The Family Business Field

1. The Family Business Field Dr. Jon Martínez Echezárraga ESE – ESCUELA DE NEGOCIOS UNIVERSIDAD DE LOS ANDES

2. Agenda • Introduction to the field • Research opportunities • Main topics • Institutions and Conferences • Main sources of information

3. Agenda • Introduction to the field • Research opportunities • Main topics • Institutions and Conferences • Main sources of information

4. What are Family Firms? They are difficult to define, but in general they are companies with three characteristics: • Their ownership is controlled by a family • Some family members run the business, as executives or Board members • They want to perpetuate the founder´s legacy The more these characteristics are present in a firm, the more “familiar” is the company .

5. Importance of Family Firms All over the world, the family firm is the predominant form of business organization: Country Family Firms • United States 96 % • Switzerland 88 % • Italy 99 % • Great Britain 76 %* • Spain 71 %* • Portugal 70 %* • Chile 65 %* ________________ * Firms from a certain size up.

6. Importance of Family Firms Family firms are the backbone of many economies: In most countries they represent: • 45 a 70% of GDP • 45 a 70% of Employment

7. “Life Expectancy” of Family Firms Statistics indicate a low expectancy of life for family companies: In the U.S.: • 40% dissapear during the first 5 years • 66% of the rest go through the second generation • but only 12% survive the 3rd. generation In the U.K.: • 24% survive the second generation • 14% last longer than the third generation In Canadá: • 90% are born as family owned • 30% go through the second generation • 10% go further

8. The Three Circles Model Family Firms are composed of three sub-systems: OWNERSHIP Partners or Shareholders Family Members Executives and employees FAMILY COMPANY Source: R. Tagiuri and J. Davis

9. Stages in Family Business Development Cousin Consortium Sibling Partnership Owner-Manager Source: J. Ward

10. Agenda • Introduction to the field • Research opportunities • Main topics • Institutions and Conferences • Main sources of information

11. Research Opportunities • The field is relatively new (less than 20 years) • There is more “folklore” than rigor • However, recent work is becoming increasingly rigorous • There are many interesting topics

12. Main Topics 1. Family businesses vs. business families 2. Succession and retirement 3. Developing successors and the next generation 4. Strategic management and planning 5. Financial dilemmas: balancing growth, control and liquidity 6. Ownership and wealth issues 7. “Professionalizing”, change and non-family managers 8. Corporate Governance: Board of Directors and Shareholders Assembly

13. Main Topics (Cont.) 9. Family Governance: Family Council, Protocol, and Family Meetings 10. Family dynamics, relations and conflict management 11. Women in family firms 12. Legal and tax issues 13. Complex and multigenerational family firms 14. Culture, values and ethnicity

14. Institutions and Conferences • The Family Firm Institute (USA) • Based in the U.S. • For academics, consultants and professionals • One big annual conference in the U.S. (Sept.-Oct.) • The Family Business Network • Based in Europe (Lausanne) • For business families • One big world conference in a European city (Sept.-Oct.) • It has a previous academic conference • IFERA • For European academics and researchers • One conference in Europe (March-April)

15. Main Sources of Information • Books • “Family Business Sourcebook” (3 editions), by Craig Aronoff, Joseph Astrachan and John Ward • Journals • Family Business Review (Journal of the Family Firm Institute, FFI) See specially: Handbook of Family Business Research, volume VII, number 2, summer 1994 • Magazines • Family Business Magazine (U.S) • Families in Business (Europe, in association with the Family Business Network)