• unlimited access with print and download
    $ 37 00
  • read full document, no print or download, expires after 72 hours
    $ 4 99
More info
Unlimited access including download and printing, plus availability for reading and annotating in your in your Udini library.
  • Access to this article in your Udini library for 72 hours from purchase.
  • The article will not be available for download or print.
  • Upgrade to the full version of this document at a reduced price.
  • Your trial access payment is credited when purchasing the full version.
Buy
Continue searching

Family-owned businesses: Strategy, leadership, family legacy, and the influence on sustainability

ProQuest Dissertations and Theses, 2009
Dissertation
Author: J. Matthew Fuhrman
Abstract:
The purpose of this qualitative, comparative case study was to understand the relationship between business models, strategy planning processes, environmental factors, leadership, and the influence on sustainability in three private, multi-generational, family-owned businesses in New Jersey and Pennsylvania. Twenty executives were interviewed to gain insight to the qualities of the business model that led to sustainability beyond the first generation. The critical component to sustainability was identified as family values and continuation of the family. The findings revealed the importance of implementing an appropriate strategy planning process, establishing an advisory governance board, understanding the maturity level of the industry, acquiring industry knowledge, and establishing relations with suppliers and customers; elements of the Sustainable Family Business Model.

Family-Owned Businesses: Strategy, Leadership, Family Legacy, and the Influence on Sustainability by J. Matthew Fuhrman A Dissertation Presented in Partial Fulfillment of the Requirements for the Degree DOCTOR OF MANAGEMENT IN ORGANIZATIONAL LEADERSHIP

UNIVERSITY OF PHOENIX July 2009

UMI Number: 3388316

All rights reserved

INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted.

In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion.

UMI 3388316 Copyright 2 009 by ProQuest LLC. All rights reserved. This edition of the work is protected against unauthorized copying under Title 17, United States Code.

ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106-1346

ii

© 2009 by J. Matthew Fuhrman ALL RIGHTS RESERVED

iii

Family-Owned Businesses: Strategy, Leadership, Family Legacy, and the Influence on Sustainability by

J. Matthew Fuhrman

April 2009

Approved:

Linda Suzanne Wing, Ph.D., Mentor

Sandra Kolberg, Ph.D., Member

Rita J. Edwards, Ed.D., Member

Accepted and Signed:

Linda Suzanne Wing

Date

Accepted and Signed:

Sandra Kolberg

Date

Accepted and Signed:

Rita J. Edwards

Date

Jeremy Moreland , Ph.D .

__________________

Date

Dean, School of Advanced Studies University of Phoenix

iv

ABSTRACT

The purpose of this qualitative, comparative case study was to understand the relationship between business models, strategy planning processes, environmental factors, leadership, and the influence on sustainability in three private, multi-generational, family-owned businesses in New Jersey and Pennsylvania. Twenty executives were interviewed to gain insight to the qualities of the business model that led to sustainability beyond the first generation. The critical component to sustainability was identified as family values and continuation of the family. The findings revealed the importance of implementing an appropriate strategy planning process, establishing an advisory governance board, understanding the maturity level of the industry, acquiring industry knowledge, and establishing relations with suppliers and customers; elements of the Sustainable Family Business Model.

v

DEDICATION This dissertation is dedicated to my children and their mother, Nathaniel, Gregory, Rebecca, Gretchen, and Susanne. With the appropriate attitude, the trials of life can be turned into opportunities. Despite not being a part of your daily lives for the last ten years, I hope my example inspires you to pursue your dreams regardless of the obstacles you encounter. I love each of you very much. I also dedicate this dissertation to my family; my parents, John and Regina Fuhrman and my brother, Mark Fuhrman. I cannot count the nights I called wanting to quit and hung up ready again to tackle the task. Despite what must have seemed like endless resistance to your advice and guidance that started in high school with the Naval Academy, everything of value that I have accomplished in academics is the direct result of your wisdom and support. A special dedication goes to my grandparents, the late Ray and Mary LeGore, the late John Fuhrman, and Arlene Graham. The bond one as with their grandparents is unlike any other. I am so blessed to have had grandparents that loved, nurtured, and taught me the values of education and family. Finally, I would like to dedicate this dissertation to Buddy. You are my friend and confidant. Never will I forget the nights you spent by my side as I worked to make this dream a reality.

