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Entrepreneurship and family business: exploring the

connections
Autores: W. Gibb Dyer, Jr. and Wendy Handler
Data: Fall 1994
De: Entrepreneurship: Theory and Practice(Vol. 19, Issue 1)
Editora: Sage Publications, Inc.
Tipo de documento: Article
Extensão: 5.675 palavras

Resumo:
This article explores how the family influences an entrepreneur's career. There are various points in time where family and
entrepreneurial dynamics intersect. These include: (1) early experiences in the entrepreneur's family of origin; (2) family involvement
and suport of early start-up activities; (3) employment of family members in the new venture; and (4) involvement of family members
in ownership and management succession. The article explores each of these four areas and suggests research questions that need
to be explored to develop a better understanding of the relationship between entrepreneurs and their families. (Reprinted by
permission of the publisher.)

Texto completo:
From the early writings of Joseph Schumpeter until the present day, much of the research on entrepreneurship has focused on
answering two questions: Who is an entrepreneur? and What does an entrepreneur need to do to start a successful business? Little
theorizing and research has been conducted to explore what happens to entrepreneurs after they build a successful enterprise.
Indeed, the assumption seems to be that once a new enterprise is viable the entrepreneur's subsequent career path ceases to be of
interest since it may not focus on traditional entrepreneurial activities.

Family business researchers, on the other hand, have largely been interested in what happens to entrepreneurs near the end of their
working lives. The problem of succession - transferring leadership and ownership to the next generation of family members - has
captivated most of the research interest. The reason for such interest can be attributed to the fact that succession is indeed a very
troublesome problem for entrepreneurs, and there are numerous, high-profile cases such as the Ford and DuPont families where the
succession problem deeply affected the business and the family. Moreover, because of the difficulty in resolving the succession
dilemma, founders have been more willing to ask for outside help in the form of either research or consulting on the succession
question. Thus, entry into the world of family business has often occurred as the entrepreneur contemplates retirement.

The result of what could be characterized as two parallel streams of theory and practice is a lack of integrated theory that would help
us to better understand the complex and changing relationships between entrepreneurs and their families over time. In this article we
will attempt to tie these two streams of research together to show how entrepreneurs and their families are inextricably linked
together and how we might develop theory and research to further explore these linkages.

INTERSECTIONS BETWEEN ENTREPRENEURSHIP AND FAMILY BUSINESS

If we take the perspective that we should study the dynamics of an entrepreneur's career from entry to exit, then there are several
points along the career path where the entrepreneur's family membership and family relationships can affect the course of the career
(Dyer, 1992). We have identified four "career nexuses" that reflect points in time where family and entrepreneurial dynamics intersect.
These are:

(1) Early experiences in the entrepreneur's family of origin; (2) Family involvement in the entrepreneur's start-up activities; (3)
Employment of family members in the entrepreneurial firm; and (4) The involvement of family members in ownership and
management succession.

We will now discuss each of these in turn.

The Entrepreneur's Family of Origin

Some of the seminal work on the entrepreneurial personality has indicated the important role that the entrepreneur's family plays in
the development of certain entrepreneurial personality characteristics. Collins and Moore (1964) noted that the childhoods of the
entrepreneurs they studied were filled with poverty, insecurity, and neglect. Often the father was absent from the home. Kets de Vries
interprets such data from a psychoanalytic perspective and suggests that such a childhood creates an individual who is "often
inconsistent and confused about his motives, desires, and wishes, a person under a lot of stress who often upsets us by his
seemingly 'irrational,' impulsive activities" (Kets de Vries, 1977, p. 35, 36). Such a childhood creates needs for control in
entrepreneurs and a desire to create and control their own businesses in order to overcome what might be considered a hostile and
threatening world. This personality type also affects the way in which the entrepreneurial firm functions, influencing decision making,
employee reactions, and succession planning. Bird (1989) presents a summary of the dynamics of this psychoanalytic perspective in
Table 1.

