The family business group phenomenon emergence and complexities

Editors
MaritaRautiainen,PeterRosa,TimoPihkala,MariaJoséParadaandAllanDiscuaCruz

TheFamilyBusinessGroupPhenomenon
EmergenceandComplexities


Editors
MaritaRautiainen
SchoolofEngineeringScienceLappeenrantaUniversityofTechnology,Lahti,Finland
PeterRosa
BusinessSchool,UniversityofEdinburgh,Edinburgh,UK
TimoPihkala
SchoolofEngineeringScienceLappeenrantaUniversityofTechnology,Lahti,Finland
MariaJoséParada
StrategyandGeneralManagementDepartment,ESADEBusinessSchool,Barcelona,Spain
AllanDiscuaCruz
DepartmentofEntrepreneurshipandStrategy,LancasterUniversityManagementSchool,
Lancaster,UK

ISBN978-3-319-98541-1 e-ISBN978-3-319-98542-8
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Acknowledgements
Thisbookwouldnothavebeenpossiblewithoutthefamilieswhoinvitedusintotheir
businesslives.Wehaveseenfamilybusinessesofallsizesfromallovertheworld.Weare
gratefultoallofthosefamilymemberswithwhomwehavehadthepleasuretoworkduring
thisandotherrelatedprojectsthathelpedustocompilethisbook.
Writingabookrequirestheworkoflargenumbersofpeople.Itisimportanttousas
editorsinthisdevelopingprofessionalfieldtoacknowledgetheinfluenceandcontributions
ofourcolleagues.Wewanttothankalltheauthorswhogavetheirvaluabledata,timeand
effortinwritingandfinishingdifferentchaptersofthisbook.
Duringtheyearsofresearch,therehasbeenfinancialsupportofseveralkinds.InFinland,
FoundationforEntrepreneurshipResearchandFoundationforEconomicEducationhave
supportedtheresearchofthistopicinseveralprojects,ashasGeorgeDavid’sEndowmentin
fundingactivitiesoftheEdinburghUniversityBusinessSchoolresearchinthisbook.Special
thankstotheDepartmentofEntrepreneurshipandStrategyatLancasterUniversity

ManagementSchoolforcontinuedsupport.WeareparticularlygratefultotheDepartmentof
StrategyandGeneralManagementatESADEandtheSTEPprojectinSpain.
ThePalgraveMacmillanpresshasoursincerethanksforhelpingusturnourresearchinto
apublication.


Contents
1Introduction:​PresentingtheCaseforStudyingtheEmergenceandDevelopmentof
FamilyBusinessGroups
PeterRosa,MaritaRautiainen,TimoPihkala,MariaJoséParadaandAllanDiscuaCruz
1.​1TheVisionandOrganizationoftheBook
References
PartI TheoreticalandMethodologicalReflections
2TheoreticalInsightsintotheNature,DiversityandPersistenceofBusinessGroups
PeterRosaandTimoPihkala
2.​1Introduction
2.​2TheEmergenceofBusinessGroupsandtheRoleofPortfolioEntrepreneurship​
2.​3Conclusion
References
3TheMethodologicalChallengesofResearchingFamily-OwnedBusinessGroups
PeterRosa,MaritaRautiainenandTimoPihkala
3.​1Introduction
3.​2MethodologicalChallenge1:​IdentifyingandRefiningKeyResearchQuestions
andTheories
3.​3MethodologicalChallenge2:​DefinitionalChallenges
3.​3.​1UnpackingtheDefinitionalComplexitiesofBusinessGroupsandFamily
BusinessGroups
3.​3.​2UnpackingtheComplexitiesofLegalEntitiesandAffiliates
3.​3.​3DefiningPortfolioEntrepreneurship​
3.​4MethodologicalChallenge3:​FamilyBusinessDatabasesAmenabletoRigorous

StatisticalAnalysisAreDifficulttoFindandAccess
3.​5MethodologicalChallenge4:​ThePhenomenonIsaDifficultProcesstoResearch
RigorouslyOverTime
3.​6MethodologicalChallenge5:​ResearchersofFamilyBusinessGroupsand
PortfoliosEncountertheChallengesofMapping,RecordingandAnalysing
Complexity
3.​6.​1Identifying,DescribingandMappingComplexFamilyBusinessGroups
3.​7Conclusion
References
PartII TheEmergenceofFamilyBusinessGroupsThroughPortfolioEntrepreneurship


4TheEmergenceofaFamilyBusinessGroup:​TheRoleofPortfolioEntrepreneurship​
MaritaRautiainenandTimoPihkala
4.​1Introduction
4.​2BusinessGroupEmergenceThroughPortfolioEntrepreneurship​:​ACaseStudy
4.​2.​1ThePortfolioEntrepreneur
4.​2.​2TheEntrepreneurialModelforDiversification
4.​2.​3TheEmergenceofaFamilyBusiness
4.​2.​4BalancingEntrepreneurship​andRetainingWealth
4.​3DiscussionoftheCaseStudy
4.​3.​1BuildingthePortfolio
4.​3.​2TheCharacteristicsofFamilyBusinessEntrepreneurship​andBusiness
Group
4.​3.​3TheComplexGroupStructure,OrganizedAccordingtotheFamilyMembers
4.​4Conclusion
References
5ManagingPortfolioEntrepreneurship​:​ACaseStudy
DonatoIacobucciandPeterRosa
5.​1Introduction

