Entrepreneurial Orientation and Generation Involvement - Research Paper Example

Internationalisation and Growth of Family Firm: The Role of Entrepreneurial Orientation and Generation Involvement Table of Contents Abstract 1 Table of Contents 1 Introduction 1 Literature Review and Propositions Development 1 (1) Entrepreneurial Orientation 2 (2) Entrepreneurial Orientation and Family Firms Performance 5 Proposition I 1 (3) Entrepreneurial Orientation Internationalization of Family Firms 5 Proposition II 1 (4) Generational Involvement and Ownership in Family Firms 5 Proposition III 1 Proposition IV 1 Proposition V 1 Discussion and Conclusion 1 References 1 Introduction Family-controlled businesses are making more of an insertion into the global markets as traditional jobs for young people fall by the wayside across world economies. To some degree, this has presented opportunities for younger family members to consider remaining with the family business rather than trying to branch out on their own. For those that have been educated in Western universities and colleges, the ability to translate that knowledge of interacting with other cultures during that time, becomes a great asset to the family business when looking at entering the global market. Along with the higher education, young people are also skilled in computer and software operations that would help design and upgrade operations for the company. Those who have learned other languages, bring a higher level of communications which are valuable in working deals on a global level. The global community of business introduces a number of situations where differing cultures will meet up with each other, and, accordingly, not all of them align in how they interact with each other. This is mainly through cultural issues of differing countries, and also a leadership within these companies which has not taken the time to learn how the other side may relate to styles of negotiations (Kontinen & Ojala 2010). In the past, this was seen more with Western powers trying to move into other countries to expand business on a global level. Failures came when Western leaders bypassed learning about the cultural influences on business in different countries, particularly Asian businesses (Chen 2011). As the global playing field levels out where small to medium companies anywhere, can now operate the same way as large companies in creating global deals, family businesses are also making their mark on the playing field. This means a slightly different manner of operating, as these businesses operate within a relationship parameter of loyalty and trust within their own family group, for the most part. Yet, there can be some discord when the Next X group (NxG), within a rigid family structure, and depending on where they stand in the total business infrastructure, proposes new ways of doing something as opposed to what was done before. The older, more traditional leadership, or head of the family, may be slow to implement what is not known to them, or to relinquish control as well (Graves & Thomas 2006). Yet, they would be more likely to trust a family member’s judgement rather than someone unknown from the outside. Asian family businesses are a perfect example of close-knit infrastructures when it comes aligning towards a common goal of successful business operations (Björnberg & Nicholson 2012; Collie, Garcia-Canal & Guillén 2013). In a new world of technology which has changed just about every method of interaction with other companies and with customers, the principles may remain the same but the actual manner of conducting business must change in order to meet the needs of customers and other inter-related business negotiations. Hence, a new generation, NxG, proposes new methods of conducting business on a much larger scale than ever before (Chen 2011). Within a family structure that contains several generations of family members, the level of trust would be much higher between family members, thus promoting a more positive approach in expansions. This is particularly true when the younger generations of involved family members have been educated at universities in the West and, therefore, are acclimated with Western technology and global business approaches. But successful expansion is also dependent on the older generations, particularly if they are the leadership for the company while NxG members are still at lower level, and less influential, business positions within the company (Chen 2011). In such cases, a traditional leadership may limit or hold back global expansion for the company until more knowledge is gained by the traditional leadership group. Subsequently, the traits and characteristics of that leadership may outweigh the family perspective of trust and loyalty normally found within the family infrastructure (Graves & Thomas 2006). Overall, the current trend is for most family businesses to move successfully into global markets, so long as the product or service transitions accordingly. Literature Review and Propositions Development While economies across the globe are experiencing smaller growth than usual, it is also a good time for entrepreneurs to move out into the same markets in order to diversify revenue bases, rather than relying on just one country. With the ability to create stores online, along with shopping carts and reliably safe payment infrastructures, the ability to sell any product anywhere in the world, is open to everyone. Some companies, when they are large enough, can have distribution centres all over the world that will send out product to anyone who buys online (Chen 2011). With less jobs available, the need to create one becomes more important for those looking for ways to sustain themselves over the long haul. Thus, in dark economic times, entrepreneurship has become a bright light for many. This also includes family-structured businesses which traditionally, might have seen younger family members moving away during or after the college years, trying to make it on their own. Instead, many of these young people are now returning and putting what they learned into the family business, helping to move it forward so that it becomes part of the family’s survival plan for the future. (1) Entrepreneurial Orientation When deciding