vi

ACKNOWLEDGMENTS I would like to acknowledge the contributions of my mentor, Dr. Linda Wing, and my committee members, Dr. Sandra Kolberg and Dr. Rita Edwards. Dr. Wing, your patience, understanding, encouragement, and expertise were invaluable to my experience and the development of this dissertation. After first-year residency, Dr. Kolberg immediately became someone I knew I wanted on my committee. Thank you for challenging me to think like a scholar and to defend my research. Dr. Edwards, you started my journey over four years ago. Your contributions from the beginning set the stage for one of my most rewarding experiences. I would also like to acknowledge the companies who participated in my study. Without your participation, none of this would have been possible. It is my sincere hope that you gain as much from the findings of this study as I did conducting the research. I wish you continued success in your family and business endeavors. You embody the entrepreneurial spirit that defines the American dream. Finally, this accomplishment would not have been possible without the support and encouragement from my classmates: Carrie O’Haire, Hettie Courtney, Ernie Navarro, and Peace Ezeogba-Odoemena.

vii

LIST OF TABLES ........................................................................................................................ xii LIST OF FIGURES ..................................................................................................................... xiii CHAPTER 1: INTRODUCTION ....................................................................................................1 Background of the Problem ......................................................................................................... 1 State of Family Business Research .......................................................................................... 1 Business Models and Strategy Development in Family-Owned Businesses .......................... 3 Statement of the Problem ............................................................................................................ 4 Purpose of the Study ................................................................................................................... 6 Significance of the Study ............................................................................................................ 6 Significance of the Study to Leadership ..................................................................................... 7 Nature of the Study ..................................................................................................................... 7 Research Questions ..................................................................................................................... 8 Theoretical Framework ............................................................................................................... 9 Strategic Management Process ................................................................................................ 9 Open Systems Model ............................................................................................................. 10 Definitions ................................................................................................................................. 11 Assumptions .............................................................................................................................. 13 Scope ......................................................................................................................................... 13 Limitations ................................................................................................................................ 14

viii

Delimitations ............................................................................................................................. 14 Summary ................................................................................................................................... 14 CHAPTER 2: LITERATURE REVIEW .......................................................................................16 Status of Family Business Literature ........................................................................................ 17 Family Businesses ..................................................................................................................... 18 Position in the Industry .......................................................................................................... 18 Employment Contracts .......................................................................................................... 19 Capital Structure .................................................................................................................... 19 Financial Ratios ..................................................................................................................... 20 Generational Succession ........................................................................................................ 21 Private Businesses ..................................................................................................................... 22 Strategy ...................................................................................................................................... 22 Formal Planning .................................................................................................................... 23 Power-Behavioral Approach ................................................................................................. 24 Logical Incrementalism ......................................................................................................... 24 Scenario Planning .................................................................................................................. 25 Competence ........................................................................................................................... 25 Strategy as a Revolution ........................................................................................................ 26 Business Environment ............................................................................................................... 28

ix

Leadership ................................................................................................................................. 29 Open-Systems Model ................................................................................................................ 30 Change Management ................................................................................................................. 32 Change and Conflict .............................................................................................................. 32 Nature of Change ................................................................................................................... 32 Governance ................................................................................................................................ 33 Boards in Family Businesses ................................................................................................. 34 Governance Models ............................................................................................................... 34 Functions of a Board of Directors ......................................................................................... 35 Values and Culture .................................................................................................................... 35 Literature Gap ........................................................................................................................... 37 Conclusion ................................................................................................................................. 37 Summary ................................................................................................................................... 38 CHAPTER 3: METHOD ...............................................................................................................39 Research Method ....................................................................................................................... 39 Appropriateness of Method ....................................................................................................... 40 Research Design ........................................................................................................................ 40 Appropriateness of Design ........................................................................................................ 43 Population.................................................................................................................................. 44