Besides this psychodynamic view, there are several other perspectives regarding the influence of the family on entrepreneurial
behavior. McClelland (1965), for example, has described how parents who provide a nurturing, supportive, yet challenging
environment in the home develop children who have high need for achievement. McClelland has long argued that such a need is
essential for entrepreneurial activity to take place. Other writers, such as Roberts and Wainer (1968), Ronstadt (1984), and Dyer
(1992), have also indicated that entrepreneurs often come from homes where the father or mother was self-employed. Thus, parental
role models seem to encourage entrepreneurial behavior. Finally, Dalton and Holdaway (1989) in their study of entrepreneurial
careers, noted that many of the entrepreneurs they interviewed reported that they had significant family responsibilities at a young
age and were given opportunities by the family to engage in entrepreneurial activities. In some cases this was out of necessity to help
the family financially; in other cases the parents were interested in providing opportunities to help their children develop their skills
and learn to accept responsibility. Such parenting provides these children with the skills, values, and confidence they need to embark
on an entrepreneurial career.

Family Involvement in Start-Up Activities

The relationship of the entrepreneur's family to the new enterprise can be a significant factor determining the business's success or
failure. The initial capital to fund the same venture generally comes from personal and family assets. Thus, the family's willingness to
support the venture financially is a critical variable. In some instances, an entrepreneur's family or extended family not only provides
needed capital, but provides other resources such as access to markets, sources of supply, technology, and even new ideas. Dyer
(1992) notes that some potential entrepreneurs were discouraged from starting their own businesses because their families were not
supportive. The family wanted a stable income that would come with a more traditional occupation. The financial uncertainty of an
entrepreneurial career was perceived as too big a burden for the family to bear.

A family member may also become involved at the start-up (or buyout) as a partner or member of an entrepreneurial team. "The
advantages are that (1) initial costs and early losses may be more easily shared, (2) later success benefits the family as a whole, (3)
the family can be together, and (4) trust" (Handler, 1990b, p. 272). "Copreneurs" or entrepreneurial couples involved in business
together is one type of family member involvement at the start-up. The experience of working together, and the dividing of
responsibilities and decision making, is profiled in Kathy Marshack's paper in this issue.

Managing the obligations of both work and family has also been described as a source of conflict for the entrepreneur. Dyer (1992), in
his study of over one hundred entrepreneurs, describes several entrepreneurs facing conflicts between work and family. Dyer quotes
one entrepreneur saying: "My wife is very supportive but occasionally has to demand my attention. She gets fed up with me being
gone all night and stuff, especially this spring, when I was traveling so much. It was very hard on her. It has been stressful in a lot of
ways" (Dyer, 1992, p. 77). Marital conflict, neglect of children, and divorce can all be outcomes if work-family issues are not managed
well by the entrepreneur. Goffee and Scase's (1985) study of entrepreneurial women illustrated how their orientation to work and
family had a profound impact on how they manage their careers. Conventional women entrepreneurs are highly committed to
succeed as a wife and mother as well as be successful in business. Innovative women entrepreneurs are more interested in
developing a successful business than in filling traditional sex roles. Domestic women entrepreneurs give high priority to their
families, while giving the business less attention. Thus they prefer home-based businesses or other work that will not interfere with
their family obligations. Radical women entrepreneurs generally start their businesses to champion women's issues; however such
women do not adhere to traditional business values. These entrepreneurial types as described by Goffee and Scase, point out that
the entrepreneur's values regarding the family dramatically shape the direction of the career and provide the structure for careers of
entrepreneurial women. Through additional research we might discover that certain male entrepreneurs also organize their
businesses to meet the demands of both work and family.

Dyer (1992) has also noted that certain demands of an entrepreneurial career may mitigate against creating a successful family.
Research on the dynamics of 3,000 families conducted by Stinnett and DeFrain (1985) summarize five core dimensions of "strong
families":

(1) High commitment to the family;

(2) Appreciation expressed within the family;

(3) Effective communication;

(4) A sense of spiritual wellness - a commitment within the family to achieving some higher purpose; and

(5) The ability to cope with crises.

Dyer notes that because of the financial and time pressures related to starting a new enterprise, entrepreneurs may have difficulty
developing such attributes in their families. Spouses and children may see the business and financial gain as more important than the
family, and that the demands of the business leave the entrepreneur with little time to communicate with family members or work
through family problems.

