to creating ventures. This chapter describes the qualitative strategies and case study approach in answering and addressing the study’s research questions.
The next chapter discusses the qualitative results of data collection and findings from the data analysis of individual interviews gathered. The next chapter describes the detailed analysis of the qualitative probe and deliberates on the findings of the qualitative responses.
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CHAPTER 4 DATA ANALYSIS
4.0 Introduction
Chapter four focuses on the results of the analysis of the personal interviews as the descriptive empirical findings. Eisenhardt (1989) describes analyzing data as the heart of building theory from case studies. The case data analysis comprises of within-case analysis and cross-case comparison. From the analysis and assisted by NVivo, several focal constructs within an emerging theory are established. Subsequently, as suggested by Baxter and Jack (2008), several propositions are determined to explain the relationship between the theoretical constructs.
4.1
Analyzing within-case data
The idea of within-case analysis is for the researcher to be comfortably familiar with each case, one where it allows the researcher to have the information at the back of her palm. As Eisenhardt (1989) puts it, “this process allows the unique patterns of each case to emerge before investigators push to generalize patterns across cases”.
In this study, field notes were also used to help the researcher to process the large amount of data and in managing this, the researcher did this in two phases: (1) notes which were written in the Interview Protocol Checklist (Appendix B) to cross check while conducting the interview using the Interview Schedule (Appendix A), and (2) additional notes were written on the Interview Protocol Checklist and also Stick-it notes as a way to expand and reflect what have been collected, thus far. This reflecting thoughts are as simple as observing the surroundings, office set-up and how people interact to higher level of observation such as 73
non-verbal cues, i.e. body language and tone of voice (during the interview or/and when interviewer is interrupted with a phone call or visit).
Over a course of three months, beginning March 2012, the researcher then started to transcribe the audio files using NVivo. This was an important exercise to ensure that the researcher could immerse into the richness of the data, whilst jotting down and drawing mind-maps to make sense of these data. Throughout the transcribing process, numerous iterations and discussions between the researcher and the supervisor took place. During these discussions, notes and mind-maps of what was found in the process of transcribing the data were shared with the supervisor, and constantly referring to the priori construct, i.e. (1) decision making, (2) motivation, and (3) new venture. This was necessary as it acted as a guide to their discussions while staying within the researcher’s conceptual framework (see Figure 2.7) and avoiding being swayed off-tangent.
In total, there were 12 audio files, each audio file were on average 90 minutes in length and a 20-page verbatim script, that brought upon to more than 10 sketches of mind-maps and stacks of notes to match the empirically valid theories used in the researcher’s conceptual framework.
The researcher has been researching these three family businesses (HD Letrik, Purple Skies and Euro Fast) since 2010 through her involvement in the STEP research project where she led the STEP Malaysia National team and had presented her findings numerous times at various international platforms. The researcher is also familiar with the non-family business (Mulder-FX) where she had researched on it since 2008, where she had developed and published teaching cases. These factors offered her the versatility to grasp the richness of each single case. Having this preconception of these cases, the researcher understood the challenge of staying impartial, thus, was careful not to be overwhelmed or biased towards what is already known of these cases. Hence, she constantly referred to the research questions, asking the “how” and “why” questions; looking at the priori constructs, i.e. (1) founder/CEO, (2) motivation, and (3) new venture of the conceptual framework as described in Figure 2.7, and constantly directed her intention towards exploring this phenomenon. 74
By May 2012, the first draft of what was seen emerging from the transcribed data were presented at the Successful Transgenerational Entrepreneurship Practices (STEP) Global Academic Meeting, and later for a presentation at the 2012 Family Enterprise Research Conference (FERC), both events were held in Montreal, Canada. The feedback and comments received from renowned family business scholars were well taken note of by the researcher and provided a boost of confidence that the work done thus far was on the right path.
In June 2012, the researcher flew back to Malaysia and took a break over the Ramadhan and Eid Mubarak months. It was during this period, that the researcher took some time to recap on the transcribed data, and the comments received from her presentations in Canada. The researcher also continue to refer to current journals and theses published between 2010 – 2012 to further understand what was emerging off her current analysis. The researcher also took some time to communicate via emails with some of the respondents to clarify on some details of the research data. The Eid Mubarak celebration gave the researcher the opportunity to visit two of the family businesses undertaken in this research, further observation and mind notes were taken to enforce what is already known and what had already been observed during the interview sessions.
In August 2012, the researcher flew again to Toulouse to continue analysing the transcribed data. Equipped with the familiarity and knowledge of these four cases, and understanding the importance of Eisenhardt’s (1989) within-case analysis, the researcher was now able to move on to the next stage of analyzing the data, i.e. cross-case comparison.
4.2
Searching for cross-case comparison
One of the challenges that the researcher experienced while analyzing the data was ensuring that the data collected are analysed in a simple yet careful manner. This was in light of trailing the participants’ understanding of decision making process in creating ventures as 75
opposed to them explaining the decisions they “had” made. On a broad sense, participants were comfortable talking about the decisions they had made and the information gathering that came with that decision process.
However, when participants were asked “why” they created the venture, they were quick to jump to say it was simply seizing an opportunity they saw before them. But when asked (the “how” questions) who they consulted when they needed more information or what they did when there was agreement or disagreement among key family members, the participants started to talk about the future of the next generation. And when further probed by asking what was their top priority in creating these ventures, the respondents began to share their hopes and dreams of “what they want for the family, rather than what they get from the business”.
As two of Group 1 respondents put it: Hassan Ali, Purple Skies (Group 1): I think, my plan is in place. I want to avoid scrambling among the second generation when the first generation is no longer around. At least, they have their own things to do.”
Manan Nor, Euro Fast (Group 1): “The decision was this…….. in a family business, when you have reached more than 30 years in existence, you have to think, who will take over the business. Some children are here, some are not here. They have their own dreams also”.
Hence, with the massive amount of information gathered through reading and referencing, the visual displays on the walls depicting the various variations of the proposed model became a symbol of hope to building a good theory. And so, the cross-case comparison begins.
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The following sections will describe how propositions to theories are presented as each theme emerges from priori constructs listed as (1) Founder/CEO, (2) motivation, and (3) new venture, which were derived from the research questions stated below: 1) Do family business owners reason and make their decisions differently from nonfamily business owners when they create new ventures? 2) Are they different? If Yes, how different? And, why are they different?
Figure 4.1: Raw depiction of the initial emergent theory
Source: Author’s own interpretation
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The first proposition is speed. This method was derived inductively by employing two methods: (1) comparing cases, and (2) priori construct, when the researcher asked the respondents the following question:
1. Can you walk me through the process of creating the business venture? a. How was the decision made? b. Who was involved?
2. Can you describe a specific time when you needed to make that decision on the business venture and did not have enough information? a. What did you do? b. What were the results? c. How did you feel about this?
As the NVivo coding progressed alongside the better understanding of the qualitative data, it was found that decision making is further coded to: 1. Patriarch 2. Process i. information gathering ii. communication 3. Trust i. commitment 4. Values i. culture ii. religion (as a way of life). (Note : in this research, all businesses are headed by Muslim patriarchs). 5. Speed
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Figure 4.2: NVivo node distribution with reference to coding
4.2.1 Patriarch The answers to this question led the researcher to term Group 1 as “Patriarch. The Patriarch, the founder or CEO at the helm of the business lays the “foundation” to the “family level” by setting a way of life (religion) with belief and instilling a value system within the family and business (with exception to Mulder-FX, laying the foundation is within the context of “firm level”). This familiness resource pool introduced by Habbershon (2003) through the RBV theory (as described in paragraph 2.7.1 STEP research model) builds on the priori constructs to this study.
Figure 4.3 below depicts the on-going laying the foundation being carried out by way of informal meetings (even meetings at dinner tables) or social gatherings for the family. It is through these informal meetings and/or gatherings that the Patriarch (hereby referred to as “P”) encourage communication, openness and respect among family members. The positive condition is denoted as “P+” and a negative condition is denoted as “P-”.
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Figure 4.3: Patriarch laying the foundation at the family level
The quotations below demonstrate the condition of “P+”: Hassan Ali, Purple Skies (Group 1): “I think, basically, I am blessed because these (co-) founders tend to have full faith in me”.
Manan Nor, Euro Fast (Group 1): “I sit down with my family and speak about it……….. This is my philosophy. I told my children, if you find someone who really makes you happy, you can't afford but only give her a RM1 gift, so you give her what you can afford. Then, you don't become greedy or jealous of other people. If God gives you more later, it's ok. Then, you can afford more”.
Malik Nor, Euro Fast (Group 2): “I think, his (Manan Nor) top priority is family, it is not his work. He is family first, then, work second. We never fail to have dinner every night together, even though he comes home late, at 9.30pm, or if there is a big workload, he comes home, every single day, at 8pm. And we will all have dinner”.
ZamaniZailand, Mulder-XF (Group 2): “I believe what he (Rashid Razak) has been preaching all the while that he wants to build up Mulder-XFand to ensure that the company can strive even without him at the helm”.
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4.2.2 Process Process as defined by Merriam-Webster is: a natural phenomenon marked by gradual changes that lead toward a particular result “the process of growth”. Decision making process defined by Wells (1974) is the entrepreneur’s abilities and those of the entrepreneurial team who are decisive in the strategic decision-making process: their background, previous experience and level of commitment. Further, Harris (1998) defined decision making process and focuses on factors such as time available for making the decision, cost involved with alternative solutions, availability of resources, knowledge and personal psychology (values).
Following is the decision making process described by Jamilah of HD Letrik: JamilahKosnan, HD Letrik (Group 3): “First of all, if there is an opportunity to pursue, we will prepare a proposal, and is brought to the meeting. Mostly are government projects, and he (Ahmad) gets some leads from government agencies. Sometimes, he will ask his project managers to assist, or get more information from his friends, or peers. For example, for the solar business, our staff, Shariman, who was previously from Shell, he was the one who had the knowledge and experience in the solar industry, and he was the one who prepared the proposal and presented in the meeting …………….. it depends on the decision being made. When it is more on operations, then, decision is made immediately. When it relates to investment, and strategic matters, then, it will involve three board meetings. They will have a few management meetings first, then it goes to the Board Meeting, and that will take about 3 board meetings…… Decisions are mostly formal, in a meeting, and it is minuted. Only when it is an operations matter, adhoc, then, we still have a short meeting for it. We have to follow our SOP, so all decisions goes through a meeting, minuted, and also goes up to the Board”.
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The decision process described by Jamilah verifies what Ahmad says about how decisions are made at HD Letrik: Ahmad Shukri, HD Letrik (Group 1): “The agency, or the person who had the contacts, will normally represent the company to get involved, in the initial stage. After all that, then they will inform in the board meeting. So, the person in charge has to declare or to inform other shareholders or directors about the intention of the venture. Then after….if it is a good one, they will proceed. Shareholders and board of directors. And then top management……. When it comes to decisions, it is generally my business partner and I who make the decision”.
At Euro Fast, Aidil said that the decision making process to set up a recent venture to be fast because its founder/CEO, Manan, and his eldest son, Mahmud, were quick in doing so: Aidil Sidek, Euro Fast (Group 3): “Mahmud (eldest son) and Manan were involved in the decision making. Manan is a very hands-on CEO, he is always down on the ground, running operations and doesn't just let it go to someone. Even though, he entrusts someone to run the business, he will still be on the ground to share his experience”.
The research asked Euro Fast’s youngest son, who is currently groomed to lead the company, how decisions are made: Malik Nor, Euro Fast (Group 2): “The Supreme Council meets once a month. I sit in all the meetings. I don't sit on the Exco…. on the Exco is all family members. I see all of them at home. This business is 100% owned by the family, I see them every day. So, Exco is just formality. We do sometimes, discuss work at home. If there is a 3rd party involved, then it goes to the board.”
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And the dialogue above verifies what the founder says about how decisions are made: Manan Nor, Euro Fast (Group 1): “That my first level of information is from my reading, my travelling, my observation. That's where ideas come first. And then, of course, I sit down with my family and speak about it. Then, again, Euro Fast is run by a Supreme Council. So, we discuss that at the Supreme Council level. Because at the end of the day, it is not me to manage it, it is the Supreme Council that runs the business”.
In all, for Euro Fast, the decision making process is described as follows: Aidil Sidek, Euro Fast (Group 3): “The decision is always united, within the family. There will always be a discussion among the family, and presented to the Supreme Council. The Supreme Council will also do a thorough study, market review, comparison and due diligence, and provide him with the feedback, for him to make the final and proper decision.”
The process for Mulder-FX is no different, except that it took longer to come up to the decision of setting up the ventures: Zamani Zailan, Mulder-FX (Group 2): “We have to do some market research, pricing analysis, that’s where our team comes in, in order for us to formulate the package, the market plan, etc. Took us about 6 months …Basically the process was information gathering, looking at the options. The Exco meets once a month, so the findings of the research are tabled during one of the Exco meetings. The Exco makes the decisions. The Board has to be informed. But I don’t think it was to seek consent”.