x

Sampling Frame ........................................................................................................................ 44 Informed Consent ...................................................................................................................... 45 Confidentiality ........................................................................................................................... 45 Geographic Location ................................................................................................................. 46 Data Collection .......................................................................................................................... 46 Interviews .............................................................................................................................. 48 Pilot Study ............................................................................................................................. 50 Internal Validity ........................................................................................................................ 50 External Validity ....................................................................................................................... 51 Data Analysis ............................................................................................................................ 52 Summary ................................................................................................................................... 53 CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA ..................................................55 Situation Assessment ................................................................................................................. 57 Data Analysis Procedure ........................................................................................................... 58 Findings ..................................................................................................................................... 60 Company A ............................................................................................................................ 60 Company B ............................................................................................................................ 69 Company C ............................................................................................................................ 76 Summary ................................................................................................................................... 90

xi

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS .................................................92 Conclusions ............................................................................................................................... 94 Recommendations ................................................................................................................... 103 Strategy Development Process ............................................................................................ 104 Business Environment ......................................................................................................... 106 Leadership and Management ............................................................................................... 107 Significance to Leadership ...................................................................................................... 111 Suggestions for Further Research ........................................................................................... 112 Summary ................................................................................................................................. 113 REFERENCES ............................................................................................................................115 APPENDICES .............................................................................................................................121 APPENDIX A: INFORMED CONSENT: PERMISSION TO USE PREMISES, NAMES AND/0R SUBJECTS .............................................................................................................. 122 APPENDIX B: INFORMED CONSENT PARTICIPANTS 18 YEARS OF AGE AND OLDER.................................................................................................................................... 123 APPENDIX C: CASE STUDY PROTOCOL ......................................................................... 125 APPENDIX D: INTERVIEW INSTRUMENT ...................................................................... 126

xii

LIST OF TABLES Table 1: Literature Review Results……………………………………………………………...17 Table 2: Strategy Development Number of Respondents…………………………………….....84 Table 3: Business Environment Number of Respondents…………………………………….....86 Table 4: Leadership and Management Number of Respondents………………………………..88

xiii

LIST OF FIGURES Figure 1: Unit and Subunits of Analysis…………………………………………………………42 Figure 2: Case Study Protocol…………………………………………………………………...47 Figure 3: Interview Instrument………………………………………………………………….49 Figure 4: Coding Template……………………………………………………………………...52 Figure 5: Strategy Development Process Model…...……………………………………….….106 Figure 6: Business Environment Model………………………………………………………..107 Figure 7: Sustainable Family Enterprise Model………………………………………………..110

1

CHAPTER 1: INTRODUCTION Family-owned enterprises provided 60% of the jobs and approximately 65% of the GDP in the United States of America in 2000 (Astrachen & Shanker, 2003). Historically, nearly 70% of family businesses failed before reaching the second generation and less than 5% succeeded into the third generation (Astrachen & Allen, 2003; Lee, 2006). The significance of family business to society and the high rate of family business failure warranted further research into family business strategy. In order to succeed, family-owned enterprises needed a business strategy to guide the organization and ensure viability for future generations (Frolick & Ariyachandra, 2006). The existence of multi-generational family firms with a high likelihood of failure led to the following research question: from a strategic planning perspective, how do successful, family-owned, multi-generational businesses remain sustainable? The focus of this qualitative study using comparative case study methodology was to understand the relationship between business models, strategy planning processes, environmental factors, leadership, and the influence on sustainability in three private, family-owned businesses in Pennsylvania and southern New Jersey. Chapter 1 provided evidence supporting the need for the study, the purpose of the study, the research questions to be answered, the research methods considered, and the benefits, both academic and practical, of the results from this study. Background of the Problem State of Family Business Research Compared to other areas of business research, family business research was in its initial stages in the 1970s through the early 1980s (Casillas & Acedo, 2007; Kreiser et al., 2006; Steier