Employing Family Members

One of the most important decisions that an entrepreneur makes concerns whether or not to employ family members. Such a
decision can have a tremendous impact on the entrepreneur, the business, and the family. In some cases, when a husband and wife
or other family members decide to create a business together, family and entrepreneurial dynamics are brought into play even before
the business is founded.

Historically, management theorists have deemed family involvement in an enterprise as being antithetical to effective business
practices, leading to corruption and nonrational behavior (Perrow, 1972; Dyer 1994). However, little empirical work has actually been
done to demonstrate a connection between family involvement and performance. One might argue that family firms may have a
competitive advantage, since family members would likely trust one another (thus reducing monitoring costs). Davis (1982) also
suggested that family businesses have high intentionality in terms of their level of perseverance and commitment to see the business
succeed. Regardless of whether such family involvement leads to higher or lower performance, entrepreneurs have generally chosen
to employ family members. Somewhere between 80% and 90% of all the firms in the world today could be classified as family firms
(Ward, 1987).

The problems inherent in working with family members are a function of the intersection of two systems, the family and the firm.
These systems are typically based on different, and often incompatible, values. Some of these differences are noted in Table 2. As
the table suggests, there are several areas where conflicts are likely to arise. Goals in a business generally relate to revenues and
profits while the family's goals are to support and develop family members. Relationships are deeply personal in a family, but are of
secondary importance in a business and tend to be impersonal in nature. Businesses are run with formal rules and procedures for
evaluation, while a family functions more informally and rewards family members for merely being a member of the family, not for
specific deeds. The entrepreneur who employs family members is faced with the problem of how to integrate or separate these two
systems.

Much of the research in the family business arena has focused on how to manage the conflicts inherent in a family business (e.g.
Lane, 1989; Lansberg, 1988; Prince, 1990; Rosenblatt, de Mik, Anderson, & Johnson, 1985; Kaye, 1991; Swartz, 1989; Ward, 1987;
Dyer, 1989). Such work has focused on issues surrounding the selection, socialization, training, rewards, and promotion of family
members as well as the impact of family involvement on nonfamily employees. Other work has emphasized the impact of family
involvement on the culture of the organization (Miller & Rice, 1967; Dyer, 1986; McCollom, 1988; Astrachan, 1988); the firm's strategy
(Ward, 1987; Daily & Dollinger, 1992; Lyman, 1991), and organizational structure (Barry, 1975; Kahn & Henderson, 1992). Still other
studies have attempted to understand family influence on the firm by conducting cross-cultural studies (Donckels & Frohlich, 1991).

The Family and Succession Planning

The problem of both ownership and management succession has largely been the domain of research on family-owned businesses,
for family dynamics come to the forefront during succession. Several streams of theory and research have emerged regarding
succession.

The role of founders and their resistance to plan for succession is one stream of theory and research. Sonnenfeld (1988) found that
there are various types of retirement styles of founders or CEOs. "Monarchs" do not leave until they are forced out or die. "Generals"
also leave office only when forced out, but plan a return to power often to rescue the company from an inadequate successor.
"Ambassadors" leave willingly and become advisors to the firm. "Governors" rule for a term and then pursue other ventures.

Furthermore, writings by Levinson (1971), Barnes and Hershon (1976), Lansberg (1988), Handler and Kram (1988), and Dyer (1992)
have discussed the psychosocial dynamics that make it difficult for the entrepreneur to contemplate transferring ownership and
management to the next generation. Succession planning is in direct conflict with the entrepreneur's needs for control, power, and
meaning. Thus, one study of Harvard-educated entrepreneurs noted that 48.9% planned to "never" retire, while another 23.3% didn't
know when they would retire or were planning to retire sometime after age sixty-five (Duffy & Stevenson, 1984). Retirement is clearly
not something that is eagerly anticipated by the vast majority of entrepreneurs.

Lansberg (1988) suggests that the family, managers, suppliers, and customers may play a significant role in colluding against
succession planning. The founder's family members may not want to accept the founder's mortality and may see the founder as the
only person able to manage family conflicts and keep the family together. Thus, they are reluctant to see the founder move out of a
leadership role. The family may also be unwilling to upset the founder with discussions regarding retirement, for family members can
be seen as being disloyal by suggesting retirement. Suppliers and customers who are used to dealing with the founder may resist
forming relationships with the next-generation family members who are gaining in power. Thus, it is not at all surprising to learn that
few entrepreneurs proactively engage in succession planning, often to the detriment of the family and the business (Trow, 1961;
Dyer, 1986, 1992).

