Innovation in Family Entrepreneurship - Term Paper Example

Innovation in Family Entrepreneurship s Submitted by s: Introduction In the past few years, family business have been a focus of attention in a lot of literature and it is important to consider that they are the most common types of businesses in the world. Even though this is the case, there are still areas that are associated with family business that need to be explored (Sorenson, 2013, p. 115). Despite the importance that is accorded to innovation all over the world, there are still blind spots as far as innovation in the business that are owned by families are concerned (OECD, 2008). Innovation is seen as very important in the success and growth of businesses and organizations. Innovation begins with a company that is very well organized and there is a lot of similarity as far as the importance of success attributes is concerned (Wulfen, 2011, p 41). These attributes are linked to commitment from the management and the employees, cross-functional cooperation, efficient procedures, networking and also culture where they are all combined to come up with a process that is ongoing. Family businesses generally differ from the other types of businesses since the ownership and control of the business is overlaps with family membership and this makes them a type of business that is extremely complex (Collins, 2012, p. 58). As a result of this, the researchers that deal with innovation have to focus on specific groups separately but still there is very little research as far as innovation in the family business is concerned (Nordqvist, 2011, p. 2). Family businesses are vital since their economic contribution is significant and have long-term constancy while showing obligation that is explicit to the populations that they operate in. the owners also have a responsibility and have a set of values that promote and stand for. Therefore, the main objective of this thesis is to understand the environment that family businesses operate in and how this affects the innovation that is associated with them. Review of core literature A family business can be defined as one that is owned and managed by one or more family members. It can also be considered to be a business that is influenced by more than two extended members of the family through exercising their relationship ties, management positions and ownership privileges. These businesses invest their funds collectively and one or more family members are mandated to be a part of the management and play an active role. Mainly they are defined in terms of ownership management the amount of involvement that the family puts into the business. In a practical setting, the members of a family must own more than a quarter of the business for it to be considered to be a family business where the company directors will double up as the shareholders. Innovation and entrepreneurship are the main drivers that are associated with economic development and they generally occur across broad scopes which may be new or old, and even public or private organizations. The levels of innovation and entrepreneurship can be determined by knowledge creation, people, and trust as well as relationship networks regardless of whether the business that is in question is a family business or a multinational corporation (Chrisman, Holbrook and Chua, 2002, p. 3). Family firms can be considered to have unique performance capabilities that are derived from their ability to create powerful and distinct cultures, which have a value proposition, and this serves to give them an edge with the stakeholders and also in the marketplace. The challenges and risks that they face are also unique to the point that they always derail them and therefore they need to overcome these challenges in order to be in a position to bring out their full potential. Family businesses can also be considered to be a vital source of economic development and growth and this can be seen all over the world since they are the most common businesses. Researchers have started to develop an increased appreciation as far as family businesses are concerned and this has greatly helped in contributing towards collective wisdom and as a result, the field has posted some sort of development. Scholarship that is associated with family businesses can no longer be considered to be emerging since it has moved to a phase that is characterized by rapid growth. In spite of the trends that are emerging, the development of theories that are related to family business is delayed to the point that this deficiency can be considered to be among the main contributors that are slowing down the coming up of family businesses as a scholarly field that is respected (Poutziouris, Smyrnios and Goel, 2013, p. 1). Innovation is a very wide topic (Bullinger, 2008, p. 1), and in the literature that deals with innovation, it is found that the term is used to cover a variety of explanations that describes both the procedure that is employed to come up with new products as well as the new products that are developed. What comes out of the innovation can be considered to be the adoption of a system, program, product or a service that was in not in the adopting company initially. The innovation procedures generally begin with the capability that the company has to innovate and this normally called the innovation capacity (Reihlen and Werr, 2012, p. 145). Innovation output and performance that is related to innovation is wholly dependent on innovative capacity even though innovation output cannot always be used to determine whether a particular business is innovative since there are many attributes that are linked to it that hinder an accurate measurement. Family businesses generally tend to be more