2

et al., 2004; Upton et al., 2001). The field started to take shape in the late 1980s and 1990s (Casillas & Acedo, 2007). The primary issue during the development of the field was the lack of a strict definition for a family business (Littunen, 2003; Sharma, 2004). Despite a focused effort by scholars, a concise definition of family business remained elusive (Ibrahim et al., 2008; Sharma, 2004). The definition of family business ranged from the family having simple voting control to the involvement of multiple generations in the day-to-day business operation, hence the wide disparity in family business statistics (Sharma, 2004). According to Sharma (2004), “Using these definitions, these researchers estimate[d] between 3 and 24.2 million family firms in the United States that provide employment to 27-62% of the workforce, and contribute 29- 64% of the national GDP” (p. 4) as of 2003. As family business research continued to develop, more distinct differences between family-owned businesses and non-family-owned businesses began to take form (Gallo et al, 2004; Sharma, 2004). The distinction between family and non-family firms was blurred (Sharma, 2004). Studies have failed to establish a set of variables that distinguished family firms from non-family firms. Research showed that while differences existed at some level, including entrepreneurship, performance, and perceptions of the industry environment, the results remained mixed (Sharma, 2004). Delineating family businesses as a group and their approach to strategy development was one specific area of interest in the study. For the purposes of the study, family-owned business was defined by the following criteria: (a) the family was in control of the strategic direction of the organization; (b) a member of the family ran the company; (c) the company had passed through more than one generation of family members; and (d) the family was involved in the executive management of the company (Astrachan & Shanker, 2003).

3

Business Models and Strategy Development in Family-Owned Businesses Understanding business models was critical for the sustainability of an organization (Voelpel et al., 2004). Research suggested that leaders who understood business models had a competitive advantage and the knowledge necessary to improve their position in their industry (Voelpel et al., 2004). Multi-generational family firms were examples of organizations that have maintained a competitive advantage over an extended period. The multi-generational family firms selected for this study provided an opportunity to understand the relationships among the business model, strategy development, and environmental factors and how they influenced sustainability. The study of family-owned businesses was new to the business research field (Casillas & Acedo, 2007; Kreiser et al., 2006; Steier et al., 2004; Upton et al., 2001). Strategy planning was one of the least studied facets of family-owned businesses (Kreiser et al.; Steier et al.). Two studies, by Kreiser et al. and Zahra et al. (2004), began research strategy in family-owned businesses. The Zahra et al. study focused on the relationship between the family firm culture and entrepreneurship. The characteristics of a family-firm, most notably long-term ownership and family ties, lend themselves readily to an innovative, risk taking, and entrepreneurial organization. The results of the Zahra et al. (2004) study indicated that not only do family firms exhibit the cultural characteristics of entrepreneurship, but also that they do so more prevalently than non-family firms, giving them a potential strategic and competitive advantage. Kreiser et al. (2006) postulated that researchers recognized that strategic planning processes in family-owned businesses differ from non-family firms. The study was designed to determine if the sample companies operated according to the principles of an entrepreneurial organization or what Kreiser et al. (2006) described as a living company. Living companies were