5.​2ResearchMethod
5.​3ThePiginiGroup:​HistoryOutline
5.​4NewVentureCreationandEntrepreneurialTeamFormation
5.​5TheDynamicsofEntrepreneurialTeamsinKnowledge-IntensiveBusinesses
5.​6Conclusions
References
6EntrepreneurialGrowthThroughPortfolioEntrepreneurship​:​TheEntrepreneurial
CareerLadder
PeterRosa
6.​1Introduction
6.​2LearningfromIndigenousEntrepreneurship​
6.​3EastAfricanIndigenousEntrepreneurship​Systems
6.​4ConceptualisingtheEntrepreneurialCareerLadder(ECL)
6.​5CaseStudiestoIllustratethe“LadderProcess”atWork
6.​5.​1CaseStudyOne:​MosestheSkinner


6.​5.​2CaseStudyTwo:​JeremiahButchery:​FredNgombo(NameChanged)
6.​5.​3CaseStudyThree:​SudhirRuparelia:​StartingAgainThroughCashFlowand
Property
6.​5.​4CaseFour:​TheECLandaTrans-generationalUgandanFamily—The
Madhvanis
6.​6BusinessFailure
6.​7CaseExamplesofaMismatchofEntrepreneurialandBusinessLevels
6.​7.​1Analysis
6.​8ExampleofSquanderingInheritancebyStartingattheWrongLevel
6.​8.​1Analysis
6.​9Conclusion
References
7ResourcefulnessandInformalEconomy:​FromPluriactivitytoPortfolio

Entrepreneurship​
NaveedAkhterandErnestineNing
7.​1Introduction
7.​2TheoreticalBackground
7.​2.​1PluriactivityandPortfolioEntrepreneurship​
7.​2.​2InformalEconomiesandEntrepreneurialResourcefulness
7.​3PropositionDevelopment
7.​4Discussion
7.​4.​1FurtherResearch
7.​4.​2ConcludingRemarks
References
PartIII ComplexityandtheDevelopmentofFamilyBusinessGroups
8TheDynamicsandComplexityofFamilyBusinessGroups
KajariMukherjee,MaritaRautiainen,TimoPihkalaandPeterRosa
8.​1Introduction
8.​2FamilyBusinessGroupComplexity
8.​3ResearchMethodology
8.​4TheEmpiricalSetting
8.​5ConceptualizingtheCaseFamilyBusinessGroupasaComplexAdaptiveSystem
8.​6AcceptingtheComplexityoftheFamilyBusinessGroup


8.​7Conclusion
References
9UnderstandingtheDynamicsofBusinessGroupDevelopment:​ATransgenerationa​l
Perspective
MariaJoséParada,NaveedAkhter,RodrigoBasco,AllanDiscuaCruzandSarahFitz-Koch
9.​1Introduction
9.​2LiteratureReview
9.​2.​1FamilyFirms

9.​2.​2Transgenerationa​lEntrepreneurship​andFamilyBusinessGroups
9.​3MethodandCaseAnalysis
9.​4Discussion
9.​4.​1AbilitytoTransformtheBusinessModel
9.​4.​2OwnershipConcentration
9.​4.​3Familiness
9.​4.​4EntrepreneurialOrientation
9.​4.​5ValueTransformation
9.​5Conclusion
References
10DecipheringOwnershipofFamilyBusinessGroups
TimoPihkala,SanjayGoel,MaritaRautiainen,KajariMukherjeeandMarkkuIkävalko
10.​1Introduction
10.​2AbouttheConceptofOwnership
10.​3FamilyBusinessGroupasaSetofLegalOwnership
10.​3.​1TheBenefitsofControllingtheBusinessandItsResourcesinFamily
BusinessGroups
10.​3.​2TheBenefitsofIncludingOutsideInvestorsintheDistinctBusinessesin
theGroup
10.​3.​3TheBenefitofOperatingontheLevelsofCollectiveOwnershipand
IndividualOwnership
10.​4EmotionalandSocialBenefitsofOwningaFamilyBusinessGroup
10.​4.​1TheBenefitsofOwningFamilyBusinessGrouponPersonalGoals
10.​4.​2TheBenefitsofFamilyBusinessGroupOwnershiponFamilyCohesionand
BusinessContinuity
10.​4.​3SocialBenefitsofOwningaFamilyBusinessGroup


10.​5ManagingtheComplexityoftheOwnershipofFamilyBusinessGroups
10.​6FutureDirectionsforResearch