4.2.2.1 Information gathering Information gathering is described by the means employed by the patriarch in acquiring knowledge and collating data by his own accord (reading or networking among peers) or assisted by his team (through market research and business intelligence), to enhance his skills and abilities in the process of decision making. 83
Jamilah Kosnan, HD Letrik (Group 3): “I think, Ahmad is usually seeking information. He talks to friends and readings. He does not use so much of his gut feel. But I think, he is more of a strategic decision maker, than, and gut decision maker”.
Melissa Chong, Purple Skies (Group 3): “………. he (Hassan) will first check with the Finance department. How the financial situation is. Then he will also do some study of the background, before he ventures into it”. Sometimes, he asks friends, he has so many friends……… he will check with his relatives, and find out the potential and risk, and then, he makes his own decision……..
Shamsul Bahrin, Purple Skies (Group 2): “The first in any decision, it would be the 3 main founders, because they own the businesses. One of the other parties agrees or not to use the resources that they own. So, maybe, if one of them does not agree, then, it is difficult. But like in any other business in creating a venture, the gut feeling, and that shared vision, whether they are willing or not to go; that would be the first step. The second step would be to calculate the risk, manage the risk, and getting a business sense. Then, it goes to our group management committee's meeting that includes the young directors as well. Which involves me, Melissa, Hasniza, etc., which we call the G7 Group. Here is where we get more feedback”.
Aidil Sidek, Euro Fast (Group 3): “In general, Manan as a President will make very informed decision, based on information he can lean, from various sources, from the internet and circle of entrepreneur friends, business friends, internal feedback, and also market review. He will exhaust all avenues to get optimal information about a certain venture before he goes into it. There has never been disagreement. There may be hesitation because of lack of information. But on his part, he will thoroughly look at success stories, white papers, and business reviews, then, only he will make the decision based on these justifications.”
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Manan Nor, Euro Fast (Group 1): “If you see at that table, they are all magazine and books on property. So, we read and we study and study and study on property, before we go in. So, we just don't go into it. We study about it. Not just here in Malaysia, but you read also want is happening elsewhere, like in the Middle East.”
Zamani Zailan, Mulder-FX (Group 2): “He (Rashid) does a lot of reading…… he does that whether through the internet or books; of course he refers to a network of friends too - quite extensive at that. In general, I think he does value the input from the team too.”
4.2.2.2 Communication Communication is described as the bridge that links family members, and certainly between family and non-family employees. However, communication can be a challenge when family members serving in multiple roles (shareholder, management, parent) and worst still, when the family reaches a dead lock and cannot figure out how to proceed with making important decisions that takes the company to the next level.
Following are the responses pertaining to communication:
When asked, how was the information disseminated: Melissa Chong, Purple Skies (Group 3): “Usually, for the top management team, we know much earlier at the meeting. Then, he will notify to all staff by email”.
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Aidil Sidek, Euro Fast (Group 3): “Manan gets a lot of feedback from employees. Manan listens. Manan is a good listener, so at the end of the day, the employees know that he is open to information sharing and he always also shares his knowledge with others freely”. “Manan is very hands-on. He will just come to our room and ask about an idea. I have been working here for 3 years (a total of 16 years in my entire career). It was peculiar, at first, to see a President/CEO who comes down to get feedback from his middle management, and even the general workforce. At any events, he will be there, doing his PR and information sharing. So, I would say, he can just call us up. Most of us, are connected to him via Blackberry, because we value the accents of time. So, when there is information to be shared there and then, we share via BBM. Straight away we share information within the Group”.
The first cross-case comparison was to evaluate the leadership approach of the patriach. Figure 4.4 describes how the patriarch is leading the family and the business, and in the case of the Mulder-FX, the company.
Figure 4.4: Cross-case comparison on leadership approach of the patriarch.
High Speaks of what he aspires Low
Purple Skies; Euro Fast
Mulder-FX HD Letrik
Encourages ongoing informal meetings to promote communication and openness
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High
4.2.3 Trust It is said that trust is built on good communication and openness, and these would not result in trust if there is no commitment among the parties involved. In families, families in business and in organisations, trust is given by or expected from those who are committed to ensuring shared goals are achieved. And in achieving shared goals, mutual respect, good communication, openness and commitment are defaults to trust. The researcher explored the meaning of “trust” including synonyms by using Nvivo and “commitment” comes as the root word to “trust” (as depicted in Figure 4.5 below):
Figure 4.5: NVivo text search query for “trust” including synonyms
Figure 4.6 below depicts “trust” as the result of the patriarch’s on-going laying the foundation through informal meetings (even meetings at dinner tables) or social gatherings for the family, which in turn encourage communication, openness and respect among family members at the firm level, and sips into the firm level which affects the employees. Trust among families is hereby referred as “Tf” and trust among employees is referred as “Te”.
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Figure 4.6: Trust is built by the patriarch
The notion above clearly shows when Aidil Sidek, a non-family employee, spoke of the trust among families members (hereby referred to as “Tf+”) and employees (hereby referred to as “Te+”), and commitment level among families and employees: Aidil Sidek, Euro Fast (Group 3): “When he (Manan Nor) makes something successful, he will really make it happen. He will go down to the ground, and really push the cards. So, the commitment level is always 100% throughout”.
This is also seen in Purple Skies as Shamsul speaks of the commitment level demonstrated throughout the organization: Shamsul Bahrin, Purple Skies (Group 2): “Whether it is something viable, whether if let say, the identification of the person, within the Group, moving over, whether he will be supported by another person, who is capable. So, that is why that 80% is thrown back to us. Because is needs commitment, it requires us to really commit, to ensure that it is a survival business venture………… second, they (the founders) know that bits and pieces that we are able to do it, but the commitment of a person to pull all these, and also to get Robert or some other people for inputs whether this is a viable business, or can we sustain, and do we have all those things. So, Hasniza, from the Magazine Division, can always say, I think, we should have, because in my schedule and my plan, I have these series of events. Irwan also can say the same thing. So, that is why it is thrown back to us (the three top-level family managers).
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The absence of trust (hereby referred to as “Tf-” and “Te-”) is due to lack of communication and openness which in turn, result in conflict and discord among family members and also employees. Jamilah Kosnan, HD Letrik (Group 3): “The family is sleeping and do not know head or tail, so, there are more negative than positive vibes. They even question me on the income of the business, and they even question whether this is a genuine income. As Moslem, rule number one, you have to think good of others. Number two, your father has passed away, and the siblings need to ask, how can I come in to help. But they are not doing that. But, luckily, Ahmad and his business partner are so responsible towards all the employees and taking care of the employees. We have never not received our salaries. They work so hard. But Ahmad’s siblings just don’t care. Two of the siblings were working here. They say there are lazy, and they are not hard up to work in this company. But now, when the company is doing so well, they are so hard up of the company. Before the founder passed away, he told me to watch over all his children. I have to hold on to his request. That is why I am also trying to make the siblings come together”.
HD Letrik whose founder had passed away in 1992 of heart disease when his eldest son (now, the CEO) was in his final year at university. At his bedside, he had requested and willed that his eldest son take charge of the business and care for the family.
Jamilah Kosnan, HDLetrik (Group 3): “As an employee, I prefer that there is only one head, if there is so many heads, then, it becomes so difficult. We all work for God, Allah, my children grows up by the salary which I got from this company which I have worked for 21 years. When I think of the late founder, I don't know how the children do not think of their father's legacy. Sometimes, Ahmad is so pressured by how the siblings squabble, and at times, Ahmad says he want to give it all up. But I told Ahmad to hang on and keep on fighting for the company. And I feel, Ahmad is very lucky that he has a business partner, who is so understanding, and so easy to work with that they do not have disagreement”.
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“During bad times, the family members will just ask Ahmad to do and make all the decisions, especially, 10 years ago, when times were bad. But when the business has boomed, and doing so well now, they all come here asking. I have been working here for so long, and I ask myself, why the siblings all disappear when times are bad, no one wanted to help the business, or be involved in the business. But when the business is doing well, the siblings will come and question Ahmad. I have also informed Ahmad’s mother to speak to her children so they do not question Ahmad this way. All of us grew up together……. We should not quarrel with each other like this”.
The researcher also asked Jamilah how she views the commitment level among employees. Jamilah Kosnan, HD Letrik (Group 3): “We usually brief the managers of new projects or relocation of staff. So, these managers will brief other staffs. Some staffs are willing to be relocated, but some may have hesitation. Nonetheless, they are all cooperative with the company's decision”.
The researcher also interviewed Ahmad’s cousin who is the General Manager of the company. When asked about the commitment level, he had this to say: Rosli Sharif, HD Letrik (Group 3): Like how it is now, there’s such a big problem with Ahmad’s family. It is unbearable. As part of the family, all the decisions are made by Ahmad and I know the family members are not interested at all. They let Ahmad control the business, and they are only concern of their shares in the business. I know the problem. If they see the dividends are bad, they get upset. It’s only that. But they do not interfere. They do not interfere in the day-to-day running. So Ahmad also do not update them”.
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Ahmad has not been talking to his siblings for almost two years now. They do not meet for any social gatherings, not even religious events such as Eid Mubarak (where families come together in celebrating the end of Ramadhan – this is the time where bonds and family ties are strengthened). Ahmad also said that he is sad that this discord has also affected his children, who now are not bonding with their cousins. The only person within the family that all the siblings were speaking to is Rosli Sharif.
Ahmad Shukri, HD Letrik (Group 1): “Rosli is unlike other people, he gives more than 100%. I can see that. He works really hard. Even my business partner consults Rosli. If there’s anything, we will call upon Rosli. He will do all the agreement and he will go through all our past, present and future agreements. Rosli will also do all the research for us. He really works, he is professional, and he has worked with international companies prior to joining us. He knows A to Z”.
The researcher asked Ahmad how were matters resolved when it needed the “family’s consensus”, if there were matters that needed to be discussed such as setting up new businesses or shareholding. Ahmad said he will then speak to his mother. At times, Ahmad says that his mother understands where he is coming from, but more often than not, Ahmad feels that his mother takes on the siblings’ plight.
Ahmad Shukri, HD Letrik (Group 1): “My late father has done all these, he has set up different companies for each of us, one for me, one for my younger brother, and some others, but last year, we close almost everything, we don’t want it anymore……..…..” “In the past, we have also used names of our family members to set up new companies, but they are not interested. They only want the dividends. I am very upset with all these” “My siblings are not on the board…… so, if there are any problems, I will consult with our mother”.
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The above analysis and findings supports LaChapelle (1997) contention that relatively low and high trust in family businesses is created and maintained by the attitudes, leadership practices, and interpersonal relationships of family members, who serve as a primary constellation of role models (based on family histories, norms and values) for those who are involved in the organization. In addition, leadership practices also create and reinforce relative trust or mistrust in the organization, and identified effective communication processes, involvement in decision making and approaching trust-building as a proactive and reinforcing process.
4.2.3.1 Trust among families Further exploration within the firm level in this study,
it seems to be coherent with
LaChappelle (1997)’s seven case studies, that higher trust environment correlates with motivation, commitment, cooperation, participation, productivity and loyalty of members of the organization, thereby, increasing performance and continuity of the business.
Therefore, the second cross-case comparison was to evaluate the level of family members’ trust towards the patriarch as well as the extent to which the employees trust the patriarch. This was to determine the level of trust built by the patriarch in leading the family and the business (with the exception of Mulder-FX, where trust is built at the firm level) as described in Figure 4.7 below:
Figure 4.7: Cross-case comparison on the level trust among families and the level of trust among employees
High Purple Skies; Euro Fast HD Letrik Mulder-FX
Trust among families Low
Trust among employees
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High
4.2.4 Values The general systems theory, in particular human ecology, healthy systems is evaluated by the degree to which they unify members around a shared value (Peterson and Distelberg, 2011). Concepts such as familiness have begun to demonstrate the role of the family in unifying individuals within the system around a shared set of goals, or a value orientation (Chrisman, Chua and Sharma, 2005; Habbershon and Williams, 1999; Habbershon, Williams and MacMillan, 2003; Zellweger, Eddleston and Kellermanns, 2010).This is a growing body of knowledge that demonstrates the capability of the family in fostering unity through the creation and capitalisation of human, social and financial resources within not only the firmlevel but also the family-level.
The following are what was captured during the interview: Manan Nor, Euro Fast (Group 1): “………. the golden rule is, you don't pay to get glamour. For me, my pocket is to pay my responsibilities is first, that's my responsibility, above all. Charity begins at home. So, I must be able to pay the salary of my staff, about 600 under my wings. And each of them, have an average of four in their household, and that is my responsibility, all 2,400. They all need to eat. If I pay them, they get to eat. Let's settle for that. The rest will come later. When you have got that in mind, and you do thing with sincerity. Of course, I sacrifice a lot of things, etc, I do not play golf, because I cannot appreciate hitting the ball, walk in the sun, wear the gloves........ unless you have other motives.”
4.2.4.1 Culture Denison, Lief and Ward (2004) referred to Hofstede’ (1983) and Peters and Waterman’s (1982) reviewed on corporate culture to study how family firms sustainability and accomplishment are imbedded in something deep within corporate culture. Additionally, there are only two studies that emphasized on family relations as the main unit of analytical focus. Salvato and Melin (2008) focused on how culture is relationally nurtured in relationships between different generations by examining both family and non-family managers in their study. On the other hand, Hubler (2009) extended the works of Whyte’s
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(1994) ‘the heart aroused’ to signal the family as the ‘soul’ of culture. Sharma & Manikutty, 2005 emphasized the effects of culture on divestment decisions, while Corbetta & Salvato, 2004 focused on effects of culture as it moves between generations.