4

more likely to save money for future business opportunities than to spend impulsively (Kreiser et al., 2006). Living companies were sensitive to the world around them and maintained a flexible strategy designed to adapt to a rapidly changing external environment (Kreiser et al., 2006). Living companies were aware of their identity, strove to develop a sense of community, and recognized individual contributions to the success of the organization (Kreiser et al., 2006). Living companies were not afraid of the unknown and sought to improve their position through change (Kreiser et al., 2006). Entrepreneurial firms were characterized by risk-taking, innovation, and proactiveness (Kreiser et al., 2006). The results of the Kreiser et al. (2006) study indicated that family-owned businesses closely matched the definition of living companies in the early years of their existence and were characterized by a more entrepreneurial approach as the company matured. To summarize, the culture of family firms tended to favor either a conservative or an entrepreneurial approach to business strategy depending on the maturity of the company (Zahra, 2004). The Kreiser et al. (2006) study supported the Zahra et al. claim and determined that increasing environmental pressures forced the firm to shift from the conservative living company to a proactive entrepreneurial approach. The inclusion of the entrepreneurism was essential to understanding the business models, business strategy, and leadership and management characteristics of sustained, multi-generational family firms (Kreiser et al., 2006). In addition, the statistics supported the importance of this study based simply on the significant percentage of society that relies on family businesses for employment, goods, and services. Statement of the Problem Historically, an estimated 70% of family-owned businesses failed before the second generation and less than 5% survived to the third generation (Astrachen & Allen, 2003; Lee,

5

2006). As of 2000, 90% of all businesses in the United States were family-owned (Astrachan & Shanker, 2003). 64% of the Gross Domestic Product (GDP) was generated and nearly two-thirds of the American workforce employed by family-owned businesses (Astrachan & Shanker, 2003). These statistics demonstrated the magnitude of family-owned businesses’ contributions to the American economy and the potential effects of the failure of these organizations on society (Astrachan & Shanker, 2003). Effective business strategy development was essential to the long- term viability of any business (Frolick & Ariyachandra, 2006). The measures of business success differed in family-owned businesses, as did the approach to strategy development and the environmental factors considered (Craig & Moores, 2006). A significant, well-documented gap existed in strategic planning literature within the area of family businesses (Pieper & Klein, 2007; Sharma et al., 1997; Sharma, 2004; Zahra et al., 2004). The authors emphasized the need for research in the area of strategic management as an important part of improving the understanding of sustainable family business ventures. A study designed to synthesize the business model and strategic planning activities of several family businesses could begin to fill this gap in knowledge. The study used qualitative research methods. Qualitative methods were appropriate because the purpose of the study was not to identify a set of metrics common to every successful family business. The study was to identify how and why family businesses sustain themselves, with the strategy planning process, the business environment, and leadership as the focal points, beyond the first generation when statistics indicate very few do (Astrachen & Allen, 2003; Lee, 2006). The qualitative method was selected as the best way to find answers to how and why questions; particularly as the focus of the study was on sustainability rather than success (Creswell, 2007; Yin, 2003).

6

The research design selected for this study was the comparative case study (Yin, 2003). The comparative case study was appropriate for a thorough investigation into three separate family businesses followed by a melding of themes and patterns into the construction of a viable family business model. The purpose of this study was to provide the strategic groundwork for sustaining family businesses. Purpose of the Study The purpose of this qualitative, comparative case study was to understand the relationship between business models, strategy planning processes, environmental factors, leadership, and the influence on sustainability in three private, multi-generational, family-owned businesses in New Jersey and Pennsylvania. The purpose was accomplished through an analysis of three private, multi-generational, family-owned businesses in the food and beverage industry. Residual benefits of the study were a more complete understanding of sustained and successful family business practices and a contribution to a well-documented gap in family-business literature (Pieper & Klein, 2007; Sharma et al., 1997; Sharma, 2004; Zahra et al., 2004).

Significance of the Study Over the last 25 years, family succession, governance, and performance have dominated family business research (Chrisman, et al., 2003; Sharma, et al., 1997; Zahra & Sharma, 2004). The most recent analysis of the research in the field indicated that from 1996-2003, 22% of all published papers in Family Business Review focused on the topic of family succession (Chrisman et al., 2003). The subjects of this study, strategy planning and environmental factors, consisted of less than four percent of published papers over the same time frame (Chrisman et al., 2003). The study may add to the overall body of knowledge by discovering the