10.​7Conclusions
References
11GovernanceinFamilyBusinessGroups:​ResolvingMultipleContingenciestoSustain
EntrepreneurialCapability
SanjayGoel,TuuliIkäheimonenandMaritaRautiainen
11.​1Introduction
11.​2TheMeaningoftheContextandGoalsforGovernance
11.​2.​1FamilyBusinessGovernance
11.​2.​2FBGsEmergeforaVarietyofReasons
11.​2.​3GoalsCreatetheBasisforGovernance
11.​2.​4AGovernanceSystemConsistsofStructures,MechanismsandProcesses
11.​3FBGGovernance
11.​4DiscussionandFutureResearch
11.​5Conclusions
References
PartIV FamilyBusinessGroupsinDifferentLocalContexts
12TheContributionofFamilyBusinessGroupstotheLocalInnovationEnvironment
SuviKonsti-Laakso,JussiHeikkilä,MaritaRautiainen,SatuRinkinenandNaveedAkhter
12.​1Introduction
12.​2FamilyBusinessGroupsandInnovation
12.​3FamilyBusinessesinaRegionalInnovationSystem
12.​4MethodologyandData
12.​5CaseLahti:​DescriptionandEmpiricalFindings
12.​5.​1TheCharacteristicsoftheLahtiRegion
12.​5.​2MeasuringInnovationActivityofFamilyBusinessGroupsinLahti
12.​6DiscussionandConclusions
12.​6.​1Limitations
References
13ResilienceandFamilyBusinessGroupsinUnstableEconomies
AllanDiscuaCruz,RodrigoBasco,MariaJoséParada,AntonioMalfenseFierroand

CristinaAlvarado-Alvarez


13.​1Introduction
13.​2LiteratureAnalysis
13.​2.​1Resilience
13.​2.​2TheFamilyBusinessandResilience
13.​2.​3UncertainEnvironments,RiskandInstability
13.​3AModeltoUnderstandFamilyPortfolioEntrepreneurship​inUncertain
Contexts
13.​3.​1RiskMitigationStrategiesandResources
13.​4MethodologicalApproach
13.​4.​1Honduras:​DistributionGroup:​AsturiasFamily
13.​4.​2Venezuela:​Agricultural-BasedGroup:​PerezDiazFamily
13.​4.​3Sharjah:​DiversifiedPortfolioGroup:​Al-QassimiFamily
13.​4.​4Malawi:​TambalaPortfolio—TambalaFamily
13.​5Analysis
13.​6ConclusionandFutureResearch
References
14Entrepreneurship​andRuralFamilyIdentity:​UnderstandingPortfolioDevelopment
inaFamilyFarmBusiness
SarahFitz-Koch,SarahCooperandAllanDiscuaCruz
14.​1Introduction
14.​2ABriefReviewofPortfolioEntrepreneurship​andItsRoleintheFamily
Business
14.​3IdentityandtheFamilyBusiness
14.​4PortfolioDevelopmentandFamilyBusiness:​ACaseIllustrationoftheSvensson
FarmingFamily
14.​4.​1FarmingandtheFamilyBusiness
14.​4.​2TheSvenssonBusinessFamily

14.​5UnderstandingPortfolioDevelopmentintheFamilyBusiness
14.​5.​1FamilyInvolvementandIdentityStructures
14.​5.​2TheCognitiveElementofIdentity
14.​5.​3TheAffectiveElementofIdentity
14.​6DiscussionandConclusion
References


PartV Conclusion
15Conclusions:​ResearchingFamilyBusinessGroups:​LessonsLearnedandAvenuesfor
FurtherResearch
PeterRosa,MaritaRautiainen,TimoPihkala,MariaJoséParadaandAllanDiscuaCruz
15.​1LimitationsandFurtherResearch
Index


ListofFigures
Fig.3.1PartoftheNurminenfamilybusinessportfoliogenogramcovering1990–2003


Fig.4.1Familybusinessgroupdevelopmentfrom1960to2017


Fig.5.1ThePiginiGroupin2011(PiginiGroupAnnualReport2011)


Fig.6.1Theentrepreneurialcareerladder


Fig.6.2ThedevelopmentofMoses’sportfolio

Fig.6.3FredNgombo’sportfolio


Fig.6.4SudhirRuparelia’sstartingportfolio


Fig.6.5SummarisedandsimplifiedemergenceoftheMadhvanifamilybusinessportfolio


Fig.6.6TheECLgrowthprocess


Fig.8.1Businessgroupstructureandownershipconnectionsafterfirstgrouprestructuringin
2002


Fig.8.2Businessgroupstructureandownershipconnectionsaftersecondgroup
restructuringin2010


Fig.9.1Entrepreneurialdynamicsinbusinessfamilies(numberofbusinesses).(Source:
EuropeanSTEPreport2017)


Fig.9.2Developmentofthebusinessgroup.(Source:authors)

Fig.9.3Businessmodelevolution.(Source:LaborCase2007)


Fig.9.4Businessgroupdiversification.(Source:authors)


Fig.9.5EntrepreneurialorientationofLaborCo.(Source:LaborCase2007)


Fig.11.1Dimensionsoffamilybusinessgroupgovernance


Fig.11.2Theevolutionofafamilybusinessgroup


Fig.12.1Scopeofthestudy(AdaptedandmodifiedfromAutio1998)


