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FAMILY BUSINESSES- INTRODUCTION AND THE ISRAELI POINT OF VIEWIDC, 16.9.08
Nava Michael-TsabariHaifa University [email protected]
1Nava Michael-Tsabari, Haifa University, Israel
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Structure of presentation
• Definitions• Some facts & figures• Family system &/vs. business system• 2 basic models• Israel – facts & figures• Some thoughts
Nava Michael-Tsabari, Haifa University, Israel
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Family businesses in the worldCompanyFamily
nameEstablis
hedTurnover
(thousand $)EmployeesGeneration
Wal-MartWalton1962244.51,400,0002
FordFord1903163.4350,3214
MotorolaGalvin192826.697,0003
ViacomRedstone195424.6120,6302
The New York TimesSulzberger1851312,1504
GAPFisher196914.4169,0002
WrigleyWrigley18922.711,2504
MarriottMarriott19278.4144,0002
Johnson&JohnsonJohnson188659,5005
Levi StraussHass18534.112,4005
SamsungLee1938142229,0002
FIATAnali189961186,4923
Peugeot CitroenPeugeot188257198,600
C&ABrenninkmeijer18414.830,0006
HeinekenHeineken186410.757,5574
BarillaBarilla18773.77,300
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:Some of the oldest family businesses
CompanyFamilyEstablished
YearsCountryGeneration
KikkomanMogo & Takanashi
1613395Japan17
ZildjanZildjan1623385USA15
BirkenstockBirkenstock
1774234Germany
EfratTaperberg
1870138Israel6
DuPontDu Pont1802206USA
Lombard Odier Darier Hentsch
Lombard & Odier
1796212Switzerland
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?
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Defining a family business
• Ownership
• Management
• Multi generations
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One definition for example:
1. Intention to maintain family control2. Unique, inseparable, and synergetic
resources and capabilities arising from family involvement
3. A vision set by the family and intended for trans-generational pursuance
4. Pursuance of such a vision
(Chrisman, Chua & Sharma, 2003)
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Methodological problems:
• 28 studies with 28 different definitions for a family business
(Miller, Le Breton-Miller, Lester, & Cannella Jr., in Press)
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Maybe it is a continuous variable:
The F-PEC scale:
• Power• Experience• Culture
(Astrachan, Klein & Smyrnios, 2002)
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Family Businesses - facts & figures
• About 90% of all small businesses
• In Israel – 392,000 active companies 375,000 (96%) small or medium
companies
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Family businesses are prevalent around the world
96% USA
75% Australia
90% Brazil
84% Germany75%
Spain
85% Italy
Source: ifera 2003
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Not only small businesses:
• 30-40% of big companies
• 37% of S&P 500 in the US
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Family businesses as an academic field
• Over 90 universities in the US and Europe with centers for research and study
• The Family Business Review celebrates 20 years
• IFERA – International Family Enterprise Research Academy – since 2000
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Family businesses as an academic field• Part of entrepreneurship?
• Bias of the business focus: a family business vs. a business family
• Interdisciplinary: management, finance, strategy, entrepreneurship, law, psychology, family studies, sociology, social psychology, organizational behavior, etc.
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Current debate in the literature
• Several recent studies find that family businesses financially outperform non-family businesses, especially the 1st generation
(e.g. Anderson & Reeb, 2003, Villalonga & Amit, 2006)
• Mixed results – because of different definitions?
because of different types? Nava Michael-Tsabari, Haifa University, Israel
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“Types” of family businesses – an empirical study
TypeDescription%
Average “stereotypical” family firm
Family ownership and control, focus on family objectives and multi-generations
60.7
Professional family firmOpen family firmCousin consortium family firm
More non-family management and directors, diluted ownership and control, importance of other objectives
39.3
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Westhead & Howorth, 2007
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More questions:
• What makes the family business unique?
• What gives the family business a competitive advantage?