The role of the next generation and their experience of succession is another important stream of research. Handler (1992) found that
the degree of mutual respect and understanding between next-generation successor and founder is a key factor affecting succession.
Other critical factors were the degree to which next-generation career interests, psychosocial needs, and life-style needs were met
through the firm. Also, the degree of sibling accommodation rather than rivalry and the family's commitment to perpetuate the firm
were important to the succession process. This study, as well as others by Davis (1982), Patrick (1985), and Iannarelli (1992),
reinforces the importance of not just looking at succession from the perspective of the entrepreneur, but instead recognizing his/her
relationship to the heir. Considering the heir's perspective and including him/her in the planning process is critical to effective
succession management.

The process of succession and the changing power relationships of the entrepreneur to the firm and the heir, is another focus of the
succession literature. There is general agreement that succession is more a process than an event (Churchill & Hatten, 1987;
Handler, 1990a; Vancil, 1987). Churchill and Hatten distinguish four stages: (1) a stage of owner-management, where the owner is
the only member of the family directly involved in the business; (2) a training and development stage, where the offspring learns the
business; (3) a partnership stage between founder and successor; and (4) a power transfer stage, where responsibilities shift to the
successor. Handler (1990a) found that succession represents a process of mutual role adjustment between founder and next-
generation family member(s) . Her qualitative interviews with 32 individuals revealed a parallel process of next-generation family
member gaining increasing involvement while the founder's role lessens in the firm. This succession dance involves the founder
moving from sole operator (central and often sole family member in the organization) to monarch (having preeminent power over
others), to overseer/delegator, and finally to consultant who is disengaged or retired from the organization. At the same time, the
next-generation family member moves from having "no role" or an undefined role, to helper, manager, and finally to leader and chief
decision maker. Unfortunately, some founders never move beyond the monarch stage, insisting on maintaining control. Also, some
heirs never progress beyond helper or manager because of inability of their parent(s) to authorize their increased power.

The literature suggests that once the succession process begins - either intentionally on the part of the founder or unintentionally in
the event of the founder's death or disability - several dynamics related to the family occur. First, there is often a struggle within the
family for control of ownership of the enterprise. This is generally the result of family members having very different needs and goals
for the business (Beckhard & Dyer, 1983). Moreover, the founder may leave assets to the family in such a way as to make
governance of the firm virtually impossible, destroying family harmony, and undermining the motivation of family members (Dyer,
1992). Thus decisions regarding how to transfer ownership to family members, whether to sell the business to outsiders, or to sell the
business to company employees through an employee stock ownership program (ESOP) or some other mechanism, are all questions
that arise during the twilight of the entrepreneur's career. Tax and estate planning become critical in the development of a plan to
transfer ownership. Estimating the firm's value, recapitalizing the business, developing buy-sell agreements, and creating
mechanisms to ensure the financial well-being of the founder in retirement are important activities that often accompany the
succession planning.

If the entrepreneur decides to turn over management of the enterprise to a family member or a nonfamily employee, an additional set
of questions arises such as:

(1) How will the successor be selected?

(2) How will he/she be trained?

(3) Will the next generation of leaders be able to foster the entrepreneurial spirit of the founder or offer new ideas to revitalize the
business as leadership moves into the next generation?

(4) What should happen to family members not selected for future leadership?

(5) How will nonfamily employees be rewarded and motivated if they have no opportunities to reach top management positions?

Answers to such questions have been discussed by Handler and Kram (1988), Poza (1989), Dyer (1986, 1992), and others. As noted
previously, the kinds of relationships between founders and successors have been reported as being the key to a successful
transition, for there are significant conflicts inherent in such a relationship (Levinson, 1971; Barnes & Hershon, 1976; Davis & Tagiuri,
1989).

The nature of family relationships during the transition period also has been shown to he related to a successful succession process
(Dyer, 1986). Families that have the following characteristics appear to manage succession most effectively: (1) consistent views
regarding what is equitable; (2) well-developed contingency plans; (3) superordinate goals; (4) the ability to manage conflict
effectively; and (5) a high level of trust. Such conditions not only serve to help the family remain healthy during the succession period,
they also are related to helping the firm remain stable during the transition period.