Following, Aidil Sidek described how culture is cultivated by the patriarch to the entire organization, hence, fortifying how the family is the “soul” of culture (Whyte, 1994): Aidil Sidek, Euro Fast (Group 3): We are fortunate enough to be groomed by him (Manan), either directly or indirectly. So, we tend to not just be a typical staff, but to inculcate a culture that this company is a family. If one person is hurt, everyone gets hurt. One person knows about it, everyone knows about it. One because it is founded by an entrepreneur and headed by an appointee. It is not easy to follow his pace. 75% of the time, I am with him handling events. It amazes me how he could go on and on and on, like an Energizer Bunny, and we want to call it a day”.
4.2.4.2 Religion All fours companies are owned and headed by Muslim patriarchs.
It is imperative to highlight the presence of Islamic teachings and values which become the way of life to two of the family businesses (Purple Skies and Euro Fast) in this research: Aidil Sidek, Euro Fast (Group 3): “Sometimes, we wonder why he (Manan) can still stand when we all feel like falling. What drives him? Manan is not the type that he will simply tell you his secret of success. You need to get him to a conversation. One of the things I have learnt, and also parts of Prophet’s Sunnah, after the Zohor prayer, take a fifteen-minutes nap, cannot be more than 15 minutes. It will give you that extra time you need to be more productive, especially at night. It is not after the Asar prayer, because it will dull your brain. Manan is taking to the path of religion, as well as a business man. I have never had a boss like this and I thank Allah for steering me this way”.
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The third cross-case comparison was to evaluate how values (culture and religion) are inculcated by the patriarch within the family level, and in turn, sips into the firm level. This was to understand the relationship between trust and values, and how they are preached by the patriarch in leading the family and the business (with the exception of Mulder-FX, where trust is built at the firm level) as depicted in Figure 4.8 below:
Figure 4.8: Cross-case comparison on the relationship between trust and values
High
Trust
Low
Purple Skies; Euro Fast HD Letrik
Mulder-FX
Values (culture and religion)
High
4.2.5 Speed Speed of the decision making process is seen to be “faster” because decisions are made among family members, many a times at informal meetings such as at their dinner tables, or social gathering. To these family businesses, what goes to the board is a matter of formality.
This was further deduced when the researcher asked the following questions: 3. How would you elaborate your decision-making when you ventured into the new business? a. Short term or long term oriented? b. Quick or fast decision-processes? c. Centralised through top/family (management) leaders or decentralised throughout? d. Informal personal interaction or formal meetings and processes? e. Acceptance of failure in the decision-making? 95
f. Intuitive and personal or strategic with planning? g. Dedicated some budget or internal corporate venturing capital for financing new ventures? h. How was the commitment and support level?
This notion is supported by a non-family manager: Aidil Sidek, Euro Fast (Group 3): “It is never quick or fast with Manan. It will usually be deliberated very very current. He gets feedback from everyone, every member of the Euro Fast Group family, and they will have an avenue to say what they think about it. Manan is very open to suggestions and feedback from staff. He will ask them to put themselves in his shoes and think how to do it. And he likes to bounce ideas and very progressive relationship - we could bounce ideas back and forth. He does not breed a yes-man. We go into any business with informed decisions, running, we never walk. Because we value our time, and do not want to second guess our every decisions. Our decisions are well thought out”.
However, exploring how Mulder-FX did it, between the two venture, the idea for one of the business venture was mooted in 2009, where it started with doing “some market research, pricing analysis, before they formulate the package to market it – it then took them about 6 months to do so, and the venture was only implemented in 2011, while the other venture took about 6 months before it was implemented: Zamani Zailan, Mulder-FX (Group 2): “I think overall, it took a couple of sessions with the Exco; and the point where our team recommended to the Exco, probably it took 2-3 months after that.
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The fourth cross-case comparison was to evaluate the speed of decision making in relation to trust in the formation of new ventures among the four organizations as depicted below in Figure 4.9:
Figure 4.9: Cross-case comparison on speed in relation to trust in the formation of new ventures
High
Speed
Low
Purple Skies; HD Letrik Euro Fast Mulder-FX Trust
High
From the analysis above, it can be concluded that decision making in Purple Skies and Euro Fast is faster compared to HD Letrik and Mulder-FX. This can be attributed to the ability of the patriarch (as he is laying the foundation) in fostering trust. This enables the patriarch to attain the commitment of family members and employees (at the “operational level”) in embarking on creating ventures (at the “performance” level). Hence, this study develops the following propositions,
P1a:
The ability of the patriarch to foster trust in the family leads to fast decision making in venture creation.
P1b:
The ability of the patriarch to foster trust among the employees leads to fast decision making in venture creation.
The above propositions are depicted in the following Figure 4.10:
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Figure 4.10: A depiction of the focal construct of “speed” in venture creation
Based on the preceding analysis and explanation, Table 4.1below provides a summary of the theoretical connection between identified constructs. For HD Letrik, the Patriarch did not communicate with his sibling for the last two years and was not able to explicitly inculcate values (demonstrating “P-”), therefore, there is lack of trust among family members (displaying “Tf-”). However, there is trust among employees towards the patriarch (exhibiting “Te+”). This is probably due to a good relationship between the patriarch and the other key shareholder/co-founder. The synergy between the two assured employees and helped build trust. Nevertheless, it resulted in a moderate speed in decision making of creating two ventures (one core and one non-core business) because decisions still need to be consented by a non-family shareholder.
On the other hand, the patriarchs of Purple Skies and Euro Fast laid the foundation through effective communication and inculcation of values (demonstrating“P+”), thereby, there was trust among family members and employees (depicted as “Tf+” and “Te+” respectively). This led to fast decision making in creating ventures (one core and one non-core business). As for Mulder-FX, the patriarch communicated and inculcated organisational values, which lead to trust among employees (exhibiting “Te+”) but there was moderate speed in decision
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making in two creating ventures. This can be due to the consensual decision making approach established by Mulder-FX that involves three other co-founders.
Table 4.1: Summary of theoretical connection for “speed” between constructs Constructs /
Patriarch
Trust
Speed
New Venture
Companies Tf
Te
HD Letrik PTfTe+ Purple P+ Tf+ Te+ Skies Euro Fast P+ Tf+ Te+ Mulder-FX P+ NA Te+ Note: L = Low; M = Moderate; H = High
L
Core
Noncore
1
1
1
1
1 2
1 NA
M
H
4.2.6 Permissiveness Permissiveness is the disposition to allow freedom of choice of behavior, or “action autonomy” given to those who are trusted to assist in decision making. Managers' abilities to make independent decisions allow the organization to be more responsive to changing market conditions. Hence, when managers are given the freedom of choice of behaviour to assist or make decisions within the business context, it gives the manager a better understanding of changing conditions and helps identify innovative ways to be competitive for the good of the business.
Andersen (2000) suggested that autonomous actions reflect the extent to which managers below the top management team are authorized to make decisions that have strategic implications. The construct of autonomous actions is captured by decision authority scales of conventional centralisation measures adapted to consider decisions affecting the firm’s strategic development, such as new market activities, product and service developments, changes in practices and policies and the like.
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The fifth cross-case comparison was to evaluate permissiveness in allowing family managers to assist in decisions against allowing non-family managers to assist in decisions with regards to the formation of new ventures. With the exception of Mulder-FX (a non-family business), this cross-case comparison was to understand the relationship between permissiveness and trust among families (as shown in Figure 4.11 below), and how permissiveness contributes to the speed of decision making in creating ventures.
Figure 4.11: Cross-case comparison on the relationship between permissiveness and trust among families in assisting in decision making
High Permissi veness
Purple Skies; Euro Fast
HD Letrik
Low
Trust among families
High
This was deduced when the researcher asked the following questions: 4. Can you describe a scenario where there was considerable disagreement when you were evaluating this new venture creation? a. What happened? b. Who made the decision and is there any disagreement how the decision was made?
5. When you made the decision in creating a business venture, what do you think were your top priorities? a. Who was consulted before making a decision? (anyone within or outside the family / business?) b. What do you consider to be the advantage or constraint from the family (management) involvement?
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This action autonomy is seen at HD Letrik where lack of trust among family members resulted in an employee to make decisions for the good of the company: Jamilah Kosnan, HD Letrik (Group 3): “It is advantages, that at HD Letrik, we have ISO and SOP. So, regardless, we have that to follow. Even though, when Mahadi (Ahmad’s younger brother) runs a project and do not follow the process, I can tell him to abide to the processes, ISO.”
Whereas at Purple Skies, where there is high trust among family members and employees, the patriarch has even given the autonomy to both family members and employees to start ventures: Shamsul Bahrin, Purple Skies (Group 2): “But also, at the same time, it is sad to see that the loyal staff, they are very loyal, but at the end of the day, they are still living on their salaries. So, if they feel that they wanted to start something, why not?’ since we can manage companies professionally, into this kind of programs to help them. Like I said, if they have the drive, they have the knack to do business, why stop us from creating wealth for them, at the same time, give back through profit sharing.”
Melissa Chong spoke of the trust Hassan has with his family, and trust Hassan has on his employees: Melissa Chong, Purple Skies (Group 3): “Then, the company decided to create an entrepreneurial team, so he wants the staff, those who have worked here for a long time, and if they are entrepreneurial enough and want to start something, the company will back them up. That is what Hassan explained to us……….. Whoever (employees) created that idea, he will go into it, he (Hassan) would expect the team to work on it.”
Melissa Chong, Purple Skies (Group 3): “I feel that, he (Hassan) encouraged because they are very close, Nasran is the cousin. He (Hassan)trusts him (Nasran). Besides that, something good for the company.” 101
For Euro Fast, it also showed that permissiveness is practiced among family members, hence, allowing action autonomy among employees to make decisions: Aidil Sidek, Euro Fast (Group 3): “He constantly challenges us to seek knowledge. In any organization, there will be a person, in a succession, there are people you groom to run the company, and there are people who he will groom to be soldiers. He is very well aware of that, he knows who he wants to steer in which way. The staffs here are very clear what he is doing as well. Those who seek a more challenging role in this company, and need to prove themselves - it is not a handout, no spoon feeding. You need to do hard work, and you do around doing it smart, so that the hard work becomes effective and easier.”
From the analysis above, it can be concluded that permissiveness in Purple Skies and Euro Fast is high compared to HD Letrik. Again, this can be attributed to the ability of the patriarch (as he is laying the foundation) in fostering trust. It is through trust that one can allow others to assist in decision making. Hence, the level of trust the patriarch has with his family (and vice versa) allows for permissiveness and action autonomy by families (shown as “Pf”) and to some extent, to employees depicted as “Pe” (at the “operational level”) in assisting in decision making when embarking on creating ventures (at the “performance” level). This notion is deemed to also speed up the decision making process. Therefore, this study develops the following proposition,
P2:
Trust among family members allows for permissiveness in assisting in decision making of venture creation.
The above proposition is depicted in the following Figure 4.12:
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Figure 4.12: A depiction of the focal construct of “permissiveness” in venture creation
Based on the preceding analysis and explanation, Table 4.2below provides a summary of the theoretical connection between identified constructs. For HD Letrik, the Patriarch did not communicate with his sibling for the last two years and was not able to explicitly inculcate values (demonstrating “P-”), therefore, there is lack of trust among family members (displaying “Tf-”). However, there is trust among employees towards the patriarch (exhibiting “Te+”). This leads to allowing permissiveness or action autonomy to the employees (exhibiting “Pe”).The good relationship between the patriarch and the other key shareholder/co-founder creates a synergistic partnership, hence, assured employees and helped build trust among them. Nevertheless, it resulted in a moderate speed in decision making of creating two ventures (one core and one non-core business) because decisions still need to be agreed by a non-family shareholder.
On the other hand, the patriarchs of Purple Skies and Euro Fast had laid the foundation through effective communication and inculcation of values (demonstrating “P+”), thereby, there was trust among family members and employees (depicted as “Tf+” and “Te+” respectively). This level of trust within the family level that sips into the firm level is conducive for permissiveness to take place. Permissiveness for allowing family managers to assist in decisions (depicted as “Pf”) and permissiveness for allowing non-family managers
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to assist in decisions (depicted as “Pe”) lead to fast decision making in creating ventures (one core and one non-core business).
As for Mulder-FX (a non-family business), the communication and inculcation of organisational values led to trust among employees (exhibiting “Te+”) but there was still moderate speed in decision making of two new ventures. This can be due to the consensual decision making approach established by Mulder-FX that involves three other co-founders. As a non-family business, permissiveness for allowing family managers to assist in decisions is not applicable (depicted as “NA”) in the case of Mulder-FX. However, it is assumed that with the level of trust among employees (shown as “Te+) leads to allowing top management to assist in decisions (hereby also depicted as “Pe”).