Fig.12.2PatentandUMfilingsbyapplicantslocatedinLahti


Fig.12.3DesignrightsfilingsbyapplicantslocatedinLahti


Fig.12.4TrademarkfilingsbyapplicantslocatedinLahti


Fig.13.1Theinterplaybetweenriskandtheenvironmentmodel(Source:MalfenseFierro
(2012,261))

Fig.14.1PortfoliodevelopmentintheSvenssonbusinessfamily




ListofTables
Table5.1Chronologyofthemainevents


Table6.1TheentrepreneurialcareerShethAllidinaVisram(1851–1916)EastAfrica’sfirst
large-scaleportfolioentrepreneur


Table6.2Majorpitfallsinclimbingtheladder


Table10.1Thebenefitsoffamilybusinessgroupownership


Table10.2Emotionalandsocialbenefitsofowningafamilybusinessgroup


Table11.1Governancesystemconsistsofstructures,mechanismsandprocesses


Table12.1Datasources


Table12.2Descriptivestatisticsfor15largestcitiesinFinland

Table12.3ThemostactiveapplicantsofpatentsandUMs


Table12.4Themostactiveapplicantsfordesignrights


Table12.5Themostactiveapplicantsfortrademarks


Table13.1StrategiesidentifiedbyMalfenseFierro(2012)


Table13.2Strategiesvsresourcesinfamilybusinessgroupsstudied


Table14.1Thefamily’sbusinessportfolio



Table14.2Identitystructureoffamilymembers,thesetofidentitiesthatischronicallysalient
toeachfamilymemberinher/hisday-to-daywork




NotesonContributors
NaveedAkhter
isanAssistantProfessorofEntrepreneurshipandStrategyatJönköpingInternational

BusinessSchool,JönköpingUniversity,Sweden.HeisaffiliatedwithCentreforFamily
EnterpriseandOwnership(CeFEO).Naveed’sresearchispublishedinHumanRelations,
StrategicEntrepreneurshipJournalandJournalofSmallBusinessManagement.Heisalsoan
affiliateofEU-ASIAInstituteESSCASchoolofManagement,France.


CristinaAlvarado-Alvarez
isapsychologistwithextensiveexperienceasafamilybusinessconsultantinissuesas
communication,familygovernance,familyconstitutionsandconflictmanagement.Currently
sheisadoctoralcandidateinPsychologyofCommunicationandChangeProgrammeofUAB.
Also,shehasbeenavisitingstudentatCoxFamilyEnterpriseCenteratKennesawState
University.


RodrigoBasco
isanAssociateProfessoratAmericanUniversityofSharjah(AUS)andholdstheSheikhSaoud
binKhalidbinKhalidAl-QassimiChairinFamilyBusiness,SchoolofBusinessAdministration,
UnitedArabEmirates.Aspartofafourth-generationfamily-ownedArgentineanfirm,Rodrigo
hasalwaysbeeninterestedinthenuancesoffamilybusinesses.Hisresearchfocuseson
entrepreneurship,managementandregionaldevelopmentwithspecialinterestinfamily
firms,andhehastaughteconomics,managementandfamilybusinesscoursesatuniversities
inSpain,ChileandGermany.


SarahCooper
isaChairofEntrepreneurshipandEnterpriseDevelopment,UniversityofEdinburgh
BusinessSchool,theUniversityofEdinburgh,Scotland,UK.Previouslysheheldpositionsasa
SeniorLecturerinEntrepreneurship,HunterCentreforEntrepreneurshipattheUniversityof
Strathclyde,andasaLecturerinStrategyatHeriot-WattUniversity,Edinburgh.
Sarah’smainresearchinterestslieinentrepreneurship,newventurecreationand

individualmotivationandcapabilitytoengageinentrepreneurialbehaviour.Muchofher
recentworkexploreslearningandknowledgetransfer,inparticulartheroleof
networks/networking,onthedevelopmentofmale-andfemale-ownedventures,including
agriculturalenterprises.


AllanDiscuaCruz


isaLecturerattheEntrepreneurship,StrategyandInnovationDepartmentinLancaster
UniversityManagementSchool(UK).HehaspublishedinjournalssuchasEntrepreneurship
TheoryandPractice,Entrepreneurship&RegionalDevelopment,JournalofFamilyBusiness
StrategyandBusinessHistoryaroundportfolioentrepreneurshipandfamilybusinessgroups.


SarahFitz-Koch
isadoctoralcandidateinEntrepreneurshipattheSwedishUniversityofAgriculturalSciences
(SLU)intheDepartmentofWorkScience,BusinessEconomicsandEnvironmental
Psychology.SarahstartedherdoctoralstudiesattheSwedishUniversityofAgricultural
ScienceinNovember2015.Herresearchfocusesonentrepreneurshipandsmallfamily
businessesintheagriculturalsector.Hercurrentprojectsexaminetherelationshipbetween
entrepreneurshipandwell-beingoffamiliesandindividuals,aswellaslifestyleandportfolio
businessesofentrepreneurialfamilies.Beforeherdoctoralstudies,SarahstudiedBusiness
andEconomicsattheUniversityofTübingeninGermanyandreceivedherMScinStrategic
EntrepreneurshipfromJönköpingInternationalBusinessSchoolinSweden.Herrecentwork
hasbeenpublishedinEntrepreneurshipTheoryandPracticeandJournalofSmallBusiness
Management.