innovative than the businesses that are non-family and the link that exists between the families and the businesses that they conduct may have a huge impact in the manner that resources are managed and shared in the family businesses. What makes family businesses unique is the pattern of ownership associated with them, governance, management and succession materially that has an effect on the objectives that the firm aims to achieve, the approaches that it employs for business and the way that they are arrived at, designed and put into practice. Family business display characteristics that are unique and at the same time appear to be dormant while having an influence on the economy through their importance to innovation (Poza, 2013, p. 27), and therefore, it is imperative to appreciate how innovative capacity is impacted by the distinctive attributes that are linked to the family owned businesses. The simplest ingredient that is associated with success in an organization can be attributed to people and social practices rather than technology and this therefore entails the principles and practices that are needed to manage human attributes of innovation Kreitner, Cassidy and VanHuss, 2014, p. 7). In terms of an innovation that is supposed to be beneficial, human capital can be seen to be an integral part. This makes the skills that the people have in the company, the amount of involvement that the employees put in, the relationships that exist between the employees and teamwork as well as innovation goes a long way in making sure that the company is successful. There is the fear that family business might have issues and constraints that concern the abilities and competencies of the employees that work for them. It is almost obvious that the family businesses will most probably employ relatives to position in the business even in the situations that the members might not be having the required skills for those positions. This might end up in a workforce that has very low qualifications and in the end have effects that will be negative for the business since managers that are qualified for these positions will not be attracted to these positions. The family characteristic of a business can also have positive effects in the area of skills and knowledge in the business that will be derived from the protective nature of the family businesses which helps in the development of skills and knowledge that are unique since they will be safeguarded and thus stay in the family for a number of generations (Del Giudice, Della Peruta and Carayannis 2011, p. 24). The family members that are active in the companies get their inclusion in to the businesses at a tender age and therefore have enough time to know the way it runs in terms of the competitors and customers. They will also receive apprenticeship training from the members of the family that are already skilled in the business that the family is operating. The workforce turnover in the family businesses is also lower compared to the rates that are experienced in the non-family business and this means that there are skills that will be kept in the business for a long time making the business successful (Schuman, Ward and Stutz, 2010, p 170). Research Question Contrary to popular belief, innovation and growth are not random since there are distinct patterns that can be used to dictate success or failure and by studying and applying these patterns, different people can have the ability to improve and succeed as far as innovation is concerned. This therefore makes innovation an area that can be predictable depending on the distinct patterns that can be associated with it (Anthony, 2013, p. 3). Given the overlap that exists between business and family wealth, and the aversion that comes out of this of the owner families to take risks in the business, the family businesses have an motivation to take part in levels of corporate diversification that are greater than the one that the non-family businesses take part in. Families may also have motivation to give up corporate diversification as a result of the negative impact of diversification on the shareholders value. The family businesses normally come up from a one entrepreneur company that is focused on a single market and therefore a strong relations with the customers and also the suppliers and the natural long term orientation then allow these businesses to hold on to the business strategies that they established. It is in respect to this that this thesis proposal seeks to find out the effect that the family businesses have on innovation. It also seeks to understand whether innovation in the family businesses and entrepreneurships are more encouraged than in the other businesses that are non-family businesses (Gerybadze, 2010, p. 405). Conceptual model Motivated by the specific influence that the family and the non-family connections may have on innovation in the family businesses, a conceptual model will be proposed to come up with a description of their effect on innovation in the family business. It is expected that relations, whether family on non-family, supported innovation. It is suggested that the familial connections in the company will have a positive effect if the business is run by a generation of the family that has enough experience and comfortable enough to be innovative. Research strategy/ approach The data that will be used for this study will be collected from companies that are in operation in different sectors and of different sizes through the use of a questionnaire that will require the respondents to answer the questions in a five point answer model. A random sample of one hundred companies will be used which will contain fifty-five family businesses and forty-five non-family