7

environmental factors and strategy development processes used by three Pennsylvania and southern New Jersey firms. Significance of the Study to Leadership The purpose of this qualitative, comparative case study was to understand the relationship between business models, strategy planning processes, environmental factors, leadership, and the influence on sustainability in three private, multi-generational, family-owned businesses in New Jersey and Pennsylvania. Recent studies identified the cultural characteristics and life-cycle tendencies that affected the strategies of family-owned businesses (Kreiser et al., 2006; Zahra et al., 2004). The specific business model and strategy development process that contributed to the understanding of environmental variables and position the organization for sustainability remained elusive in current literature (Chrisman et al., 2003). Analysis and comparison of data led to a set of defined business model and strategy development characteristics, providing leaders of family-owned businesses the opportunity to focus on the issues that most significantly influenced the success of the organization. Nature of the Study The methodology chosen for this research project was qualitative. The selection of a qualitative approach was appropriate because the study was conducted in a natural setting, not a controlled environment conducive to quantitative studies, within a specific industry; namely the three private, family-owned, multi-generational businesses (Creswell, 2007). Qualitative research was also appropriate for answering the research questions, which consisted of how and why questions (Yin, 2003). The findings of this study provided a framework to assist family business leaders with the means to develop more effective business models.

8

The comparative case study design was chosen to compare and contrast the strategy and related leadership techniques of three family owned businesses in the food and beverage industry. The three conditions that justified the use of the case study design were the type of research question posed, the extent to which the researcher has control over the events being studied, and the focus on contemporary or historical events (Yin, 2003). A qualitative research project using case study methodology was appropriate for research that asked how and why questions, required no control of the events being studied, and focused on contemporary events (Yin, 2003). In this comparative case study, three private, multi-generational, family businesses in the food and beverage industry were studied to find out how and why family-owned businesses used their business model to develop a strategy to aid the understanding of environmental variables and ensure a sustainable future. The study was conducted within the existing context of the sample companies. The focus was on determining what the participant does in the present to ensure the long-term viability of the organization. Research Questions The qualitative research used comparative case study methods. The use of interviews and qualitative data analysis facilitated the determination of the business model, strategy planning process, environmental factors considered, and the influences on leadership and management in three private, family-owned businesses. The following research question provided the framework for the study: From a strategic planning perspective, how did successful, multi-generational, family-owned businesses remain sustainable from one generation to the next? Additional sub-questions described the extended focus of the study. For example, how did family businesses define and document their business models? How did family-owned companies develop their business strategy? How did the business model and business strategy

9

contribute to identifying internal and external environmental factors in a private, family-owned business? How did family business leaders manage cultural influences such as the Board of Directors, if one exists, family members, and entrepreneurism? The research questions established the foundation for the interview questions and were designed to keep the study focused on the role of strategy, the business environment, and leadership in the sustainability of family firms. Theoretical Framework Strategic Management Process Research suggested the strategic management process consisted of goal formulation, strategy formulation and implementation, and organizational performance (Sharma et al., 1997). The inputs to the strategic management process included “environmental opportunities and threats, organizational resources and skills, managerial values, social responsibilities, and family interests” (Sharma et al., 1997, p. 3). The strategic management framework was not a new concept, but was in fact, a simplified version of a model used in several studies conducted in the 1970s (Sharma et al., 1997). Strategic management processes delineated the activities essential to successful business: goal setting, planning, implementation, performance measures, and a control loop to assess and make changes (Sharma et al., 1997). The difference between family-owned and non-family-owned businesses was whose interests and values were served in the development of the strategy plan: the family or the public stakeholder(s) (Sharma et al., 1997). Until the late 1990s, there were very few studies conducted on the strategic planning processes and environmental factors considered by family-owned businesses (Sharma et al., 1997). According to Sharma et al. (1997), the influence and values of the family were most important to a family business. How these influences and values affected strategy planning and