In summary, the role of the family becomes very significant in the life of the entrepreneur and the business once the process of
succession begins. Much of the research indicates that entrepreneurs manage this process quite badly, to the detriment of
themselves, their businesses, and their families. Moreover, managing such a transition is highly complex since it involves family
dynamics, nonfamily employees, business dynamics, and technical legal and tax issues.

IMPLICATIONS FOR THEORY AND PRACTICE

The preceding discussion has presented a brief overview of the previous work that has been done to examine the relationship
between entrepreneurs and their families. There are still many gaps to fill in and questions to answer. The articles presented in this
special issue of Entrepreneurship Theory and Practice have helped to raise important issues related to theory, research, teaching,
and practice that will need to be addressed as we try to move the field forward. To conclude this article, we would like to summarize
some of the areas where more research and better practice are needed to understand the interactions between entrepreneurs and
their families, and to help entrepreneurs succeed in managing the dynamics of these two worlds.
Understanding the Role of the Family in Developing Entrepreneurs

We have noted the previous research that has described the role that the family has played in encouraging people to start
entrepreneurial careers. Whether one adheres to the psychoanalytic framework, which emphasizes the "neurotic" aspects of
entrepreneurship, or accepts the views of McClelland, which emphasize how nurturing, supportive parents can stimulate
entrepreneurial desires in their children, we need to move beyond such frameworks to develop a more comprehensive theory of how
child-rearing practices encourage or discourage entrepreneurial behavior. It is clear that certain ethnic groups such as Asian
Americans have been far more successful in developing entrepreneurs than Hispanics or African Americans. While there are certainly
explanations for these differences that go beyond child-rearing practices, we might learn much about what kinds of socialization
experiences within the family lead to entrepreneurial behavior. Such information could prove valuable to entrepreneurs who want to
turn over the business to their children and want their children to carry on the entrepreneurial tradition that they started. Such
research might also help us develop curriculum and training that might prove more useful in inculcating entrepreneurial values in our
students than current approaches to teaching entrepreneurship.

Balancing the Demands of Work and Family

An entrepreneurial career is extremely demanding, fraught with long hours and high stress. Balancing the needs of both the family
and the business is not easy for the entrepreneur. Thus, more research needs to be done to understand how entrepreneurs and their
families adjust to an entrepreneurial lifestyle. Marshack's study in this special issue helps to illuminate some of those dynamics as
she compares copreneurial couples with dual-career couples. And, as Goffee and Scase (1985) have shown, women entrepreneurs
may find their careers as a reflection of their values regarding the family. Indeed, their orientation toward their families in many ways
is the mechanism that they use to cope with the needs of work and family. Much more research needs to be done to articulate the
various approaches to coping with the demands of work and family and to understand how the work-family dilemma is managed by
entrepreneurs.

The family can play a supportive role for the entrepreneur by providing money, contacts, labor, and other resources. The family can
also be supportive of entrepreneurial endeavors and provide a safe haven from the vicissitudes of starting a new business. On the
other hand, the family can also prove to be an obstacle to starting a new business, by providing few material resources and little or no
social support. While much of the research on start-ups has suggested that resources such as capital, raw materials, and labor are
critical for the success of a new enterprise, the role of the family as one of the "success factors" needs to be studied more
systematically. We might find that the role of the family is a much more important determinant in business success than many of the
other, more traditional factors.

Business and Family Dynamics

As has been noted, the assumptions underpinning business and family systems are often antithetical, creating complex dilemmas for
the entrepreneur. However, as we have also noted, the commitment of the family to the success of the business can also be a very
positive force in starting and growing a business. Thus, what is needed are more comparative studies to better understand the
differences between family and nonfamily enterprises. While a few studies have been conducted (e.g. Daily & Dollinger, 1992), we
know little about the relationship between the performance of family versus non-family firms. We know even less about the
differences between different types of family firms. For example, we could ask: do businesses that are family owned and family
managed perform better than businesses that are family owned and professionally managed? To understand why there might be
differences in performance in these various types of family firms, we might compare how they select and train family and nonfamily
employees, develop reward systems, and do strategic planning. Founder approaches to mediating the conflicts of family and firm also
need additional research. We have just scratched the surface in many of these areas. We need more comparative, empirical studies
to develop better theory, and we must also do more ethnographic work to better understand how entrepreneurs view their world and
attempt to cope with it.