Table 4.2: Summary of theoretical connection for “permissiveness” between constructs Constructs /
Patriarch
Trust
Permissiveness
Speed
New Venture
Companies Tf
Te
HD Letrik PTfTe+ Purple P+ Tf+ Te+ Skies Euro Fast P+ Tf+ Te+ Mulder-FX P+ NA Te+ Note: L = Low; M = Moderate; H = High
Pf
Pe
L
M
H
Core
Noncore
1
1
1
1
NA
1 2
1 0
4.2.7 Motivation Entrepreneurial motivation as described at Figure 2.4 describes the motivation and entrepreneurial process through the lenses of entrepreneurial cognition and entrepreneur’s decision making process. In this study, the researcher further explored the understanding of motivation in the context of family business, by unearthing the contributing factor to the patriarch’s motivation when creating ventures.
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The sixth cross-case comparison was to evaluate the motivation (or purpose) to creating the venture. This cross-case comparison was to understand why he made the decision and what the priority was for the patriarch in creating the two ventures discussed in this study, i.e. the motivation for finding a place for the family against the motivation for willing for growth, as exhibited below:
Table 4.3: Cross-case comparison on the two new ventures – the motivation for finding a place for the family versus the motivation for willingness for growth Constructs Companies
/
Motivation for finding a place for the family
Motivation for willingness for growth
Number of new ventures in the past 3 years
HD Letrik
1*
1
2
Purple Skies
2
0
2
Euro Fast
2
0
2
Mulder-FX
0
2
2
* Note: The business was initially set up as part of a diversification strategy, but the move towards a non-core business resulted in its inability to sustain the business. However, upon a family intervention, the board agreed to continue operations, including pumping more investment and resources into it (hence, it is categorised as a “motivation for finding a place for the family”).
This notion was induced when the researcher asked what the top priority was when they were creating the ventures.
Jamilah from HD Letrik spoke of the motivation behind the solar business: Jamilah Kosnan, HD Letrik (Group 3): “For the solar business, the first reason is it is an opportunity. And secondly, because, he (Ahmad) wants HD Letrik to be everywhere, and be able to provide all kinds of business. He wants to set up businesses that handle the entire supply chain. He wants to widen HD Letrik’s penetration, and HD Letrik’s advancement.”
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And she continued to speak of the other venture which initially focused on the “motivation for willingness for growth” and later changed to the “motivation for finding a place for the family”: Jamilah Kosnan, HD Letrik (Group 3): “When it was set up, the co-founder was very aggressive and with high hopes but when the researcher quit, he also stopped pursuing the business. But since Suhaila (Ahmad’s wife) has contributed a lot in selling the product, so, Ahmad is encouraging her to continue the business. Suhaila has ideas and proposed to pursue corporate account and approaching large companies to use the product. Yes, it has been mentioned in the board meetings. Ahmad is in the process of rebranding the product, and refocus the target market, and in getting a team to run the business”.
Ahmad reiterated the motivation behind the cleaning liquid venture, and the decision to continue the venture for his wife, Suhaila, i.e. motivation for finding a place for the family: Ahmad Shukri, HD Letrik (Group 1): “She had used the product at our home and even had sold it to her friends. She really believed in the product. When I told Suhaila that the venture was going to close down, she told me not to close it down. So, we sat down together and discussed how to proceed forward. After we did some restructuring in term of manpower and streamline the process, then, we started to see the money coming in……… Now, with better work process and we have retained staff who are trustworthy, we seem to do better. We have started to see the profits.”
As for Purple Skies, the following transcribed data describes the motivation for finding a place for the family: Hassan Ali, Purple Skies (Group 1): “I said to Nasran (Hassan’s cousin), that this is an opportunity for you to train your son. You take up this project. Purple Skies will own 50% or 51%, you own the rest. Then, you train your son.”
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Hassan Ali continued to say why he is setting up ventures for his family: Hassan Ali, Purple Skies (Group 1): “It was my own decision, my own decision; because I feel that I have now started creating a lot of business for the siblings. If not they all come to Purple Skies, and they will fight. So spin-offs…… My partners, they supported it, I throw the idea to them, and I think because they know my philosophy, and now I wanted to because now Purple Skies is quite stable, well structured, very well organized, I want to spend the balance of my life to create opportunities for the second generation, but using the strength and synergy from Purple Skies.”
For Euro Fast, following are the priorities spoken of to the researcher: Manan Nor, Euro Fast (Group 1): “My top priority now, is to retire. Which I have broken my promise. I said I want to retire at 65, but I am already 68. Which is not right. I need to make time for me….. but yes, I want to pass the business over to my children or the management. Now, our active business, my children have handpicked what they want to do. What they do not want to do, we pass it to the management. That's why I created the Supreme Council. It is now in its 3rd year. I don't attend that meeting anymore. Because if I attend, it becomes my meeting. But now, it is run and managed without me. When we ironed out our financials, they will have their own resources to manage themselves for their own. Say, you need xamount to manage. They need that amount with this average income. The balance is yours. So, they have a sense of belonging of the business. Now, it is already happening. My children are also in it (the Supreme Council), where they want, they go. They are the shareholders.” Aidil Sidek, Euro Fast (Group 3): “This is a family business. He (Manan) will consult his family because it is not just about investment of funds, but always about him having to diverse his time. Him having to travel often, if need be, to promote his business. There are a lot of sacrifices he will have to make. He will consult his family first.”
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For Euro Fast, a company with a strength of 600 employees, revenue of RM600 million, with over 60 subsidiaries, its motivation is still grounded to finding a place for the family, and not motivation for willingness for growth. Following is an excerpt of what the patriarch said when it comes to maintaining the size of the business to what it is today (Note: name of the referred family, i.e. Nuri, is changed to keep its confidentiality):
Manan Nor, Euro Fast (Group 1): “For instant, my family is very close to the Nuri family, the boys grow up together, so they know what Nuri is thinking and feeling. So, we know what they are into, and whether we want to be like that or not. Nuri is too big, we don't want to be like that.”
As for Mulder-FX, when the researcher asked the founder, Rashid Razak, what his top priorities were in creating the ventures, his answer was very much operational, specific to the business: Rashid Razak, Mulder-FX (Group 1): “We have a problem with the current technology. It was heavy, it was costly, we (Mulder-FX) needed to invest on a lot of hardware. We tested with a few sites with the new platform. It didn’t cost much – no licensing. We replaced it slowly behind the scene. The customers don’t care as long as it works.
And when the researcher spoke to Danial of what Rashid’s top priorities are, he said the following: Danial Hakim, Mulder-FX (Group 3): “It’s very obvious; his (Rashid) priority is to make a profit. It’s bad, but I still have that perception. I have asked him directly. Are you selling this company? If the value of the company is very high based on the performance of what we’re doing. He said, “no” unless someone offers something so good that he can’t resist. That’s a catch! We never know!.” …….. His priority is profit. The bottom line. He decisions based on those numbers.
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From the analysis above, it can be concluded that the reason to why new ventures are setup are divided into two categories: (1) motivation for finding a place for the family, and (2) motivation for willingness for growth.
In Purple Skies it clearly demonstrated that Hassan’s top priority was for his family, creating wealth and spin-offs for his family and his extended families. Even though he does encourage employees to come forward should they have any business ideas to share with him, the purpose was still to match that to one of the family members who would be interested to take charge of the business. As for Euro Fast, the priority was also for his family (even though the management of the venture may be managed by either the family or the professional – this will be discussed further in the subsequent proposition).
However, for HD Letrik, the priority of the business was motivation for willingness for growth on both of the ventures it had partook in the past three years. However, as explained above in one of the ventures, the motivation for finding a place for the family took place only after Ahmad’s wife, Suhaila, requested to salvage the ailing business venture. And finally, for Mulder-FX, clear indication of its motivation for willing for growth as described in the interviews above.
These two categories of motivations, i.e. (1) motivation for finding a place for the family, and (2) motivation for willingness for growth may also deem to facilitate in the speed of making decisions when creating ventures as it provides the entrepreneurial condition to “visioning” based on the patriarch’s philosophy. Therefore, this study develops the following proposition,
P3:
Trust among family members enhances the motivation for finding a place for the family in venture creation.
The above proposition is depicted in the following Figure 4.13 :
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Figure 4.13: A depiction of the focal construct of “motivation” in venture creation
Based on the above analysis and explanation, Table 4.4below provides a summary of the theoretical connection between identified constructs. For HD Letrik, the Patriarch did not communicate with his sibling for the last two years and was not able to explicitly inculcate values (demonstrating “P-”), therefore, there is lack of trust among family members (displaying “Tf-”). This led the patriarch to plan for growth of the business; hence, the motivation for willing for growth is demonstrated in this case. Again, the good relationship between the patriarch and the other key shareholder/co-founder resulted in a moderate speed in decision making of creating two ventures (one core and one non-core business).
On the other hand, the patriarchs of Purple Skies and Euro Fast had laid the foundation through effective communication and inculcation of values (demonstrating “P+”), thereby, there was trust among family members (depicted as “Tf+”). This led the patriarch in his motivation for finding a place for the family, and this motivation facilitates in fast decision making when creating ventures because his vision and philosophy are clearly communicated.
As for Mulder-FX, the communication and inculcation of organizational values led to trust among employees (exhibiting “Te+”) but there was still moderate speed in decision making of the two new ventures. This can be due to the consensual decision making approach 110
established by Mulder-FX that involves three other co-founders. As a non-family business, the motivation for willingness for growth is clearly depicted as per the transcribed data exhibited above.
Table 4.4: Summary of theoretical connection for “motivation” between constructs Constructs /
Patriarch
Trust
Permissiveness
Motivation
Speed
New Venture
Companies Tf
Te
HD Letrik PTfTe+ Purple P+ Tf+ Te+ Skies Euro Fast P+ Tf+ Te+ Mulder-FX P+ NA Te+ Note: L = Low; M = Moderate; H = High
Pf
Pe
Mf
Mg
L
NA
NA
M
Core
Noncore
1
1
1
1
1 2
1 NA
H
4.2.8 Mode of New Venture Mode of new venture describes how the venture is managed upon its formation. Business ventures can either be managed by a family manager, or by a non-family manager. How and why this is decided upon is dependent on the trust level at the family level and firm level.
The seventh cross-case comparison was to evaluate the mode of new venture. This cross-case comparison was to understand whether the new venture is managed by family managers or managed by non-family managers, as exhibited in Table 4.5 below:
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Table 4.5: Cross-case comparison on the two new ventures – new venture managed by family managers versus new venture managed by non-family managers
Constructs / Companies
New venture managed by family managers
Core HD Letrik Purple Skies
1
New venture managed by non-family managers
Non-core
Core
1
1
Total 2
1
2
1
Euro Fast
Non-core
Number of new ventures in the past 3 years
1 2
Mulder-FX
2 2
Jamilah from HD Letrik spoke of who manages the operations of the solar business which falls under its core business: Jamilah Kosnan, HD Letrik (Group 3): “Prior to this, I was not involved in the sales 100%, but now that I am involved with the sales, at least I can answer to any family members when I am asked on the sales from Sabah.”
And she continued to speak of the other venture (a non-core business venture) which is managed by a family member: Jamilah Kosnan, HD Letrik (Group 3): “Since Suhaila has contributed a lot in selling the product, so, Ahmad is encouraging Suhaila to continue the business. Suhaila has ideas and proposed to pursue corporate accounts and approaching large companies to use the product.”
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Hassan Ali explained how the new venture (a core business venture) is managed by family managers: Hassan Ali, Purple Skies (Group 1): “Nasran’s son is running the show with one of our senior staff. So, I told that staff, you have been working here for more than 20 years, you help Nasran, and we will give you some shares.”
And Hassan further explain how their decision in venturing into a non-core business (for the first time ever since their inception 30 years ago) came about when a land they owned was leased to a driving school which had problems with management issues, family problems, and even corruption. But after Purple Skies took over the driving school, putting in investment and resources into it, the driving school is now prospering: Hassan Ali, Purple Skies (Group 1): “I think we have been running the company for the past 3 years now, it is doing well. In the first year we took over, it was already in the blacks, but yet to recoup our investment. But at least, our rentals, every month, it is okay.”
As for Euro Fast, Aidil Sidek explained how the new venture (a non-core business) is managed by a family manager: Aidil Sidek, Euro Fast (Group 3): “It is headed by Mahmud. When he was based here (in Kuala Lumpur), he was the VP Automotive. But when he decided to venture into Europe because he sees it as a challenge for him to fortify and strengthen the Euro Fast brand there. We have been in Europe for the past 20 years, prevalently in motorsports. But out of the need for Halal food at the track when we go racing, that also cultivated the requirement of having our catering or food outfit…….. So, Mahmud decided to go into convenient food, i.e. sandwiches, Mahmud discussed that at length with Manan. And the opportunity arises for him to open the first all-Halal Subway in Northampton.”
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It is to note that Euro Fast is a highly diversified company, with its core business in automotive, and spanning over sixty subsidiaries involving F&B, property development, hospitality and health care management. Here, the founder spoke of how his youngest son, Malik, is put in-charged to manage the operations in Kuala Lumpur, including the new business venture (a non-core business): Manan Noor, Euro Fast (Group 1): “Malik handles the business here alone, and the business is very spread open……. But, we have other things we are doing. We have put in place what needs to be done for the next level, for the group. This will take one to three years. We are already planning that, hence the formation of the Supreme Council*, of which Malik sits in.” Note: The Supreme Council consists of 10 members; Malik sits in the council, together with nine other CEOs of other subsidiaries.