SanjayGoel

isanAssociateProfessorofStrategicManagementandEntrepreneurshipattheUniversityof
MinnesotaDuluth.Hisresearchinterestsareinthebroadareaofgovernance,familybusiness,
corporatestrategyandentrepreneurship.HewasborninDehradun,India.


JussiHeikkilä
isaprojectresearcherattheJyväskyläUniversitySchoolofBusinessandEconomics(JSBE).
Hisresearchfocusesoneconomicsofinnovationandintellectualpropertyrights.


DonatoIacobucci
isaProfessorattheUniversitàPolitecnicadelleMarche.Hisresearchhasfocusedonthree
mainareas,businessgroupformation,growthandgovernance,andentrepreneurshipand
clusteragglomerationandfirmperformance.Hehaspublishedarticlesinleading
entrepreneurshipjournalsonportfolioentrepreneurship.


TuuliIkäheimonen
workswithfundingandresearchpolicyissuesandistheDeputyDirectorofEntrepreneurship


MasterProgrammeattheLappeenrantaUniversityofTechnology(LUT),Finland.Shehasa
strongbackgroundinfamilybusinessesandfamilybusinessresearch,especiallyinthefields
offamilybusinessownership,governanceandboardofdirectors.


MarkkuIkävalko
isanAssociateProfessoratLappeenrantaUniversityofTechnologyandhasbeenworkingat
theuniversitysince1999.FromAugust2017onwards,hehasfocusedonbuildingofJ.
HynemanCenter,aprototypelaboratoryforLUTstudents,andacademictasksrelatedto

strategy,entrepreneurship,SMEmanagementandownership.Hehasdecades-long
consultingexperienceonSMEs,strategyissuesandorganizationaldevelopment.


SuviKonsti-Laakso
worksasaprojectresearcherinLappeenrantaUniversityofTechnology,LUTLahti.Her
researchinterestrelatestoinnovationresearch,particularlyonuserco-creation,innovation
networksandlivinglabs.Herforthcomingdoctoraldissertationfocusesonuserco-creation.
Inaddition,sheisanexperiencedprojectmanagerinmulti-disciplinaryresearch
environment.


AntonioMalfenseFierro
isapracticallymindedacademic,activeinstart-upadvisoryservices.Hisresearchfocuseson
large-scale,entrepreneur-ownedbusinessportfoliosandfamilybusinessandrisk(Africaand
othercontexts).Hiscapabilitiesextendtothedevelopment,designandundertakingof
bespokemarketresearchinchallengingcontexts,andexecutiveeducationintheareasof
businessopportunities/challenges.


KajariMukherjee
isanAssociateProfessorinIndianInstituteofManagementIndore(IIMIndore).Herareaof
researchspansthreedistinctarenas,namely,organizationdesignusingparadigmof
complexitytheory,corporatesocialresponsibilityandfamilybusinessfirms.Shehas
authoredbooks,articles,casestudiesandconferencepapersintheseareas.SheholdsMSc
(Mathematics),PGDRM(IRMA)andPhDfromTataInstituteofScience(TISS).Priortojoining
academicsin2012,shehadtwodecadesofcorporateexperience.Sheisoneofthe12senior
managersofIndiaselectedforCheveningscholarships(UK)in2004.

ErnestineNing


isaPhDstudentattheUniversityofEdinburghBusinessSchool.Sheisresearchingthenature
androleoffamilynetworksandtheireffectsontheentrepreneurialperformanceof
pluriactivefemaleentrepreneursinCameroon.


MariaJoséParada
isaLecturerattheDepartmentofStrategyandGeneralManagementatESADEandcoDirectoroftheESADEFamilyBusinessLab.SheholdsPhDfromJönköpingInternational
BusinessSchoolandPhDfromESADEBusinessSchool,andsheteachesfamilybusiness
courses,strategyandentrepreneurshipindifferentprogrammes.Shehasbeenavisiting
researcheroftheINSEADGlobalLeadershipCentreinFranceandavisitingscholarinHEC
Paris.Herresearchmainlyfocusesontransgenerationalentrepreneurship,governance
structures,professionalization,values,NextGendevelopmentandfamilybusinessesin
developingeconomies.


TimoPihkala
isaProfessorofEntrepreneurshipatLappeenrantaUniversityofTechnology(LUT)since
2001.Since1994,hehasmaderesearchondifferenttopicsrelatedtoentrepreneurship,
includingentrepreneurshipeducation,SMEinnovation,smallbusinessnetworks,family
businessesandownership,andregionalinnovationsystems.Currently,heoperatesasthe
HeadofEntrepreneurshipMasterProgrammeatLUT.Infamilybusinessresearch,hefocuses
ontherelationshipbetweenentrepreneurshipandownership,especiallyontheportfolio
entrepreneurshipphenomenonandownershipinbusinessgovernance.