Entrepreneurial Succession

While we do know that succession is a critical problem facing entrepreneurs, there is still little systemic research to illuminate the
dynamics of the succession process and the entrepreneur's role in providing for succession. Much of the entrepreneurship research
to date has focused on the business start-up and neglected the important issues that exist later in the life of a business venture, when
the entrepreneur faces retirement and succession. While certain work has helped to provide insight into the dynamics of the
succession process, we need more comprehensive models to show how various dynamics of succession (e.g. resistance to planning,
founder-successor relationships, successor training) relate to one another. In-depth, clinical studies that track the dynamics of
succession over time are likely to yield the greatest insights (Schein, 1987). This may prove difficult to do, but to understand such a
complex, dynamic process like succession, which may take place over several years, requires longitudinal, panel studies like
Schein's (1978) to understand the changes in the founder, the family, and the firm that occur over time. While such studies would
allow us to do some comparisons, one must keep in mind the fact that the nature of a given entrepreneur, the firm, and the family are
likely to be rather unique and idiosyncratic. This suggests the need for in-depth case studies to generate theories that are well
grounded and take into account the unique characteristics of succession processes (Glaser & Strauss, 1967). Such in-depth studies
will likely produce surprises that can help to deepen our understanding of the succession process, and hopefully provide better
guidance for entrepreneurs contemplating succession.

Research that is designed to address the issues we have just mentioned will not be easy. As Brockhaus has pointed out in this issue,
there are many pitfalls to be avoided. However, when we study the dynamics of the entrepreneurial career over time, the importance
of the role of the family in shaping that career becomes apparent. Rather than ignoring the connection between the entrepreneur and
the family, future research and practice should marry the interests of the fields of entrepreneurship and family business to provide
more robust theories, better research, and practical solutions to the dilemmas facing entrepreneurs. Hopefully, this special issue will
serve to encourage those in both fields to make those connections.

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RELATED ARTICLE: Table 1

Psychoanalytic Model of Entrepreneurship

Social, cultural, historic, economic context

Society that supports the development of authoritarian personality Family poverty

AND

Childhood family dynamics

Father's:
absence remoteness villainy role model

Mother's:

dominance nurturance

RESULT IN

Disrupted, deprived childhood

Conflicts in identification (love-hate)

Splitting the good and bad (either-or thinking, closed-mindedness)

Persistent feelings of dissatisfaction, rejection, powerlessness, low self-esteem, distrust

THAT DEVELOP INTO

Young adulthood characterized by

Disorientation, goal-lessness, testing Non-conformity, rebelliousness Enjoying setbacks (martyrdom, masochism) High need for
control Suspicious thinking Fear of being victimized Scanning the environment

THROUGH A SERIES OF CONSCIOUS CHOICES A PERSON ENDS UP AS AN ENTREPRENEUR

Adulthood creation of an organization that is

Authoritarian

Centralized

Lacking trust and delegation

Lacking planning, impulsive

A work environment of high dependency and power that is a function of centrality or closeness to the entrepreneur

Unresolved regarding succession: Rivalry with sons Coping with loss or losing control

From Bird, 1989.

W. Gibb Dyer, Jr. is Professor and Chair of the Department of Organizational Behavior, Brigham Young University.

Wendy C. Handler, D.B.A., is Assistant Professor of Management at Babson College; her expertise is family business.

Copyright: COPYRIGHT 1994 Sage Publications, Inc.

http://www.sagepub-com.ez373.periodicos.capes.gov.br
Citação da fonte (MLA 8)
Dyer, W. Gibb, Jr., and Wendy Handler. "Entrepreneurship and family business: exploring the connections." Entrepreneurship:
Theory and Practice, vol. 19, no. 1, Fall 1994, p. 71+. Gale Academic OneFile,
link.gale.com/apps/doc/A17042910/AONE?u=capes&sid=AONE&xid=b7318126. Accessed 2 Mar. 2021.
Número do documento Gale: GALE|A17042910