From the analysis above, it can be concluded that the management of the business venture can be categorized into two: (1) new venture managed by family managers, and (2) new venture managed by non-family managers. In Purple Skies, both the new ventures (core and non-core) are managed by family managers. As for Euro Fast, their 60-odd subsidiaries clearly show that it is a highly diversified company, even though its core business is still automotive. Hence, the management of the business for its new ventures (both are non-core businesses) are managed by a family manager, and the other by a non-family manager.
However, for HD Letrik, where there is lack of trust among family members has led to having both its business ventures (one core and one non-core) managed by a non-family manager. That is, until the non-core business was about to by winded down, and later, upon Ahmad’s wife’s intervention, it is now managed by her, i.e. the venture is managed by a family manager (and this contributed to the trust level Ahmad has on his wife, Suhaila, hence, the motivation for finding a place for the family).
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These two categories of management of the business venture, i.e. (1) new venture managed by family managers, and (2) new venture managed by non-family, that this study suggests the following proposition,
P4:
Trust among family members leads to new venture managed by family managers.
The above proposition is depicted in the following Figure 4.13.
Figure 4.14: A depiction of the focal construct of “mode of new venture” in venture creation.
Based on the above analysis and explanation, Table 4.6 below provides a summary of the theoretical connection between identified constructs. For HD Letrik, the lack of trust among family members (displaying “Tf-”) led to having the new business venture managed by nonfamily managers (depicted as “NVe”).
On the other hand, the patriarchs of Purple Skies and Euro Fast had laid the foundation through effective communication and inculcation of values (demonstrating “P+”), thereby, there was trust among family members (depicted as “Tf+”). This led the patriarch in creating 115
spin-offs and building wealth among family members. The motivation behind creating ventures was to find a place for the family, and subsequently, the new venture is managed by family managers (depicted as “NVf”). The exception to this is for Euro Fast, which is highly diversified; the management of the new venture is open to either a family manager or managed by a non-family manager.
As for Mulder-FX, a non-family business, the management of the business is run by top management team which reports to the board of director.
Table 4.6: Summary of theoretical connection for “mode of new venture” between constructs Constructs /
Patriarch
Trust
Permissiveness
Motivation
Speed
Mode of New Venture
Companies Tf
Te
Pf
Pe
Mf
Mg
L
M
H
NVf Core
HD Letrik
P-
Tf-
Te+
Purple Skies
P+
Tf+
Te+
Euro Fast
P+
Tf+
Te+
Mulder-FX
P+
NA
Te+
NA
NA
1
NVe
Noncore
Core
1
1
Noncore
1 1
1 2
Where, P=Patriarch; Tf=Trust in family; Te=Trust among employees; Mf=Motivation for finding a place for the family; Mg=Motivation for willingness for growth; L=Low; M=Moderate; H=High; NVf=New venture managed by family managers; NVe=New venture managed by non-family managers.
4.3
Conclusion
This chapter demonstrates how data from the four cases was analysed and the application of the case study approach and methodological steps that went through the analysis in determining themes resulting in the establishment of the focal constructs for the emerging theory. This guided process led to the formation of several theoretical constructs namely
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trust, speed, permissiveness and motivation. Four propositions are developed to explain the theoretical connections between the focal constructs, as listed below:
4.3.1 Proposition 1 P1a:
The ability of the patriarch to foster trust in the family leads to fast decision making in venture creation.
P1b:
The ability of the patriarch to foster trust among the employees leads to fast decision making in venture creation.
This can be attributed to the ability of the patriarch (as he is laying the foundation) in fostering trust. This enables the patriarch to attain the commitment of family members and employees (at the “operational level”) in embarking on creating ventures (at the “performance” level).
4.3.2 Proposition 2 P2:
Trust among family members allows for permissiveness in assisting in decision making of venture creation.
From the analysis above, it can be concluded that permissiveness in Purple Skies and Euro Fast is high compared to HD Letrik. Again, this can be attributed to the ability of the patriarch (as he is laying the foundation) in fostering trust. It is through trust that one can allow others to assist in decision making. Hence, the level of trust the patriarch has with his family (and vice versa) allows for permissiveness and action autonomy by families (shown as “Pf”) and to some extent, to employees depicted as “Pe” (at the “operational level”) in assisting in decision making when embarking on creating ventures (at the “performance” level). This notion is deemed to also speed up the decision making process. Therefore, this study develops proposition 2.
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4.3.3 Proposition 3 P3:
Trust among family members enhances the motivation for finding a place for the family in venture creation.
The two categories of motivations, i.e. (1) motivation for finding a place for the family, and (2) motivation for willingness for growth may also deem to facilitate in the speed of making decisions when creating ventures as it provides the entrepreneurial condition to “visioning” based on the patriarch’s philosophy.
4.3.4 Proposition 4 P4:
Trust among family members leads to new venture managed by family managers.
These two categories of management of the business venture, i.e. (1) new venture managed by family managers, and (2) new venture managed by non-family, that this study suggests the proposition 4.
In the subsequent chapter, results and outcomes of the qualitative, case data are used to address the research questions of this study. The next chapter will further deliberate on the study’s findings and their implications to theory-building.
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CHAPTER 5 DISCUSSION AND IMPLICATION
5.0 Introduction
This chapter proceeds with the discussion and explanation of the analysis and outcomes from Chapter 4 with an emphasis on answering the research questions presented in Chapter 1. This chapter presents and relates on how the results of the qualitative, case data have contributed towards addressing the research questions. In addition, this chapter further elaborates on the emergent theoretical framework for family business decision making process in new ventures and provides a matrix view of the emergent theory which describes the taxonomy of family business decision making process in new ventures.
5.1
Discussion of Research Questions
As mentioned in Chapter 1, this study explores and examines the process of and factors that affect decision making by entrepreneurs within the selected family businesses and a nonfamily business with the intention to understand how the entrepreneurs decide when creating ventures and to compare between family business and non-family business. Believing that the family is a critical variable, this study explores into why and how family business owners reason and make decisions when they create ventures. Predicting that the reason and how family firms make decisions are different compared to non-family firms, this study examines these differences and why they are different when these entrepreneurs embark on diversification strategies, i.e. creating ventures.
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There is scant family business literature that explores on the decision making process and the factors that influence entrepreneurs in making decisions related to venture creation, and includes the family domain into the context of the study. The research questions addressed by this study are: 1. How do family business owners make their decisions when they create ventures? 2. What is the difference between family business and non-family business in their decision making process in creating ventures?
In answering both these questions, the subsequent sections of this chapter shall highlight the assessment of the qualitative analysis by clarifying and explaining on specific focal constructs and the emerging theory. Thus, by responding to the research questions, the discussions will explicitly highlight the contributions of the study.
5.1.1 Research Question 1 How do family business owners make their decisions when they create ventures? i.
What is the decision making process when the founder/CEO is creating ventures?
ii.
Who does the founder/CEO consult in the decision making process when creating ventures?
iii.
What are the founder/CEO’s priorities in creating ventures?
iv.
What are the references to which the founder/CEO will seek when he needs more information pertaining to venture creations?
v.
What are the resources required by the founder/CEO during the decision making process of creating ventures?
vi.
What does the founder/CEO do when there is a disagreement during the decision making process of creating ventures?
vii.
How is the commitment level of family and employees during the decision making process of creating ventures?
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The researcher reiterates what was inferred through the interview sessions carried out with the respondents: when respondents were asked “why” they created the venture, respondents were quick to jump to say it was simply seizing an opportunity they saw before them. But when asked (the “how” questions) who they consulted when they needed more information or what they did when there was agreement or disagreement among key family members, the participants started to talk about the future of the next generation. And when further probed by asking what their top priority in creating these ventures was, the respondents began to share their hopes and dreams of:
“What they want for the family, rather than what they get from the business”.
Hopes and dreams for the family. These are the key difference between family and nonfamily business found in this study. These were the top priorities when the entrepreneurs were creating ventures. These particular hopes and dreams are the key difference between family business and non-family business: 1. The hope that the next generation will take over the business, yet ensuring that the children’s dreams are also met. 2. The dream of continuously having a harmonious family institution, even after they are long gone.
As two of Group 1 respondents put it: Hassan Ali, Purple Skies (Group 1): I think, my plan is in place. I want to avoid scrambling among the second generation when the first generation is no longer around. At least, they have their own things to do.”
Manan Nor, Euro Fast (Group 1): “The decision was this…….. in a family business, when you have reached more than 30 years in existence, you have to think, who will take over the business. Some children are here, some are not here. They have their own dreams also”.
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But putting one’s hopes and dreams across and having the next generation and the extended family (at the family level) understand the philosophy behind all these, is intricate, a challenge all by itself. Having to extend these hopes and dreams to the firm level, is crucial and difficult, but it can be done if one is true to oneself. As described by Manan Nor, of Euro Fast, who believes that trust is the golden rule to ensure that his philosophy is understood by his family and it is then understood at the firm level, too:
Manan Nor, Euro Fast (Group 1): “In life, the one golden rule is you need to have and understand is to learn how to trust. If you don't learn how to trust, you yourself is the crook, because you don't trust yourself, and you don't trust other people. If you learn how to trust, you trust other people, then, you too can be trusted. If you have doubt in every human being, please take a close look at yourself and think why?”.
As discussed at paragraph 4.2.7 Motivation, it can be concluded that the reason to why new ventures are setup are divided into two categories: (1) motivation for finding a place for the family, and (2) motivation for willingness for growth. In Purple Skies, it clearly demonstrated that Hassan’s top priority was for his family, creating wealth and spin-offs for his family and his extended family. Even though he does encourage employees to come forward should they have any business ideas to share with him, the purpose was still to match that to one of the family members who would be interested to take charge of the business. As for Euro Fast, the priority was also for his family.
However, for HD Letrik, the priority of the business was motivation for willingness for growth on both of the ventures (the same as the non-family business, Mulder-FX), whichit had partook in the past three years. However, as explained above, in one of the ventures, the motivation for finding a place for the family took place only after Ahmad’s wife, Suhaila, requested to salvage the ailing business venture.
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In exploring the analysis of “within-case comparison” based on the researcher’s knowledge of HD Letrik, Ahmad frequently speaks of putting his immediate family as his priority. He and his wife, Suhaila, aspire to setup ventures based on their three children’s interest and capabilities. In fact, he indicated that his eldest son (age 15) seems to be interested in engineering and is currently being groomed for HD Letrik. Whilst his youngest son, (age 10) seems to have an inclination for music, hence, perhaps, a venture in a music school or music production house is an option. Regardless, Ahmad said that he needed to set up ventures for his immediate family to ensure their livelihood, while his own family (among his siblings) sorted their family discord. In addition, this lack of trust is contributed to how Ahmad’s siblings perceive him as a “patriarch” (in this study a “P-”) i.e. a brother who was entrusted to lead HD Letrik upon their father’s death in 1992, rather than a brother that leads and set directions for the family who happens to be in business.
Moreover, it is to note that HD Letrik has two shareholders (not blood-related), both holding a 50% share. As indicated in the analysis above, this contributed to its motivation for willingness for growth (similar to that of a non-family business, i.e. Mulder-FX). For Ahmad, perhaps, it is a motivation for HD Letrik, as an entity, and not a motivation for his family (due to the serious family discord).
As per Table 5.1, the similarities between Purple Skies (100% owned by the family, with Hassan, the founder, holding the majority share of 55%, while the remaining is held equally by the co-founders, a brother and a cousin), and Euro Fast (100% owned by one family), that made them different from HD Letrik, is trust among family members. The explanation to this is described in length in paragraph 4.2.1 Patriarch, in paragraph 4.2.3 Trust, and also in paragraph 4.2.4 Values. Only with trust from the Patriarch and trust among family members, can family businesses have a bigger meaning in exploring the family’s hopes and dreams.
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Table 5.1: Proposition 3 - Motivation
Constructs /
Patriarch
Companies
Trust
Motivation
Tf
Te
Mf
HD Letrik
P-
Tf-
Te+
Purple Skies
P+
Tf+
Te+
Euro Fast
P+
Tf+
Te+
Mulder-FX
P+
NA
Te+
NA
Mg
Where P=Patriarch; Tf=Trust in family; Te=Trust among employees; Mf=Motivation for finding a place for the family; Mg=Motivation for willingness for growth.
Therefore, it can be concluded that, When P+, it leads to Tf+ (and Te+), which then leads to Mf. When P-, it leads to Tf- (and Te+) , which then leads to Mg.
5.1.2 Research Question 2 What is the difference between family business and non-family business in their decision making process in creating ventures? i.
How different is the decision making process in creating ventures between family business and non-family business?
ii.
Why is there a difference between family business and non-family business in their decision making process in creating ventures?
Yes, they are different. They are different because of patriarch’s philosophy. They are different because of the hopes and dreams that the patriarch has for his family. They are different because the motivation in creating ventures is for finding a place for the family.