MaritaRautiainen
isapost-doctoralresearcheratSchoolofEngineeringScience,LappeenrantaUniversityof

Technology(LUT).Herresearchfocusesonintegratingfamilybusinessgroupsandhistorical
perspectivesforabetterunderstandingofthenatureoffamilybusinessgroupdevelopment.
Inaddition,herresearchinterestsincludesystemicinnovation,businesstransformationand
ownership.Shehasastrongbackgroundasanentrepreneurandaresearcherof
entrepreneurship.Sheteachesentrepreneurshiptheoryandfamilybusiness
entrepreneurship.Shehasseveralyearsofexperienceworkinginherownfamilybusinessas
wellasbeinganindependententrepreneur.


SatuRinkinen
worksasapost-doctoralresearcheratLappeenrantaUniversityofTechnology,LUTSchoolof
EngineeringScience.Herresearchinterestsincludeinnovationpolicy,regionalinnovation
systemsandregionaldevelopment.Herdoctoraldissertationfocusedoninnovationpolicy’s


conceptevolutionandregionalrenewal.


PeterRosa
istheGeorgeDavidEmeritusProfessorofEntrepreneurshipandFamilyBusinessatthe
UniversityofEdinburgh.Hehasaspecialresearchinterestinportfolioentrepreneurshipand
familybusinessgroupsinEuropeandEastAfrica.




©TheAuthor(s)2019
MaritaRautiainen,PeterRosa,TimoPihkala,MariaJoséParadaandAllanDiscuaCruz(eds.),TheFamilyBusinessGroup
Phenomenon
/>

1.Introduction:PresentingtheCaseforStudyingthe
EmergenceandDevelopmentofFamilyBusiness
Groups
PeterRosa1 ,MaritaRautiainen2 ,TimoPihkala2 ,MariaJoséParada3 andAllanDiscua
Cruz4
(1)
(2)
(3)
(4)

BusinessSchool,UniversityofEdinburgh,Edinburgh,UK
SchoolofEngineeringScience,LappeenrantaUniversityofTechnology,Lahti,Finland
StrategyandGeneralManagementDepartment,ESADEBusinessSchool,Barcelona,Spain
DepartmentofEntrepreneurshipandStrategy,LancasterUniversityManagementSchool,
Lancaster,UK


PeterRosa
Email:
MaritaRautiainen(Correspondingauthor)
Email:
TimoPihkala
Email:
MariaJoséParada
Email:
AllanDiscuaCruz
Email:
Keywords Businessgroups–Familybusiness–Portfolioentrepreneurship
RichardBranson,perhapstheUK’sbest-knownentrepreneur,ownsmorethansixtydifferent
companies(www.​virgin.​com).ThereareVirgincompaniesoperatinginmostareasofthe

world,coveringabewilderingvarietyofsectors(financialservices,healthandwellness,
musicandentertainment,telecomsandmedia,travelandleisure).Theonlythingsthat
connectacompanylikeVirginTrainsandVirginBalloonFlights,forexample,aretheVirgin
brandnameandtheownershipofRichardBranson.TodecipherthefullspectrumofVirgin
companiesandhowtheydevelopedfromRichardBranson’sfirstventurein1960wouldbea
complexanddifficultexercise.Overtheyears,therearejointventures,acquisitions,


divestments,failures,aswellasaconsistentstringofnewventures.AlthoughRichard
Bransonappearsasaloneentrepreneurheadingthegroup,theVirginwebsiteproudly
proclaimstheVirginGroupas‘afamily-ownedgrowthcapitalinvestor’.
TheVirginGroupisbutoneexampleofthousandsofentrepreneur-foundedfamily
businessesthatappearassinglebusinessesintheirpublicity,butareinfactgroupsoflegally
independentbusinessesboundtogetherbysharedfamilyownershipandmanagement
control.Themostcomplexarelargefamilybusinessesthathaveexistedforseveral
generationsandwhichhavedevelopedsizeablebusinessportfoliosovertheyears.The
NurminenfamilyinFinland,forexample,hasbuiltupanextensiveportfolioofcompanies
sinceitsoriginsinthelatenineteenthcentury(Rautiainen2012).Familybusinessgroups
existallovertheworldandappeartothriveinmanydifferentbusinessenvironmentsand
settings.Masulisetal.(2011)inabroadcross-nationalstudyfoundthatanaverageof19per
centoffirmslistedontheworld’sstockexchangeswerefamily-ownedorcontrolledbusiness
groupsandthattheproportionwasashighas40percentincountrieswithemerging
markets.Theirstudyonlyreferredtolistedcompanies.Therearemanyotherlargeprivately
ownedbusinessgroupsnotlistedaspubliccompanies.Astheyarenotlistedonstock
exchanges,theiractivitiesarelessvisible.
Sincethe1970s,therehasbeenconsiderableresearchonlargebusinessgroups.Research
hasparticularlycentredonthreecorequestions:Whydobusinessgroupsexist?Doesa
businessgroupstructureenhanceperformance,andifso,inwhichcontext?Aretheoverall
effectsofbusinessgroupsinthewidereconomyandsocietypositive?Carneyetal.(2011),in
ameta-analysisof141researchstudiesonbusinessgroupsin28countries,haveconcluded