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A family business= family+business
In a family
GoalsSupport, continuity, wellbeing
BelongingBirthright, everyone, forever
ValuesLove, sharing, fairness
RewardsCaring, love, support
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A family business= family+business
In a business
GoalsMaximize profits
BelongingHired employees
ValuesHard work, professionalism, persistence
RewardsAccording to performance, economic
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The dualistic approach
The family system The business system
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1. Business function
2. Business demands
3. Management of changes
1. Emotional content
2. Familial needs
3. Seeks stability
The two systems differ in goals, belonging, decision making, priorities, evaluation of performance, rewards and continuity(Carlock & Ward, 2001, Fleming, 2000, Kepner, 1983)
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Disadvantages of the dualistic approach
• Encouragement of extremity and opposition
• Stereotypical views – professional/emotional,
masculine/feminine
• Unclear boundariesNava Michael-Tsabari, Haifa University, Israel
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The unified systems approach• The family business: two powerful entities
that share the same enterprise (Denison et al., 2001)
• The business and the family are equal and overlapping systems that move simultaneously towards coexistence, success in one leads to success in the other, and problems or changes in one express in problems or changes in the other (Heck et al., 2006)
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The current view
• “Family firms exist because of the reciprocal economic and non-economic value created through the combination of family and business systems. In other words, the confluence of the two systems leads to hard-to-duplicate capabilities or “familiness” that make family business peculiarly suited to survive and grow” (Chrisman, Chua & Sharma, 2003)
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Different point of views
Unified Dualistic
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Current view of the overlap
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• Not only a possible source of conflict
• But a source of synergy that gives the family business a competitive advantage
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A cross cultural study (Birley, 2001)
• 16 different countries• Owner-managers• 47 statements about attitudes toward
the business and the family
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Results: 3 different clustersFamily Out (33.5%)Family In (28.3%)Family –Business
Jugglers (38.2%)
Do believe that:• Children should not be introduced to the business at an early age• Management successors should not be chosen from the family• The business is not stronger with family members involved• Children’s education should not be geared towards the business
Do believe that:• Children should be introduced to the business at an early age• Management successors should be chosen from the family• The business is stronger with family members involved• Children’s education should be geared towards the business• Children should receive shares in the business in equal parts
Are generally neutral about all these issues
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The first generation
Overlap of all functions:
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FamilyManagementOwnership
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The 3 circles model (Gersick et al., 1997)
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1
2 3
Family
Ownership
Business
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6
7
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Developmental stages - Lansberg (1999)
3rd generation
2nd generation
1st generation
only 1/3
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Controlling owner
Sibling partnership
Cousins consortium
only 1/3
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Succession is the big issue
• Most of the research is about succession• The family usually grows faster than the
business• Changes in both systems• Succession – a point in time or a long
process?
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Level of analysis
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Family business
Environment
Subsystem
Individual
Pieper & Klein, (2007)
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In Israel: More than 50% of the publicly held firms are family businesses
• A young country: most businesses are in the 1st – 2nd generation
• Publicly held companies - a study on 1994 data: 34% are family businesses and 18% more are sole owner companies (Lauterbach & Vaninsky, 1999)
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From the list of the 100 most successful publicly held companies 2007: (Globs)
GenerationFirms
1st generation entrepreneurs
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1st + 2nd 19
2nd 2
2nd + 3rd 4
Business partnerships21
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From the list of the 100 wealthiest people in Israel 2007 (Globs)37
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GenerationFirms
1st generation entrepreneurs
49
1st+ 2nd 19
2nd 22
2nd + 3rd 10
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The result:
• Many family businesses have changed ownership structure during the last years, and this trend should become even stronger in the near future
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Sales of family businesses in the :last 10 years, some examples
familyCompany namegenerationindustry
Reccanati familyIDB, Discount bank3rdHolding, banking
Moschevitz familyElite2ndfood
Dankner familyDankner Investments
2nd
Oron familyGali1stfootwear
Wertheimer familyIscar1st+ 2ndTooling
Isenberg familyIsrael Corp.2ndholding
Baranovitch familyConstruction2ndconstruction
PackerPacker Plada1ststeel
ProperOsem2ndfood
RabinovitchRabintex2ndArmy equip.Nava Michael-Tsabari, Haifa University, Israel
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Who remembers?
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The Milikovsky family
The Fromchenko & Moshevitz families
The Moler family
The Tavori family
The Lieber family
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Thoughts
• The Jewish point ?• The Israeli point ? Israel is more family oriented than west and
east Europe (Harpaz & Ben-Baruch, 2004):
- Higher birth rate - Lower divorce rate - Less extramarital children - More importance of traditional family
patternsNava Michael-Tsabari, Haifa University, Israel
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Thoughts
• Israel as part of the Middle East ?
• “The Middle East is synonymous to family business”
(Gupta et al., Culturally-Sensitive Models of Family Business in Middle East, 2008)
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More thoughts
• The collectivistic/culture point (Kibbutzim)?• The moral point ?• Israeli wealth more concentrated in 2006:
companies controlled by 19 families earned the equivalent of 88% of the country’s budget and 54% of the business-sector domestic product. Within the 19 families, 5 controlled 61% of all wealth, as opposed to 54% in 2005 (The Jerusalem post, 19.7.07)
Nava Michael-Tsabari, Haifa University, Israel
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Last thoughts
• What about “businessness” ?
• What is considered a “success” for a family business?
• Is it identical with the success of the business family?
• Who decides? Nava Michael-Tsabari, Haifa University, Israel
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Thank you
Nava Michael-Tsabari, Haifa University, Israel
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