to move a family-based business into the global market, there has to be a research and analysis period on where the business is being taken to before that move is made. If a business in India, wishes to open a branch of the business in the United States, aside from dealing with national and international regulations, the American culture has to be understood as well (Chen 2011). This includes how to market appropriately according to the standards by which Americans would receive the marketing or advertising piece. However, that same piece of advertising or marketing would not work in India because of cultural perceptions. Just about every company will have this same issue to work through when moving into an international market. The other side of moving out into the unknown is that communications must be constant, particularly in the beginning of any venture’s unveiling in the new area of operation. This is where the family-based business will gain over other businesses because the family infrastructure allows for constant and rapid communication, particularly when the CEOs and the managers are family members (Chen 2011). As profit for the family through the business, is generally the goal for all family-based businesses, this is helpful not only for the business itself, but for the global market as well. The important point is that there will be focused leadership because it is a family and every member of that family is focused on the group’s success. It is not an individual act but a common group act (Chen 2011). In this respect, it is also easier for the connected group to take risks as there are more people willing to help with the problems that may occur. In other companies that are not family-based, the willingness to solve problems may not be so evident because the workers do not have a personal stake in solving any one particular problem and it is viewed as part of the working day. In the family-oriented structures, family members may continue working on the problem around the clock until the problem is fixed. It is an entirely different outlook on how the job and problems are viewed (Chen 2011). This is assuming that leadership characteristics and traits are focused on the job at hand and the people involved; that there are free-flowing lines of communication; and that command is not so centralized that the majority of decisions cannot be made without input from the top leader. (2) Entrepreneurial Orientation and Family Firms Performance How a family-based company performs in the international arena, depends first on the leadership and planning capabilities and, second, on the product itself in how it translates across borders (Graves & Thomas 2006). As is shown by Graves and Thomas (2006) in their research studies over a number of years, it is not so much that it is a family structure, but that the skills and efficiencies of family-oriented businesses are at the same or higher level as any other company when internationalization takes place. Indeed, if the appropriate managerial capabilities are not in place at the beginning, then family-oriented businesses will fail just as other non-family-oriented businesses do (Graves & Thomas 2006). Ideally, the communications process would be the one area where family-oriented companies succeed better because of the ability to bypass formalities and get to the point. Another point of potential failure is if there is a lack of resources within the family infrastructure of the business, whereby tapping outside sources, provides the needed financial funding to conduct the expansion into internationalization (Holt 2012). Therefore, in some circumstances, outside resources in a number of areas may need to be accessed in order to achieve success, such as taking care of regulatory problems by meeting the right contacts, finding expeditors who can get the job faster than the previous one hired, and working with specific marketing and advertising people or groups in each country, wherever there is a rollout of the company’s product or service (Holt 2012). In such cases, family-oriented management must be open to outside influences who can give the company what it needs to be successful (Present at end of lit review) Proposition 1: Entrepreneurial Orientation is positively related to the family firm performance. (3) Entrepreneurial Orientation Internationalisation of Family Firms Proposition 2: Entrepreneurial Orientation is positively related to the internationalisation of family firms. In the study by Chen (2011), the empirical results showed that family-oriented businesses were more likely to move into internationalization than those that were not family-based. This is particularly true of Asian-based family-oriented businesses. Those businesses with a higher family ownership are the most likely to move into the global market, indicating that the family infrastructure provided aspects of consolidation, allowing them to take risks in such a profitable venture as internationalization (Chen 2011). (4) Generational Involvement and Ownership in Family Firms After elaborating the literature and argument, the following proposition emerges: Proposition 3: Generational Involvement is related to the structure of ownership in family firms. (1) Generational Involvement and Entrepreneurial Orientation in Family Firm’s Performance After elaborating the literature and argument, the following proposition emerges: Proposition 4: Generational Involvement moderates the relationship between Entrepreneurial Orientation and Performance in family firms. (2) Generational Involvement and Entrepreneurial Orientation in Internationalisation of Family Firms After elaborating the literature and argument, the following proposition emerges: Proposition 5: Generational Involvement moderates the relationship between Entrepreneurial Orientation and internationalisation of family firms. a. Discussion and Conclusion (Must more than 2pages, or at least 500 words) b. References References Arregle, J-L., Naldi, L., Nordqvist, M. & Hitt, M.A. (2012). Internationalization of Family-Controlled Firms: A Study of the Effects of External Involvement in Governance. Entrepreneurship (ETP): Theory & Practice, (November), 1115-1143. Basco, R. (2013). 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