‘thataffiliationdiminishesfirmperformanceingeneral,butalsothataffiliatesare
comparativelybetteroffincontextswithunderdevelopedfinancialandlabourmarket
institutions…Overall,ourresultsindicatethataffiliateperformancereflectscomplex
processesandmotivations’(Carneyetal.2011,p.437).Aconsensushasemergedonfour
issues(Carneyetal.2011):
1.

2.
3.

4.

Thatbusinessgroupsaregroupsoffirmswhichconsistofanumberoflegally
independentfirmsboundtogetherbyformalandinformaltiesandwhicharesubjectto
coordinatedaction(KhanaandRivkin2001).
Thatbusinessgroupscommonlyoccurinallcapitalist-basedcountrieswherelargerfirms
arepermittedandoperate(Yiuetal.2007).
Thatthereisalargediversityofformsofbusinessgroups,someofwhich,suchas
conglomerates,aremorecomplexthanthetraditionalmulti-divisionalformofcorporate
organizationwhereaparentcompanyownsandcoordinatesagroupofsmaller
companies.
Thatbusinessgroupsareespeciallycommonindevelopingcountrieswheremarket
failures,poorregulatoryandlegalinstitutions,andcorruptionencourageinternalization
oftransactionsandthespreadingofriskthroughsmallerlegallyindependentcompanies
ratherthaninonelargeunaffiliatedone.Researchonbusinessgroupsinemerging
marketshasproliferatedasemergingcountrieshavegrownineconomicimportance

(KhannaandPalepu1997,2000a,b;YaprakandKarademir2010).
Anumberofquestionsarisefromtheprevalenceandcomplexityoflarge-scalebusiness
groups.Howmuchdiversityisthereinthescaleandnatureofbusinessgroups,andhowdoes
thisdiversityreflectdifferingregulatoryandmarketcontextsindifferentsectors,countries
andregions?Howhavecomplexbusinessgroupsarisen,andwhydotheycontinuetopersist
andexistinamoderncorporatebusinessenvironmentwherethefashionhasbeena
preferenceforconcentrationandspecializationratherthanunrelateddiversification?How
muchmorecomplexarefamilybusinessgroupsthannon-familycorporategroups?Whydo
largefamilybusinessgroupsvaryinprevalenceindifferentpartsoftheworld?Inparticular,
whydotheyseemmorenumerousindevelopingcountries?
Largefamilybusinessgroupsrepresentalowproportionofthetotalstockoffamily
businesses,butinsomecountriestheycanaccountforasizeableproportionofannual
economicgrowthandjobgeneration.InUganda,forexample,onefamilygroupalone,the
MadhvaniGroup,arethelargestprivatesectoremployersandtaxpayersinUganda(Balunywa
2009).Their27companiesinUgandaarethemselvespartofawiderfamilyconglomerate
thatoperatesinmanyothercountries.TheSawirisfamilyinEgyptisthelargestprivate
sectorcontributortoitseconomy,withitsglobalOrascomGroupspecializinginconstruction,
telecommunicationsandtourism(Hatem2012).IntheFarEast,familybusinessgroupssuch
asSony,Samsung,MitsubishiandAlibabaareleadingglobalcompanies.EvenintheUSA,what
appeartobesinglecorporationsare,oncloserinspection,entrepreneur-ledbusinessgroups.
TheMicrosoftCorporation,forexample,hasacquired209companiessinceitsfoundation,
hasdivested64andhassizeableinterestsin32othercompanies.
Itisourcontentioninthisbookthatthe‘complexprocessesandmotivations’observedin
manycorporatebusinessgroupsaregreatlymagnifiedwhereentrepreneursandfamiliesare
involvedinthebusiness.Itisonlyrecentlythatanyattentionhasbeenpaidtolargefamily
businessgroups(Masulisetal.2011).Thefamilybusinessgroupresearchershavebegunto
assesshowfarbusinessgrouporganizationsaredifferentinfamilyfirms;howfarcrosscuttingfamilymotivationsandownershipcomplicatethescale,natureandformsofa