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“How different?” They are different because of the way they do things, the way they run their business, the way the business is growing, and at the speed it is moving. In the analysis in chapter 4 above, based on the three family businesses and one non-family business, the following rationalization explains the differences between family business and non-family business, and with a summarized depiction in Table 5.2, clarifies “why they are different”.
Table 5.2: Summary of theoretical connection constructs for decision making in creating ventures Constructs /
Patriarch
Trust
Permissiveness
Motivation
Speed
Mode of New Venture
Companies Tf
Te
Pf
Pe
Mf
Mg
L
M
H
NVf Core
HD Letrik
P-
Tf-
Te+
Purple Skies
P+
Tf+
Te+
Euro Fast
P+
Tf+
Te+
Mulder-FX
P+
NA
Te+
NA
NA
1
NVe
Noncore
Core
1
1
Noncore
1 1
1 2
Where, P=Patriarch; Tf=Trust in family; Te=Trust among employees; Mf=Motivation for finding a place for the family; Mg=Motivation for willingness for growth; L=Low; M=Moderate; H=High; NVf=New venture managed by family managers; NVe=New venture managed by non-family managers.
5.1.2.1 Permissiveness Permissiveness is the disposition to allow freedom of choice of behavior, or “action autonomy” given to those who are trusted to assist in decision making. Managers' abilities to make independent decisions allow the organization to be more responsive to changing market conditions. Hence, when managers are given the freedom of choice of behaviour to assist or make decisions within the business context, it gives the manager a better understanding of changing conditions and helps identify innovative ways to be competitive for the good of the business.
The similarities found in the patriarchs of Purple Skies and Euro Fast is how they laid the foundation through effective communication and inculcation of values, which includes Islam 125
as a way of life (paragraph 4.2.4.2) and fostering family and organizational culture (paragraph 4.2.4.1). Thereby, the patriarch (demonstrating “P+”), was able to instill trust among family members and employees (depicted as “Tf+” and “Te+” respectively). This level of trust within the family level that sips into the firm level is conducive for permissiveness to take place. Permissiveness for allowing family managers to assist in decisions (depicted as “Pf”) and permissiveness for allowing non-family managers to assist in decisions (depicted as “Pe”) lead to fast decision making in creating ventures.
For HD Letrik, the Patriarch who has not been communicating with his sibling for over two years, and was not able to explicitly inculcate values (demonstrating “P-”), therefore, there is lack of trust among family members (displaying “Tf-”). However, there is trust among employees towards the patriarch (exhibiting “Te+”). This leads to allowing permissiveness or action autonomy of the employees (exhibiting “Pe”).The good relationship between the patriarch and the other key shareholder/co-founder creates a synergistic partnership, hence, reassured employees and helped build trust among them.
As for Mulder-FX (a non-family business), the communication and inculcation of organizational values led to trust among employees (exhibiting “Te+”) but there was still moderate speed in decision making of two new ventures. This can be due to the consensual decision making approach established by Mulder-FX that involves three other co-founders. As a non-family business, permissiveness for allowing family managers to assist in decisions is not applicable (depicted as “NA”). However, it is assumed that with the level of trust among employees (shown as “Te+) leads to allowing managers to assist in decisions (hereby also depicted as “Pe”).
Therefore, it can be concluded that, When P+, it leads to Tf+ (and Te+), which then leads to Pf and/or Pe. When P-, it leads to Tf- (and Te+) , which then leads to Pe.
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5.1.2.2 Motivation As discussed at paragraph 4.2.7 Motivation, it can be concluded that the reason to why new ventures are setup are divided into two categories: (1) motivation for finding a place for the family, and (2) motivation for willingness for growth. In Purple Skies, it clearly demonstrated that Hassan’s top priority was for his family, creating wealth and spin-offs for his family and his extended family. Even though he does encourage employees to come forward should they have any business ideas to share with him, the purpose was still to match that to one of the family members who would be interested to take charge of the business. As for Euro Fast, despite the fact that it is a highly diversified company with over sixty subsidiaries, the priority and motivation for setting up new ventures was still for his family.
However, for HD Letrik, the priority of the business was motivation for willingness for growth on both of the ventures (the same as the non-family business, Mulder-FX), which it had partook in the past three years. However, as explained above, in one of the ventures, the motivation for finding a place for the family took place only after Ahmad’s wife, Suhaila, requested to salvage the ailing business venture.
As describe in Table 5.1 above, the similarities between Purple Skies (100% owned by the family, with Hassan, the founder, holding the majority share of 55%, while the remaining is held equally by the co-founders, a brother and a cousin), and Euro Fast (100% owned by one family), that made them different from HD Letrik is trust among family members. The explanation to this is described in length in paragraph 4.2.1 Patriarch, in paragraph 4.2.3 Trust, and also in paragraph 4.2.4 Values. Only with trust from the Patriarch and trust among family members, can family businesses have a bigger meaning in exploring the family’s hopes and dreams.
Therefore, it can be concluded that, When P+, it leads to Tf+ (and Te+), which then leads to Mf. When P-, it leads to Tf- (and Te+) , which then leads to Mg.
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5.1.2.3 Speed Based on the analysis and explanation above, it can be concluded that decision making in Purple Skies and Euro Fast is faster compared to HD Letrik and Mulder-FX. This can be attributed to the ability of the patriarch (as he is laying the foundation) in fostering trust. This enables the patriarch to attain the commitment of family members and employees (at the “operational level”) in embarking on creating ventures (at the “performance” level). The commitment attained drives the family and organization to move more efficiently in terms of gathering information (market research and business intelligence) and execute the process towards decision making in creating ventures.
As per Figure 5.1below, the similarities is contributed by the patriarchs of Purple Skies and Euro Fast who laid the foundation through effective communication and inculcation of values (demonstrating “P+”), thereby, there was trust among family members and employees (depicted as “Tf+” and “Te+” respectively). This led to speed, hence, a faster decision making process in creating ventures. Permissiveness for allowing family managers to assist in decisions (depicted as “Pf”) and permissiveness for allowing non-family managers to assist in decisions (depicted as “Pe”) also contributes to speed because family managers and nonfamily managers are empowered to make decisions, hence leading to fast (classified at Table 5.2 as “H”) decision making in creating ventures.
As discussed at paragraph 4.2.7 Motivation, it can be concluded that the reason to why new ventures are setup, are divided into two categories: (1) motivation for finding a place for the family, and (2) motivation for willingness for growth. These two categories of motivation are an indication of clear intention and goals that drive speed (classified at Table 5.2 as “H”) when decisions are being made in creating ventures.
For HD Letrik, the break down in sibling-relationship, with hardly any communication among them, resulted in family discord and lack of trust among family members. The Patriarch was not able to explicitly inculcate values (demonstrating “P-”), therefore, a lack of trust among family members (demonstrating to “Tf-”). However, there is trust among
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employees towards the patriarch (exhibiting “Te+”). This is probably due to a good relationship between the patriarch and the other key shareholder/co-founder. The synergy between the two assured employees and helped build trust. Family managers are not involved in the business, thereby, only there is only permissiveness for allowing non-family managers to assist in decisions (depicted as “Pe”), thus, contributes to moderate (classified at Table 5.2 as “M”) decision making in creating ventures.
As for Mulder-FX, the patriarch communicated and inculcated organizational values, which lead to trust among employees (exhibiting “Te+”) but there was moderate speed in decision making in two creating ventures. This can be due to the consensual decision making approach established by Mulder-FX that involves three other co-founders.
Therefore, it can be concluded that, When P+, it leads to Tf+ (and Te+), which then leads to Pf and/or Pe and Mf and/or Mg, which results in “H” speed. When P-, it leads to Tf- (and Te+) , which then leads to Pe, and Mg, which results in “M” speed.
5.1.2.4 Mode of New Venture From the analysis above, it can be concluded that the management of the business venture can be categorized into two: (1) new venture managed by family managers (depicted as “NVe”) , and (2) new venture managed by non-family managers (depicted as “NVf”).
In Purple Skies, both the new ventures (core and non-core) are managed by family managers (depicted as “NVe). In the case of Euro Fast, this 60-odd-subsidiaryis highly diversified company, with its core business in the automotive industry. As such, the management of the business for its two new ventures (both are non-core businesses) are managed by a family manager, and the other by a non-family manager. 129
However, for HD Letrik, lack of trust among family members has led to having both its business ventures (one core and one non-core) managed by a non-family manager. That is, until the non-core business was about to by winded down, and later, upon Ahmad’s wife’s intervention, (it is now) managed by her, i.e. the venture is managed by a family manager.
Table 4.6 in the previous chapter provided a summary of the theoretical connection between identified constructs. For HD Letrik, the lack of trust among family members (displaying “Tf-”) led to having the new business venture managed by non-family managers (depicted as “NVe”).
On the other hand, the patriarchs of Purple Skies and Euro Fast had laid the foundation through effective communication and inculcation of values (demonstrating “P+”), thereby, there was trust among family members (depicted as “Tf+”). This led the patriarch in creating spin-offs and building wealth among family members. The motivation behind creating ventures was to find a place for the family (depicted as “Mf”), and subsequently, the ventures is managed by family managers (depicted as “NVf”). The exception to this is for Euro Fast, which is highly diversified (with over sixty subsidiaries), the management of the new ventures was open to either managed by a family manager or managed by a non-family manager.
As for Mulder-FX, a non-family business, the management of the business is run by top management team which reports to the board of director.
Therefore, it can be concluded that, When P+, it leads to Tf+ (and Te+), that leads to (Pf and Mf), which results in NVf. When P-, it leads to Tf- (and Te+) ,that leads to (Pe and Mg), which results in NVe.
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However, the exception to this conclusion is when the company is highly diversified, for instance in the case of Euro Fast, whereby, When P+, it leads to Tf+ (and Te+), that leads to (Pf or Pe and Mf or Mg), which results in NVf or NVe.
5.2
The Emergent Theory
The above discussions enabled the researcher to understand family business issues, framed what is known of family business, and featured the constructs to the gaps in the knowledge of family business decision making process and the reasons behind creating these ventures. By building on past studies on family business, decision making, RBV and entrepreneurship, this study uncovered and conducted an in-depth analysis of understanding family dynamics or in the context of familiness: on leadership, relationship, culture, knowledge and certainly, decision making.
This study has explored and uncovered the reasons to why the Patriarch made such a decision when creating ventures, the motivation that pushed the leader in influencing his entrepreneurial process, and highlighted how the mode of new ventures are decided upon based on the perceived trust within the family. In all these, the patriarch is guided by his philosophy, his values and taking into consideration his family as stakeholders.
By virtue of the entrepreneur’s expectation for creating wealth for his family and preserving the family legacy as the top priority in his mind, this study also proved that the process of decision making in new venture for family business is different from non-family business.
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Figure 5.1: Emergent Theoretical Framework for Family Business Decision Making Process in New Ventures
In Figure 5.1 above, the Patriarch’s (paragraph 4.2.1 ) decision making process (paragraph 4.2.2) in creating ventures is influenced by the trust (paragraph 4.2.4) built among family members and employees. Furtherance to this, trust also moderates permissiveness (paragraph 5.1.2.1), motivation (paragraph 5.1.2.2), speed (paragraph 5.1.2.3), and mode of new ventures (paragraph 5.1.2.4).
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Figure 5.2 below, provides a matrix view of the emergent theory by offering the taxonomy of family business decision making process in new ventures.
Figure 5.2: Emergent Theory for the Taxanomy of Family Business Decision Making Process in New Ventures
The following Figure 5.3 below provides a matrix view of the emergent theory by offering the taxonomy of family business decision making process in new ventures as it is mapped to the four cases in research.
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Figure 5.3: Emergent Theory for the Taxanomy of Family Business Decision Making Process in New Ventures Mapped to the Four Cases
5.3
Credibility of the Theory
Reay and Whetten (2011) explained that a good (and strong) theoretical contribution in family business research must be reliable and explain the phenomenon of interest, hence, addressing the following questions (a) what are the key factors that are critical to the explanation of the phenomenon of interest?; (b) how are these key factors related to each other?; (c) why does this representation of the phenomenon deserve to be considered credible?, (d) What are the conditions under which we should expect the predictions of the theory to hold true? Next, is to address is how to make significant, incremental improvements in current family business theory. It was suggested that researchers should (a) clarify the focal construct and (a minimum number of) key variables; (b) use the research question to organise and guide the theoretical contribution; and (c) reconsider the argument and theory development.
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Therefore, in tackling the questions above, the first part of the discussion will explain why this research contributes to a good (and strong) theoretical contribution in family business research which is reliable and explains the phenomenon of interest; and the second part will address how to make significant, incremental improvements in current family business theory.
5.3.1 Part 1: A good (and strong) theoretical contribution in family business research which is reliable and explains the phenomenon of interest.
The phenomenon of interest, when answered, addresses the “how” and “why” questions. The key factors shaped in the research questions and the identification of the three prior constructs described as (1) Founder/CEO, (2) motivation, and (3) new venture led to the research questions below:
1. How do family business owners make their decisions when they create ventures? i.
What is the decision making process when the founder/CEO is creating ventures?
ii.
