Levels of Control among Family Businesses Approaching Succession - Research Proposal Example

Levels of Control among Family Businesses Approaching Succession A Critical Review Insert Name Insert Date Introduction This review attempts to analyze the strengths and weaknesses of the conceptualization behind De Potent, Wrosch, and Gagne’s article titled “An Exploration of the Generational Differences in Levels of Control Held among Family Businesses approaching Succession.” This paper is divided into six sections. The first section pinpoints the driving force behind the article and discusses its significance as a research topic. The second part identifies its central hypothesis and traces how it flows – or doesn’t flow – from theorized concepts. The third section argues that, while solidly rooted in theoretical constructs, the operational measurement of the units of analysis proved to be flawed. The fourth and fifth sections build on the weaknesses in measurement to analyze the sources of data used and how it affects the validity of the findings. Lastly, the sixth section identifies possible areas of improvement for future academic research. Significance of the Problem The research area on family businesses has garnered much attention from scholars, an observation further validated by this article. In the context of this article, authors content that family businesses represent over 90% of businesses in Canada and provide over half the jobs in North America (Astrachan, Allen, Spineli, & Whittmeyer, 2003, as cited in De Pontent, Wrosch, and Gagne, 2007). In addition, family businesses come in a wide range of sizes and legal structures and operate in every industry known to mankind. Hence, such businesses are crucial not only for massive employment generation and health of domestic business sectors, but more importantly, the global economy at large. If most family businesses fail, it may create a domino effect across industries, which would inevitably lead to a crisis. Because statistics show that family businesses tend to decline, or worse, fail in succession, studying the succession process and the interplay of factors in its development is a worthy area for research. The driving force of the article in review is that family businesses often fail in succession. Leadership succession in family businesses is the norm. However, while failure of succession receives much scholarly attention, the process itself leaves much to be researched. The authors have contributed to understanding why succession fails – an area where much can still be studied – examining the variables in the succession process and the process itself. Central Hypothesis The article’s main proposition is that the family succession process, described as a slow shift in power and responsibility over time (Handler, 1990 as cited in De Pontet, Wrosch, and Gagne) is essentially an interplay of generational differences and levels control. The more the leader’s – the incumbent – responses reflect succession readiness, the more succession is expected. The incumbent no longer holds a controlling interest in the business and the successor would hold some shares. The hypothesis called for a measure of association. This hypothesis is best described as predictive or causal, in which the path or relation between variables (i.e. A implies B) is established through the authors’ analysis of the data. The theoretical bases of the authors in constructing their three hypotheses come from three frameworks. The first is Levinson’s (1986) theory of developmental stages, which established that the age of the incumbent and successor affect how the experience succession and determined more or less whether they are to make adaptive progress (Davis and Taguiri, 1989, as cited in De Pontet, Wrosch, and Gagne). The second is Handler (1990)’s model of succession, broken down into four stages of transition. The third is Le Bretton-Miller et al. integrative model of succession, which includes important contextual variables in the succession process. Stemming from existing literature and studies, the said hypothesis is derived from theorized constructs and not just picked out of thin air. For instance, the conceptual definition of family businesses is based from existing sources. Furthermore, the first framework used as reference establishes the importance of generational difference in the succession process. On the other hand, Handler provides a model of succession upon which the authors were able to review how succession readiness affects the incumbent’s and successor’s control over the business. Lastly, Le Bretton-Miller et al identified the how the business context – needs and abilities of the incumbent and successor – affect the process. Research Design & Validity De Pontent, Wrosch, and Gagne used survey as research design. The authors used a very practice-oriented research method for their chosen topic of study. In the article’s central hypothesis, the independent variable (succession) is measured through four key indicators of succession readiness, namely: (1) presence of clear successor; (2) public progress in succession; (3) confidence in JR’s Leadership skills; and (4) confidence from other stakeholders. Transforming these indicators into data that are measurable was a challenge the authors had to overcome. With survey as the research design, respondents answered the question on ownership in percentage. Management, stakeholder comfort, and perceived control were measured using a scale between 1 and 6. Despite having family businesses – essentially a group unit – as the subject of discussion, incumbents were used as the unit of analysis to answer the question at hand. The writer of this paper is of the opinion that the variables’ operational measures are acceptable, that they were chosen based on established measurements of scholarly sources. For example, the scalar range of 1 to 6 used to measure confidence in successor was based on other academic research, namely the work of Gomez and Rosen (2001). However, it is important to note that, the respondents are not fit to answer the fourth succession readiness indicator – stakeholder comfort – and only provided their perception of such to authors. To have an accurate measurement of the said indicator, the authors should have gathered survey data directly from stakeholders. Furthermore, the scalar measurement (0-3) of the said indicator was not explained; there was no theoretical basis for such measurement to be used. Validity of Sample The sample used in this study came from businesses located in nine Canadian provinces, with the intention of mirroring the population distribution of Canada. The companies’ ages vary from five to 122 years of operations, with a mean of 43 years in business. 32% of the sample are very small companies, 38% can be considered medium, while 27% are mid-size to large businesses. This sample is acceptable and can more or less reflect the reality on the ground in the Canadian business sector. However, it is important to note that there are only ten provinces in Canada, plus three territories. In as much as the sample used came from nine provinces, the authors did not delve further as to why each of the nine provinces was selected. Data Collection & Conclusion The authors sent out 404 questionnaires to 189 different companies. Of the 404, 233 questionnaires were returned completed from 132 companies. The final sample was set to the number of completed questionnaires (N=100). It is important to note that the authors relied heavily on these survey questionnaires as primary sources of data. While acceptable, it would have been of great improvement to study to include other sources, such as personal interviews and review of documents. In any academic research work, having one primary source of data is not enough to make findings valid. Possible Improvements The fundamental strength of De Pontet, Wrosch and Gagne’s work is their solid foundation in theories. These theories were heavily borrowed from other disciplines. Having a sound and appropriate theoretical framework is the key to making a good academic study. Utilizing the model by Le Breton-Miller, their study stems from a definite perspective. However, no matter how solid an article’s theorized constructs are, the validity of its findings will rely on the soundness of operational measures. In this case, the research relied heavily on survey. Using incumbents as the unit of analysis, the paper failed to encompass the variables it described, specifically that of stakeholder comfort. In addition, all units of measurement must have a sound basis behind it. The scalar measurement of 0-3 for stakeholder comfort, unlike the scalar range for confidence in successor, was not explained, neither was it referred to as the product of previous research works. To improve the paper, primary data sources need to be supported by secondary sources. It would also be interesting to ascertain whether a different sample size, in terms of geographical location, would yield different results. That is another possible area of further research. References Brun de Pontet, Stéphanie, Wrosch, Carsten, and Gagne, Marylene. An Exploration of the Generational Differences in Levels of Control Held among Family Businesses approaching Succession. Family Business Review; Dec 2007; 20, 4; ABI/INFORM Global pg. 337 Read More