businesses that have a difference in the structure of operation. The businesses that will be in the two will have the same characteristics in terms of the representation that they will have in their different sectors, the size as well as the turnover and they should have more than twelve employees and be focused on getting profits. Data collection/ methods The data that will be specific to the firms will be obtained by the use of a questionnaire that will be employed to identify the issues that affect innovation as far as family businesses are concerned and how this differs from the case of the non-family businesses. A five point scale will be used that will range from “agree completely” to “disagree completely” and the managers who are in charge of the businesses that will be a taking part in the research will be asked to point out to what extent specific attributes are related to their businesses. All the attributes will be weighed using multiple elements and the skills and involvement that comes from the employees will be weighed using four elements while teamwork will be weighed using five elements. A factor analysis will be applied for each particular attribute so that a variety of views can be established. From the questionnaires, the cumulative sum of the results shall be calculated by getting the summation of the answers that were given for each particular question. A score that is high will mean that the family businesses have more attributes that promote innovation and therefore more innovation can be found in them than the non-family businesses. Type of conclusions/ recommendations/ solutions It is expected that the results of the research will show that the innovation capacity that is there in a business will highly depend on the skills that the people that are working in the business will have. Therefore, the skills will have a positive influence on capacity of innovation that a business has. In the case of the characteristics of the family business having a positive impact on innovation, it is expected that the results will show that this is dependent on the particular generation of the family that is in charge of the business, in the businesses where the members that are in charge are those that have been there for a while and have acquired experience, innovation will be easy to identify. It is also predicted that the research will show that if the employees that are in the family businesses are allowed to take part in the innovation processes, then there is a high chance that this will have a positive effect on innovation. This is because the employees will feel motivated and encouraged to work and come with ideas that can greatly help to make improvements. In the long run this will help to improve the innovation capacity of the business in the largest proportions. It is also expected that the research will find that teamwork in the business will not necessarily improve the capacity to be innovative in the company even though it is an important factor as far as the innovation process is concerned. The innovation capacities that in relation to both the family and non-family businesses will generally compare almost equally even though it will be seen that the family business will have a slightly higher capacity than that of the non family business. This might be because innovation is generally influenced by a variety of factors that are related to a particular firm and this leads to a difference in the innovation capacity. It is aimed that this research will take place within a period of a month to allow time to request the managers to be respondents to the questionnaires that will be administered through seeking a written consent from them and also enough time to analyse and come up with accurate results from the questionnaires that will have been filled. The results will consequently be published in the relevant journals that deal with material that is of topics that are linked to the one covered by this research. It may also be presented in conferences that may come up that will be of the same nature and in the subject the research was done in. Bibliography Anthony, S. D. 2013. The little black book of innovation. Harvard press. Boston, Massachusetts. Bullinger, A. C. 2008. Innovation and ontologies. Gabler. Wiesbaden. Chrisman, J. J., Holbrook, J. A. and Chua, J. H. 2002. Innovation and entrepreneurship in Western Canada. University of Calgary Press. Calgary, Alta. Collins, L. 2012. The modern family business. Palgrave Macmillan. Houndmills, Basingstoke, Hampshire. Del Giudice, M., Della Peruta, M. R. and Carayannis, E. G. 2011. Knowledge and the family business. Springer. New York. Gerybadze, A. 2010. Innovation and international corporate growth. Springer. Berlin. Kreitner, R., Cassidy, C., & VanHuss, S. H. (2014). Administrative management: Setting people up for success. Cengage learning. Stamford, USA. Nordqvist, M. 2011. Understanding entrepreneurial family businesses in uncertain environments. Edward Elgar. Cheltenham, UK. OECD. 2008. OECD Reviews of Innovation Policy China. Organisation for Economic Co- operation and Development. Paris. Poutziouris, P., Smyrnios, K. and Goel, S. 2013. Handbook of research on family business. Edward Elgar. Cheltenham. Poza, E. J. 2013. Family business. Thomson South-Western. Mason, OH. Reihlen, M. and Werr, A. 2012. Handbook of research on entrepreneurship in professional services. Edward Elgar Publishing. Cheltenham. Schuman, A. M., Ward, J. L. and Stutz, S. 2010. Family business as paradox. Palgrave Macmillan. Basingstoke. Sorenson, R. L. 2013. The landscape of family business. Edward Elgar Pub. Ltd. Cheltenham. Wulfen, G. 2011. Creating innovative products and services: The FORTH innovation method. Gower Pub. Farnham, Surrey. Read More