Who does the founder/CEO consult in the decision making process when creating ventures?
iii.
What are the founder/CEO’s priorities in creating ventures?
iv.
What are the references to which the founder/CEO will seek when he needs more information pertaining to venture creations?
v.
What are the resources required by the founder/CEO during the decision making process of creating ventures?
vi.
What does the founder/CEO do when there is a disagreement during the decision making process of creating ventures?
vii.
How is the commitment level of family and employees during the decision making process of creating ventures?
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2. What is the difference between family business and non-family business in their decision making process in creating ventures? i.
How different is the decision making process in creating ventures between family business and non-family business?
ii.
Why is there a difference between family business and non-family business in their decision making process in creating ventures?
The linkages of the RQ1 and RQ2 are explained in paragraphs 5.1.1and 5.1.2 where answers to the “how” and “why to the phenomenon of interest are dealt with in detail. The relationships among these key factors and the emerging themes that led to the four propositions brought forth were clearly explained in paragraph 5.1.2.1Speed, 5.1.2.2 Permissiveness, 5.1.2.3 Motivation and 5.1.2.4 Mode of new venture.
Furthermore, the representation of the phenomenon deserves to be considered credible because the methodology behind this study was designed from the process laid by Eisenhardt (1987) as described in Figure 3.1.
Moreover, the theory-building research was based on a hybrid approach (deductive and inductive process) with careful analytical procedure as laid down in sections 3.4.5.1 Withincase analysis, and, 3.4.5.2 Cross-case patterns. Additionally, the researcher has provided information on the sample, data collection procedures, and analysis. This was also done carefully by ensuring the rigor and trustworthiness (Padgett, 1998) of the data are at par with the acceptable standards set by scholars within the parameters of social sciences studies.
Additionally, the predictions of the theory may hold true because the researcher has provided enough evidences (refer to paragraphs 5.1.2.1 Speed, 5.1.2.2 Permissiveness, 5.1.2.3 Motivation, and 5.1.2.4 Mode of new venture) for each construct, so readers can make their own assessment of the fit with theory.
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5.3.2 Part 2: How to make significant, incremental improvements in current family business theory.
Eisenhardt and Graebner (2007) suggested that the best way to present newly developed theory is to first, sketch the emergent theory in the introduction (see Figure 4.1). Then, in the body of paper, write each proposition (implicitly or explicitly stated), and link it to the supporting empirical evidence for each construct and for the proposed relationship between the constructs (explained in length from paragraph 4.2.1 to paragraph 4.2.8). Followed by “pattern-matched” between theory and data (also presented from paragraph 4.2.1 to paragraph 4.2.8) while logical link between the constructs within a proposition. And finally, a visual theory summary such as a “boxes and arrows” diagram or summary table was also presented to ensure that data and case fits the theory (see from Table 4.1 to Table 4.6; and also from Figure 4.7 to Figure 4.14).
The emergent theory is presented and explained in section5.2 depicting the focal constructs and the emerging constructs as depicted in sections 5.1.2.1 Speed, 5.1.2.2 Permissiveness, 5.1.2.3 Motivation, and 5.1.2.4 Mode of new venture. Furtherance to this, Eisenhardt (1989) iterates that a strong theory-building research should result in new insights, hence, the depiction of not only the Emergent Theory (see Figure 5.1) but also matrix visualization as displayed in Figure 5.2: Emergent Theory for Taxonomy of Family Business Decision Making in New Ventures, is also shown and clarified by the researcher.
All these were done with the intention of using the research questions to organise and guide the theoretical contribution, argument and theory development.
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5.4
Implication to Practice
Poza (2007) described that more than 70% of family businesses will fail in the first five years. Out of those that survived, only 30% would make it to the second generation. The number gets smaller as it moves to the third generation, with only a 12% survival rate and only 4% survives in the fourth generation. The global pattern sees that between 60% to 80% of businesses are held by family businesses.
Malaysia is no exception to this phenomenon whereby the same percentages of 60% to 80% of businesses are run by family businesses. Generally, with Malaysia being a new economy, which gained its independence in 1957, whereby the spark of entrepreneurship came about in the 70s, hence, most family businesses are presently in its second generation, with most of the founders still running the business (similar to the three cases in this study).
The question is what if the pareto principle applies to the context of family business; i.e. that 80% of the Malaysian economy is held by 20% of the largest family businesses in Malaysia? How would the landscape of family business look like in Malaysia ten years from now; as it completes the handover to the second generation? What would it be like as it moves to the third generation and beyond? Would family businesses in Malaysia be able to survive the prediction of Poza (2007)?
Hence, this study fortifies the understanding of family dynamics and the motivation behind its business growth. Furtherance to it, this study may also give a clearer picture to understanding trust among family members, managing conflicts, and the importance of values and a shared vision for a common purpose. The significance and relevance of these differences in explaining the position of family businesses and non-family businesses, and perhaps these criteria, could give a better explanation to the different phenomenon in the family environment, and could guide future business development the world over, and specifically in Malaysia. Future research could provide a better understanding to family businesses in the context of: 138
1. Fulfill and understand the landscape of family business in Malaysia 2. Understand the resources tapped within and beyond the family in pursuing innovation and growth 3. Ascertain the transgenerational potential of the family business 4. Understand the expectation of wealth creation for the family, and within the family; and in preserving their family legacy. 5. To investigate and analyze the main concern with regard to a firm’s progress and growth, and what it needs to attract resources within the family and from beyond what the family can provide. 6. To ascertain its trangenerational potential, the relationship between the family and the business with regard to succession, their training, education and exposure. 7. To determine the motivation behind the founder starting the business (and businesses) and how he or she financed the business, in light of growing competition and globalization, and the action/inaction in dealing with these challenges. 8. To identify the available support and roles by the govenment, regulatory agencies and associations, and financial institutions in Malaysia. 9. To develop a Framework: Building a Family Business Landscape in Malaysia, that can lead to enhancing transgenerational entrepreneurship in Malaysia.
5.5
Conclusion
In this chapter, the discussion on the research questions explicitly clarifies family business issues, framed what is known of family business, and featured the constructs to fill the gaps in the knowledge of family business decision making process and the reasons behind creating ventures. The researcher has also elaborated on:
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1) the emergent theoretical framework for family business decision making process in new venture. 2) a matrix view of the emergent theory which describes the taxonomy of family business decision making process in new ventures.
The following concluding chapter will illuminate the pertinent results reported in this chapter and highlight the study’s contributions. Then, limitations of the study and potential future research opportunities and directions will be presented.
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CHAPTER 6 CONCLUSION
6.0 Introduction
The research effort is concluded in this final chapter by presenting a final discussion of the thesis, followed by a deliberation of the research contributions. To date, there is still a paucity of research pertaining to decision making process in venture creation within family firms, it is therefore believed that the discoveries and outcomes of this research provide theoretical contribution to the existing body of knowledge, literature and methodology for family business research, as well as enlightening leadership of family businesses, their families and stakeholders to appreciate and recognize the factors and processes involved in decision making that can enhance the development of new businesses. This research can also benefit the public, policy makers, industry practitioners, family business advisors and consultants, educators and trainers.This is followed by a discussion of the limitations of the study and suggestions for future research, and finally the overall conclusion of this research will be drawn.
6.1
Research Summary
The main purpose of this research is to discover and examine the process of and factors that affect decision making by entrepreneurs within the selected family businesses and a nonfamily business. From this exploratory and qualitative research, the researcher is able to determine how the entrepreneurs decide when creating ventures and to compare between family businesses and non-family businesses. Venture creation (as a diversification strategy) is chosen as the outcome variable because there is a unique reason to why and how family businesses are embarking into such a strategy.
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In order to realise the research purpose, valid and reliable approaches had to be recognised and employed. With this in mind, data was collected via a rigorous case study approach and analytical process that includes among others, coding, constant cross-case pattern comparison method, and the naming of themes, concepts and categories. Ultimately, the goal of the thesis is to generate a good theory that explains the decision making process in venture creation within a family business.
This study pinpoints a gap in the literature that is the recognition of the dynamics, challenges and complexity of running a family business as it is not the same as managing a non-family business. Thus, studies employing qualitative strategies and design are needed to discover and theorise pertinent aspects of family business management, for instance, in decision making. Family business leaders have their own ways and styles in making decisions. The element of “patriarch” plays a major role as “he” is the founder, the leader, the father, and everyone follows it without questioning it. However, with shared values, open communication and trust among family members lead to synergistic alliance between the family and firm levels. Their perspective of decisions, their motivation, and possibly their appetite in taking risks are also different from non-family business leaders. Therefore, a study on the decision making by entrepreneurs within a family business will enrich the knowledge of mechanisms that drive the companies to participate in the economy, thus creating growth and prosperity for society.
The search for understanding these differences, the significance and relevance of these differences in explaining the position of family businesses and non-family businesses, and perhaps these criteria, could give a better explanation to the different phenomenon in the family environment, and could guide future business development, more specifically in Malaysia. The ever-changing business environment, the unique make-up of the family, and the lack of research that can tailor to specific situations in the orientation of decision making process, calls for this qualitative study to be attempted and positions it to contribute meaningfully to the body of knowledge. Research in family business management is still at an infancy stage in Malaysia, hence, this study fills the lacuna in the discipline particularly in explaining and theory building the decision making process in venturing into new business.
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6.2
Research Overview
Chapter 1 provided an opening vignette of this study, by discussing the background of the study and the importance of the topic as it explained the problem statement and highlighted the research questions. The first chapter declared the objectives while focusing on the issue and presented clear insight into the study’s organization.Specific objectives of the study were to:1) To identify the process of and factors that affect decision making by entrepreneurs. 2) To understand how these entrepreneurs decide what actions to take when these entrepreneurs embark on diversification strategies, i.e. creating ventures.
Chapter 2 presented the theoretical background by means of a review of the relevant literature. The chapter further set the boundary for the research as well as situating theories and the initial conceptual framework for the research questions. In addition, the research gaps addressed by the study were deliberated and positioning of the study was highlighted within the relevant body of knowledge and literature.
Chapter 3 was concerned with the research methodology, the methodology justification and description of the research process and methods used in this study. It presented the rationale for adopting the qualitative research method and processes related to data collection and instrumentation in order to attain data validity and reliability.
Chapter 4 discussed the qualitative results of data collection and analysis of twelve personal, individual interviews. The analytical process that included coding, within-case analysis, cross-case patterns comparison and the naming of themes, concepts and categories as well as data saturation was shown and elaborated. The research gathered rich data sufficient to answer both research questions and to ground the theoretical contribution, making it a good theory that fits the data.
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Chapter 5 presented the answers to the research questions, drawing upon the overall data analysis and research findings. The chapter also examined the implication of the findings for theory and practice, as well as providing the relevant suggestions for practice.
Finally, in Chapter 6, an overall summary of the thesis is briefly outlined. Subsequently, the research contributions, research limitations, future research directions and overall conclusion are presented.
6.3
Research Contributions
In Chapter 4, based on the analysis of the data, several themes emerged namely trust, speed, permissiveness, motivation and mode of new venture.
This contributes to the extant
literature since this study proves that the reasons to “why” the Patriarch made such a decision when creating ventures is not solely for business growth (Martin & Lumpkin, 2003; Casillas & Moreno, 2010) but the priority was more for his family. Similarly, this study also fills the gap to the literature and findings on family entrepreneurial orientation (Zellweger et al., 2011), as this findings can be extended especially when the lens is focused on trust and motivation within the family context.
This study also highlighted “how” the mode of new ventures is decided upon based on the philosophy of the Patriarch, his motivation, and the perceived trust within the family. As a result of taking on from the suggestion by Chrisman et al. (2010) where he postulates that an explicit acknowledgement on the importance of the involvement, non-economic goals, vision and culture of the family in the firm in determining family firm behaviour, this study also highlighted “how” the mode of new ventures are decided upon based on the philosophy of the Patriarch, his motivation, and the perceived trust within the family.
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Despite the critical influence of the decision making process in venture creation, no research has been done to understand what makes family business different from non-family business when creating ventures (De Massis et al., 2012). Additionally, to promote theoretical development in family business research, Yu et al. (2012) identified three hundred twenty seven dependent/outcome variables used in two hundred fifty seven empirical family business studies in 1998-2009 and developed a numerical taxonomy with seven clusters i.e. performance, strategy, social and economic impact, governance, succession, family business roles, and family dynamics (see Figure 2.5 depicts the landscape of family business outcomes).
Taking the two researchers’ overviews on family business in the past two decades, this research has contributed in developing a theory and model of the decision making process in venture creation within a family business. Hence, this emergent theory and model of decision making process has proved that family’s involvement and its influence on a firm has its unique entrepreneurial opportunities as well as distinctive advantages and disadvantages, depending on the individuals who participate and the family structure. As a result, more are known about venture creation in relation to the level or degree of trust, speed, permissiveness, motivation and mode of new ventures when different types of leadership and patriarch are better understood.