businessgroup;andwhetherthereareproblemsandadvantagesuniquetofamilybusinesses
inthewayabusinessgroupisstructured.
Ineverycountry,thelargestnumberofbusinessesaresmall-tomedium-scalefamily
businesses,manyofwhicharestructuredassmallbusinessgroups.IntheirScottishstudy,
RosaandScott(1999)estimatedthatoveraquarterofallbusinessesregisteredas
companiesweregroups,fundedbyanentrepreneurorafamily,andthatnearlyafifthof
partnershipswereassociatedwithmorethanonefirm.Indevelopingcountriestoo,
ownershipofmultipleenterpriseshasbeenobservedtobecommoninthesmall-andmicrobusinesssectors(McGaffey1987;Kiggundu2002;Rosaetal.2006).Whyaresuchfamiliesnot
concentratingongrowingasinglebusinessratherthan(apparently)dissipatingtheir
energiesamongtwoormoreenterprises?Whatadvantagesdoesasmallgrouphaveovera
singleventure?Isoptingforamultipleenterpriseorganizationmoreadvantageousinsome
contextsthaninothers?Howfardofamilyownershipandgoalscomplicatethemanagement
ofabusinessgroupevenatasmallscaleofoperation?Putanotherway,doeshavingfamily
makeiteasiertodelegateresponsibilitytofamilymemberswhenseparatecompaniesare
startedanddevelopedfromthecorebusiness?


Themainstreamstudiesonbusinessgroupshavefocusedalmostexclusivelyonlargescalefirmslistedontheworld’sstockexchanges.Therehasbeenlessattentionpaidto
whetherbusinessgroupsarealsorelevanttonon-listedbusinessesortosmallerbusinesses.
Littleofthemainstreammanagementresearchonbusinessgroups,whetherfamily-basedor
not,hasconsideredhowbusinessgroupsareformedinthefirstplace.Howabusinessgroup
hasformedfromsmallbeginningstoitscurrentcomplexformisadifferentquestionfrom
whyitcontinuestopersistandthriveonceafirmhasreachedalargesize.Toanswerthe
questionrequiresamoreholisticapproach,includingtheconsiderationofbusinessgroupsin
smaller(usuallyfamily)firmsandevenoftheactivitiesofindividualentrepreneurs.
Agrowingvolumeofresearchonsmallerentrepreneurandfamilybusinessgroupshas
beenundertakensincethe1990s(reviewedbyUcsbasaranetal.2008).Thesestudieshave
demonstratedthatthedevelopmentofsmallbusinessgroupsisdrivenmainlyby
entrepreneurialgrowth,inwhichentrepreneursorentrepreneurialfamiliesgrowtheir
businessesbyaddingnewventuresasnewopportunitiesareaccessed.Thisprocesshasbeen

termed‘portfolioentrepreneurship’(BirleyandWesthead1993;ScottandRosa1999;Rosa
1998).However,interestinportfolioentrepreneurshipandsmallerbusinessgroups,despite
havingburgeonedsincethe1980s,isstillanichespecializationwithinthebroaderfieldof
entrepreneurship.
Thisentrepreneurship-basedliteratureonportfolioentrepreneurshiphasdevelopedin
paralleltothemainstreammanagementliteratureonbusinessgroups.Ontheonehand,
managementresearchersinvestigatinglarge-scalebusinessgroupshavetendedtoassume
thatbusinessgroupsareeithernonexistentoratbestembryonicinthesmallfirmsector.As
theportfolioentrepreneurshipresearchhasfocusedprimarilyonsmallerfirms,ithasfailed
toattracttheattentionofmainstreammanagementresearchersonbusinessgroups.Onthe
otherhand,researchersonportfolioentrepreneurship,byfocusingonsmallerfirms,havenot
accessedthemainstreambusinessgroupresearch,astheymayhaveperceivedthatmostof
themanagementliteratureonbusinessgroupsmaybelessrelevantinasmallerfirmcontext
(Iacobucci2002).Interestinlarge-scaleportfolioentrepreneurship(asdisplayedby
entrepreneursandfamilieswhohavedevelopedlargebusinessgroups)isonlyarecent
researchdevelopmentandisstillatapioneeringstage.Anumberofempiricalstudieshave
beenconductedsincethelate2000sonlarge-scaleportfolioentrepreneursandlargefamily
businessgroups.TheseincludeBalunywa’s(2009)andMalfenseFierro’s(2012)researchon
UgandanandMalawiportfolioentrepreneurs,Hatem’s(2012)researchonthe
internationalizationoflarge-scaleportfolioentrepreneursandfamiliesintheMENAregion,
Rautiainen’s(2012)analysisoflarge-scaleFinnishfamilybusinessgroupsandDiscuaCruz’s
researchonfamilyentrepreneurialteamsinHonduras(DiscuaCruz2010,2012).These
studieshavedemonstratedthatportfolioentrepreneurshipcontinuestoplayasignificant
roleinthecontinueddevelopmentandrenewaloflargebusinessgroups,particularlylarge
familybusinessgroups.Itsroleisnotconfinedtotheearlystagesofbusinessgroup
developmentwhenthebusinessesweremuchsmallerinscale.
Duringthedevelopmentofresearchintobusinessgroupsandportfolioentrepreneurship,
familybusinessresearchershavepursuedresearchagendasthathaveoverlookedthe
existenceorprevalenceoffamilybusinessgroups.Instead,theyhavetendedtoconcentrate
theirinterestsonfamilystrategyandlifecycleissuessuchaslong-termstewardshipand

orientation,overcomingproblemsofsuccessionandfamilyconflicts,andunderstandingthe