Family Business Research - Case Study Example

In this paper we compare traditional Norwegian family businesses in the process of modernization with modern British business families who are reinventing traditional solutions. What we find is a striking similarity between quite different sectors in two different countries. The results indicate that the modern British industrial strategy of promoting flexibility and entrepreneurship implies reinvention of traditional solutions to an old dilemma imposed on actors confronting insecurity. Traditional family businesses, traditional and modern business families These contrasting exemplars of modernization enable us to bring a number of novel perspectives to small-business research. The first is a methodological approach that starts with a household or family-level analysis, making gender a foundation stone (Wheelock and Oughton, 1996, 151). Second, we introduce an institutional perspective that places business in its micro and macro context (Wheelock and Mariussen, 1997, Press). We look at the relations between different forms of rationality in the business and the family, allowing a more holistic analysis than one based on the more orthodox concept of rational economic man. Business behavior tends to be modeled on entrepreneurial responses to risk. The analysis here strives not to see small business as large business in microcosm. It recognizes small business as an "uneasy stratum" (Bechhofer and Elliott, 2001) with characteristics of labor as well as capital - an institution that can only be fully understood when seen in its social and economic context. Why should a household approach be used in small-business research? Concepts of "flexibility" - both in the production system as a whole and in individual large firms - have become fashionable explanations for competitive responses as a crisis of Fordist mass-production methods. Given the key role played by small firms in these models, it is surprising that there has been so little investigation of the forms that flexibility might take within the small business itself (Wheelock, 2002b, 162; Mariussen and Wheelock, 1997, 15). The forms flexibility takes within the smallest firms will be, at least in part, a function of how they are embedded in household, family, and other social networks in the informal or complementary economy (Wheelock and Oughton, 1996, 153). Studies of small businesses in restructuring economies showed a close interrelationship between work for the business and the family, to an extent that justified the use of the term "family economic unit" (Wheelock, 1992b, 163). This is supported by other qualitative studies (Phizacklea and Ram, 1996, 321; Ram and Holliday, 2003, 633) as well as by two large-scale surveys (Poutziouris and Chittenden, 1996; Rosa, Hamilton, Carter, and Burns, 2004, 29),(1) indicating that other motivations operate besides economic gain. People in households may base their actions on traditional or patriarchal reasoning, and they have a need for dignity, independence, and a lived identity. Examining the economic character of the household allows us to look at how the boundary between the formal and the informal (or complementary) economy is constructed and reconstructed. This point of departure brings up three questions, the first two of which are: 1. What is the nature of rational choice when people form and maintain households together? 2. How do the institutions of the family household and business and the labor market relate to each other? These questions, which are usually ignored, are answered through the empirical analysis of particular British and Norwegian family firms. Our institutional perspective implies a focus on change, leading to the third question: 3. How does the relationship between household, business, and economy evolve over time? In terms of the individual household, movement through the life cycle, including birth and transition to the adulthood of children, necessitates adaptations in household behavior and family work strategies, including work in business, household, and the labor market. Structural and cyclical economic changes (such as rising male unemployment, rising female participation in the labor market, and rising bankruptcy rates) can also influence the behavior of different household members as well as the deep dynamics of modernization, which influence us all in different ways. Examining the economic character of the business household in this manner necessitates the use of in-depth qualitative interviews. It is then possible to examine the relations among different forms of rationality in the business and the family, allowing a more holistic analysis than one founded on the presumption of the maximizing individual. This micro-institutional focus on the household and family context for business contrasts with the conventional interest of small-business research in the "entrepreneurial individual." The presumption that there may be differences in rationality between business and household also indicates a need to reexamine concepts of risk and insecurity. Risk estimation may provide the foundation for entrepreneurial behavior, but risk may also be handled through the creation of postmodern reflexive meaning and identity for other household members. Risk may be an appropriate category for those in the household who concern themselves primarily with the organization of business as capital, but the concept of insecurity may be more appropriate for the household as a supplier of labor. As Polanyi (2006) would see it, substantive institutional analysis examines the way in which lives and livelihoods interrelate. Maintaining a livelihood involves varying ways of embedding business and household through social and economic relations in the formal and the complementary economy. Different modes of embedding, we argue, are related to different solutions to risk and insecurity as well as to different business strategies. We prefer to use the term "business family" rather than "family business" to capture the importance of family to business survival and success. Our investigation of this variation is based on a comparison of two sets of contrasting cases. Methods and sample The Norwegian study The Norwegian fishing industry is characterized by its dependence on fish inputs, which are subject to extreme uncertainty generated by variability in fish stocks due to bioecological factors, climate, seasonal variations, the interrelation between fish harvesting and biological production, as well as by national and international regulation of the fishing fleet, fish stocks, and fish markets. At the same time, the Norwegian fishing industry enjoys advantages given by its location close to fishing grounds where valuable and highly prized varieties of fish are caught. This combination of uncertainty and generous natural gifts results in conservatism in terms of technology, products, markets, and organizational solutions. In the Norwegian study, selected firms in two fishing communities (Maloy on the western coast south of Alesund, and Ballstad on the Lofoten Islands) were studied as part of a comprehensive analysis of restructuring in coastal regions. The selection of the two communities was based on their contrasts. Whereas Maloy is going through a rapid modernization process, the Lofoten Islands are still dominated by the tradition of dried-fish production. In the two communities, information on all firms was gathered by informant interviews and through available public statistics. based on this overview, a selection of cases was made to cover expanding as well as traditional firms, both young (recently started) and old (four generations) ones, with different technologies, strategies, and products.