This study contributes to the area of inquiry by explaining the influence of motivation in the decision making process. From the probing of the individual interviews, two types of motivation (paragraph 5.1.2.2) for undertaking entrepreneurial activities were identified, motivation for finding a place for the family and motivation for willing for growth. This broadened the dimensions and scope of the theory. Additionally, trust (paragraph 4.2.3) emerged as a theme that contributed either positively, or negatively, to speed, permissiveness and motivation to the process of decision making when creating ventures. Therefore, this study contributed in the understanding of trust in the realm of decision making process in venture creation within the context of family business, both at the family and firm levels.
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6.4
Research Limitations
There are several limitations to the research. Firstly, the context of the study was the three family businesses and a non-family business. While the number of family businesses analyzed may be arguably small but as described by Pettigrew (1988), it makes sense to work within the limited number of cases where the process is “transparently observable”. Thus, the goal of theoretical sampling is to choose cases which are likely to replicate or extend the emergent theory Eisenhardt (1987). Further, as the focus of this study is to understand the family in business, the selection of one non-family business mainly serves as a control case.
Secondly, this is a qualitative study and current investigation is restricted to the context of medium-to-large privately-owned businesses within specific parameter, i.e. the phenomenon of interest. Therefore, the generalisation of findings is limited by the characteristics of this specific context. A case study theory building is a bottom up approach such that the specifics of data produce the generalizations of theory which risk to its inability to raise the level of generality of the theory. Thus, generalisations must be cautiously inferred within the context of this study, and not to grand it up to an organisational theory.
Thirdly, the study focused on decision making process by family business owners as a phenomenon of interest, scoped around the priori constructs and bounded within the theoretical parameters of RBV, entrepreneurial orientation, family entrepreneurial orientation, and some elements within family resource pools, i.e. familiness.
Finally, the majority of the participants in the study were Malays, the businesses are owned by predominantly Malay shareholders and their workforce mainly constitute Malay staffs. Thus, it can be argued especially in discussing that the Malay culture may have some influence on some of the identified and discovered factors. The study decided not to probe into this issue too much since it did not fall into the scope and objectives of the research.
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6.5
Future Research
The limitations mentioned in the preceding section suggest valuable directions for future research which could extend the research findings. Thus, this section proposes several interesting research ideas to be investigated or explored based on the knowledge gained from the research undertaken.
First, this study focused on the decision making process in venture creation within a family business. And, through the research efforts, this study was able to develop the emergent theory. This study postulated the view that the founder/CEO makes decisions on new ventures based on specific reasons or priorities which he has set for himself and his family, i.e. his hopes and dreams. But, this only gave a one-sided perspective of the inductive process and mainly serves to identify notions. Future research could perhaps look into the next generations’ perspective, too, and identify what are their hopes and dreams. By doing so, the study would be able to propose a fit between the senior generation and the junior generation in matching their hopes and dreams – with the anticipation that the family business will have a synergistic balance between the two (or three) generations for transgenerational entrepreneurship potentials.
Second, the study probed into the role of the patriarch in laying the foundation within the family level, which in turn resulted towards the outcome of decision making process. Future qualitative research could further extend the study by exploring further the role and characteristics of the patriarch in influencing the decision making process within the context of the family level which impacts on the firm level.
Third, it was also found in this study that trust affects either positively or negatively to speed, permissiveness, motivation and mode of new venture, which seems to be the underpinning factor to the decision making process of the founder/CEO. Thus, future research should seek to probe farther and deeper into trust to understand different perspectives of trust from
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various categories of the respondents, i.e. several family members (family managers, and family members), and employees (family managers and non-family managers).
Fourth, the theoretical lens which had been used in this study includes decision making, RBV, entrepreneurial orientation, family entrepreneurial orientation and some elements within family resource pools, i.e. “familiness”. For example, using stewardship as a theoretical lens (whereby the perspectives of seeing the ownership of the family business as a responsibility to the next generation, employees and community, rather than just a financial gain/investment) would provide a greater understanding in the context of decision making process in venture creations. In addition, the validity of the findings in this study can and needs to be further tested to generate new insights pertaining to the evolution of the decision making process in venture creation within family businesses.
Fifth, the study focused on decision making process by family business owners as a phenomenon of interest, scoped around the priori constructs and bounded within the theoretical parameters of RBV, entrepreneurial orientation, family entrepreneurial orientation, and some elements within family resource pools, i.e. “familiness”. The extension to other constructs and parameters is vast when one pursues on the dynamics of a family in business.
Sixth, since the study focused on three Malay family businesses only, future research could extend the study to non-Malay-similar-sized businesses, and even to public listed family businesses in Malaysia. Perhaps, funding can be obtained from the government since the size of the research will be bigger because it will cover a large amount of resources. This would also enable future research to develop measurement scales to measure, test and validate the theory. Further, a longitudinal study could be embarked upon to determine the robustness of current findings.
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Seventh, it will also be noteworthy to see how religion plays a part in shaping values and culture, especially, in religions such as Hinduism, Buddhism, and Judaism. Perhaps, future research can also be carried out using similar methodology in predominately Islamic countries, such as Brunei, Indonesia and United Arab of Emirates. Additionally, it can also be extended to compare with other neighbouring countries within Asia Pacific, and the western countries, thus, an opportunity to debunk or support the discussion that the Malay culture may have some influence on some of the identified and discovered factors, and/or whether religion is a factor that binds the family’s shared values.
Lastly, for founders, this emergent theory (as per Figure 5.1 above) and taxonomy mapped to the four cases (refer to Figure 5.3 above) can be a roadmap and affirmation to their patriarchal approach towards their premeditated philosophy. This may encourage them to review matters which were deemed trivial, and be open to weight their options to new approaches in light of the changing environment, and handling generational differences. For families in business, this emergent theory (as per Figure 5.1 above) and the taxonomy mapped to the four cases (refer to Figure 5.3 above) provide a template for how they might better steer around the complexities and dynamics of family in business when creating ventures and be able to enhance transgenerational potentials. Additionally, it will give a better understanding and provide an innate impression for family businesses to chart their long term strategic plan for their families, who happens to be in business, for generations to come.
In summary, the emergent theory deserves foremost attention for future theory testing to validate the theory and this would certainly add scholastic value in the field of entrepreneurship, specifically, in the area of family business.
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6.6
Conclusion
The development of family business research augurs well for economic development and growth of the world’s nations and vice versa since family businesses are an important segment of the global economy. It is hoped that this research contributes to enhancing the survival rate of family businesses as they transition to the second generation onwards. This research has managed to examine the motivation underlying entrepreneurial activities undertaken by the selected family businesses and found that the motivation was not only to sustain their growth, but also to create wealth for and within the family, and to ultimately continue their business legacy (Astrachan, 2010).
The research has also answered the questions of “how, why (and possibly for whom) are these decisions made?, and the differences in the decision making process between family business and non-family business. With this contribution to theory and practice, leaders of family businesses, their families and stakeholders, policy makers and other stakeholders are able to enhance their understanding of the decision making process undertaken by the business owner when they venture into new businesses. The drive towards organizational growth, profitability and wealth creation of these family businesses is not limited to financial investments but are also motivated towards fortifying family legacy across generations.
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APPENDIX A: Interview Schedule The researcher designed the following questions specifically for the present study (with prior knowledge that the business is embarking or has embarked on a new venture creation).
Group 1: Founder / CEO I would like to start this discussion on the decision making process by you when you created the business venture you had undertaken. (highlight to the CEO / Founder the business venture he had undertaken in the past 3 years on the wall chart/presentation slides) 1. Can you walk me through the process of creating the business venture? a. How was the decision made? b. Who was involved?
2. Can you describe a specific time when you needed to make that decision on the business venture and did not have enough information? a. What did you do? b. What were the results? c. How did you feel about this?
3. When you made the decision in creating a business venture, what do you think were your top priorities? a. Who was consulted before making a decision? (anyone within or outside the family / business?) b. What do you consider to be the advantage or constraint from the family (management) involvement?
4. Can you describe a scenario where there was considerable disagreement when you were evaluating this new venture creation? a. What happened? b. Who made the decision and is there any disagreement how the decision was made?
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5. How would you elaborate your decision-making when you ventured into the new business? a. Short term or long term oriented? b. Quick or fast decision-processes? c. Centralized through top/family (management) leaders or decentralized throughout? d. Informal personal interaction or formal meetings and processes? e. Acceptance of failure in the decision-making? f. Intuitive and personal or strategic with planning? g. Dedicated some budget or internal corporate venturing capital for financing new ventures? h. How was the commitment and support level?
(Close by thanking the respondent for giving his/her time to help the study).
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Group 2: Family member in Management Capacity Group 3: Non-Family member in Management Capacity (Note: Exception for Mulder-XF, both Group 2 and 3 are employee in management capacity).
I would like to start this discussion on the decision making process by the CEO / Founder when he created the business venture he had undertaken. (highlight the business venture the CEO/Founder had undertaken in the past 3 years on the wall chart/presentation slides) 1. Can you walk me through the process of which the CEO/Founder created the business venture? a. How was the decision made? b. Who was involved?
2. Can you describe a specific time when the CEO/Founder needed to make that decision on the business venture and did not have enough information? a. What did he do? b. What were the results? c. How did you perceive how he felt about this?
3. When the CEO/Founder made the decision in creating a business venture, what do you think were his top priorities? a. Who was consulted before making a decision? (anyone within or outside the family / business?) b. What do you think would he have considered to be the advantage or constraint from the family (management) involvement?
4. Can you describe a scenario where there was considerable disagreement when he was evaluating this new business venture? a. What happened? b. Who made the decision and is there any disagreement how the decision was made?
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5. How would you elaborate the decision-making of the CEO/Founder when he created the business venture? a. Short term or long term oriented? b. Quick or fast decision-processes? c. Centralized through top/family (management) leaders or decentralized throughout? d. Informal personal interaction or formal meetings and processes? e. Acceptance of failure in the decision-making? f. Intuitive and personal or strategic with planning? g. Dedicated some budget or internal corporate venturing capital for financing new ventures? h. How was the commitment and support level? (Close by thanking respondents for giving their time to help the study)
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APPENDIX B: Interview Protocol Checklist Interview with : Company : Date / Time : Venue : CRQ1 Do family business owners reason and make their decisions differently from non-family business owners when they create new venture? Research Question
Sub RQ IQ1(a) IQ1(b) IQ2(a) IQ2(b)
IQ2(c)
IQ1
IQ2
IQ3
Can you walk me through the process of creating the business venture?
Can you describe a specific time when you needed to make that decision on the business venture and did not have enough information?
When you made the decision in creating a business venture, what do you think were your top priorities?
How was the decision made? Who was involved? What did you do? What were the results? How did you feel about this? What were the results? How did you feel about this?
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CRQ2 Are they different? If yes, how different? and why are they different? IQ4 Can you describe a scenario where there was considerable disagreement when you were evaluating this new venture creation?
IQ5 How would you elaborate your decision-making when you ventured into the new business?
CRQ1 Do family business owners reason and make their decisions differently from non-family business owners when they create new venture? Research Question
Sub RQ 1Q3(a)
1Q3(b)
1Q4(a) 1Q4(b)
1Q5(a)
IQ1
IQ2
IQ3
Can you walk me through the process of creating the business venture?
Can you describe a specific time when you needed to make that decision on the business venture and did not have enough information?
When you made the decision in creating a business venture, what do you think were your top priorities?
Who was consulted before making a decision? (anyone within or outside the family / business?) What do you consider to be the advantage or constraint from the family (management) involvement? What happened? Who made the decision and is there any disagreement how the decision was made? Short term or long term oriented?
173
CRQ2 Are they different? If yes, how different? and why are they different? IQ4 Can you describe a scenario where there was considerable disagreement when you were evaluating this new venture creation?
IQ5 How would you elaborate your decision-making when you ventured into the new business?
CRQ1 Do family business owners reason and make their decisions differently from non-family business owners when they create new venture? Research Question
Sub RQ 1Q5(b)
1Q5(c)
1Q5(d)
1Q5(e)
1Q5(f)
IQ1
IQ2
IQ3
Can you walk me through the process of creating the business venture?
Can you describe a specific time when you needed to make that decision on the business venture and did not have enough information?
When you made the decision in creating a business venture, what do you think were your top priorities?
Quick or fast decisionprocesses? Centralized through top/family (management) leaders or decentralized throughout? Informal personal interaction or formal meetings and processes? Acceptance of failure in the decisionmaking? Intuitive and personal or strategic with planning?
174
CRQ2 Are they different? If yes, how different? and why are they different? IQ4 Can you describe a scenario where there was considerable disagreement when you were evaluating this new venture creation?
IQ5 How would you elaborate your decision-making when you ventured into the new business?
CRQ1 Do family business owners reason and make their decisions differently from non-family business owners when they create new venture? Research Question
Sub RQ 1Q5(g)
1Q5(h)
IQ1
IQ2
IQ3
Can you walk me through the process of creating the business venture?
Can you describe a specific time when you needed to make that decision on the business venture and did not have enough information?
When you made the decision in creating a business venture, what do you think were your top priorities?
Dedicated some budget or internal corporate venturing capital for financing new ventures? How was the commitment and support level?
175
CRQ2 Are they different? If yes, how different? and why are they different? IQ4 Can you describe a scenario where there was considerable disagreement when you were evaluating this new venture creation?
IQ5 How would you elaborate your decision-making when you ventured into the new business?