(2) For each case, between one and six informants were interviewed. In some cases, there were several subsequent interviews. Interviews normally lasted one to two hours, with material obtained from thirty-two firms in the two communities. Informants were encouraged to tell the story of the firm, its family context, and their involvement in the development of the firm. Stories were taped and then transcribed. Informants were asked to approve the written version of their interview. Stories were compared and synthesized into a more generalized "master story," on which central informants were asked to comment. In this way, additional information was obtained, and misunderstandings were clarified. Emphasis was placed on the hermeneutic understanding of the actors involved - in particular, in clarifying their conceptualization of the contexts of the central decisions they faced (Steyaert, 1997). An analysis of the development of the two communities was reported in Norwegian (Mariussen, Karlsen, and Andersen, 1996, Press). This material is reassessed here and related to the conceptual framework generated through the British case studies. The British study The investigated firms were micro businesses (defined as businesses with zero to nine employees) in the fast-growing business services sector in two locations: one in the north of England (Newcastle upon Tyne) and one in the south (Milton Keynes). These are both urban locations selected for their contrasting socioeconomic profiles. Newcastle upon Tyne lies in the Tyne and Wear conurbation which has been described as among "the most turbulent and volatile English metropolitan agglomerations," characterized in the late 1980s by reliance on traditional manufacturing employment, population decline, and shortages of educated professional workers. Milton Keynes, in contrast, lies in the suburban counties to the west of greater London characterized by growth in total employment (but not manufacturing), high average earnings, and sizable pools of professional and educated employees (Westhead and Birley, 1994, p. 53). A telephone survey with 200 businesses (100 in each location) formed the starting point, after which two stages of face-to-face interviews were conducted. The first of these stages was an interviewer-administered questionnaire with 104 owner-managers. The final stage, with which we are mainly concerned here, consisted of in-depth interviews with owner-managers (and, where possible, with another significant person in the business) of thirty-four of the businesses already interviewed. People who participated in this stage were invited to talk in detail through critical incidents in the recent life of their families and businesses. When the two levels of face-to-face interviews are added together, we seldom spent less than two hours and sometimes up to three hours with each of these thirty-four firms. From these rich data, the investigators were able to examine the interaction between businesses and families in daily life and to uncover the economic character of their households. Unlike the businesses in the Norwegian fishing industry, British business service businesses had no tradition of family ownership. On the contrary, they were predominantly new businesses in a sector that, as discussed above, grew rapidly in the 1980s. Two-thirds of the 200 businesses contacted by telephone were founded in the 1980s, and only 7 percent had been in existence prior to 1980. A framework for handling risk and insecurity Divergent motives and values in small enterprise have been characterized elsewhere through a dichotomy between: (1) ambitious, money-motivated, and growth-oriented business owners, and (2) the remainder, who are more contented, less money-motivated, and less growth-oriented. This is in essence the two-way distinction between the "craftsman" and the "opportunistic" entrepreneur (Smith and Miner, 2003, 325). An extension of this two-way classification to incorporate a third type dominated by a search for economic security is offered by Gray through a three-way categorization of business owners' concerns into "money," "lifestyle" and "safety" (Gray, 1997, 20). The function of our categorization is to develop a deeper and more focused inquiry into the issues of family interaction with business survival, maintenance, and growth, which has been as yet little noted in most small-business research. Although "motives" are a component of this categorization, it is important to stress that our typology does not fall into the trap of implying that the choices available to business owners are infinite and that business behavior can accordingly be read off directly from the tastes and ambitions of owners. Our framework identified four groupings of business/household relations, used in the following sections to show how each of the four groups followed different paths of development and had different relationships to risk, family, and business growth. Typologies abound in the literature, but the framework presented here is novel in its focus on the interaction of business livelihoods and daily lives. Conclusion The parallels and contrasts between Britain and Norway are discussed in each of the following four groups: 1. "Survival and security," where satisfactions beyond providing or contributing to a living for the owner(s) and his or her family are not very evident; 2. "Business-intrinsic," where satisfaction in the ownership and running of a business is associated with personal independence, producing good work, and serving clients' needs; 3. "Intrinsic-creative," where there is a creative output and strong emphasis on and pride in creativity; and 4. "Achievement," where there is an expressed capacity to seek out and face business challenges. The "survival and security" group experienced relentless pressure to offer "flexibility" in the form of long hours of work with precarious financial rewards. In both countries, it is the participation of family members that often made such flexibility sustainable. Survival and security business owners are devoted to minimizing the extreme riskiness of their circumstances as far as possible. At the other end of the scale, firms in the "achievement" group are most likely to enter into partnerships with nonfamily members, to take financial and other risks willingly, and to look for finance from outside the family, while they are least likely to call upon family support. Enthusiasm for growth was rarer but not entirely absent from the "business-intrinsic" and the "intrinsic-creative" groups. In both countries, the business-intrinsic stressed the value they placed upon their "independence," and they tended to strive for, and may attain, a separation of family and business. It was characteristic of the creative group in Britain to express a very positive attitude to integrating their personal relationships and their work. However, they recounted extreme difficulty in incorporating other people from outside their family into the objectives and values of their business. Neither the business-intrinsic nor the creative relished risk. References Wheelock J., and Mariussen, A. 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Work Employment and Society, 10, 2 (1996), 319-339. Ram, M., and Holliday, R. "Relative Merits: Family Culture and Kinship in Small Firms." Sociology, 27, 4 (2003), 629-648. Read More