10

development within family firms remained unexplored. Sharma et al. (1997) suggested that future research focus on defining strategic problems and opportunities to help family business managers improve the sustainability of their organization. Since the late 1990s, the status of family business strategy planning and environmental factors had received little attention and was still identified as insufficient (Casillas & Acedo, 2007). In a study of family-business literature, Casillas and Acedo (2007) conducted an author co-citation analysis (ACA) of articles written for Family Business Review (FBR) between 1988 and 2005. The analysis indicated that the field of family business research was highly fragmented based on the low repetition of citations in the articles studied. The result indicated a lack of agreement regarding foundational literature upon which to base further research. The result of this analysis also provided a scientific and historical framework to the field of family business studies (Casillas & Acedo, 2007). Open Systems Model Family-business research, like all areas of research, went through stages of development that eventually led to a full, robust body of knowledge (Pieper & Klein, 2007). To facilitate this process, Pieper and Klein (2007) proposed the concept of the open-systems model of the family business to help researchers discover, explore, and advance family business specific theory. The model was also designed to help family business leaders better understand the unique characteristics of family firms (Pieper & Klein, 2007). The model consisted of six subsystems. The first two subsystems, culture and economic setting, referred to the environmental context in which the organization operated (Pieper & Klein, 2007). The four remaining subsystems, family, business, ownership, and management, referred to organizational levels (Pieper & Klein, 2007). The final part of the model was

11

individuals, who can be a part of one or several subsystems (Pieper & Klein, 2007). The concept was that the model informed leadership regarding how the subsystems interacted and how change in one sub-system affected the others. The information gathered through subsystem analysis allowed business leaders to understand their organizations, identify and trace problems, and develop and implement sustainable solutions. The incorporation of the environment was the element that made the model an open system. According to Pieper and Klein (2007), the environment consisted of both family business and individual systems. The interactions between the business and the environment as well as the influence these interactions had on the organization were central to an open system approach to family business research (Naumann & Lincoln, 1989). The concepts of interaction between businesses, environmental factors, and the environmental influence on organizations were central to the purpose of this study. Definitions Business Model. According to Voelpel (2004), Timmers (1998) defined the business model as “an architecture for the product, service and information flows, including a description of the various actors and their roles” (p. 260). Context. Context was the setting in which the organization operates (Creswell, 2007). Environment. According to Pieper and Klein (2007), Miller (1978) defined environment as a “large, living system with organizations and lower levels of living systems as subsystems and components” (p. 305). Environmental Factors. Environmental factors were the subsystems of the environment, such as customers, competitors, suppliers, labor, and the government (Pieper & Klein, 2007).

12

Family Legacy: Family legacy consisted of the beliefs, values, and goals rooted in familial history and were a significant force behind generational succession (Aronoff, 2004; Hall, et al., 2001). Family legacy was represented by different values and beliefs in each participating company. Family-Owned Business. The definition of family-owned businesses ranged from majority ownership by the family to multiple family members involved in day-to-day management of the organization. For the purposes of the study, family-owned business was defined by the following criteria: (a) the family was in control of the strategic direction of the organization; (b) a member of the family ran the company; (c) the company had passed through more than one generation of family members; and (d) the family was involved in the executive management of the company (Astrachan & Shanker, 2003). Family Values: Family values consisted of the altruistic characteristics that create bonds of trust and loyalty within the organization (Schulze, et al., 2001). Open Systems Model. The open systems model considered the influences and interactions between the various components of the business model (Pieper & Klein, 2007). Strategic Management Process. A component of the business model that consisted of “goal formulation, strategy formulation, strategy implementation, and organizational performance” (Sharma, et al., 1997, p. 3). Sustainability. The definition of sustainability, for the purposes of the study, was the ability of the organization to remain in business beyond the next generation (Dobson & Swift, 2008).

13

Assumptions The research was based on the following assumptions: (a) sustainable family-owned businesses considered more than family succession when developing a strategic plan; (b) participants were family members or non-family members; (c) the participants provided an honest evaluation of their strategic planning process and the environmental factors considered; and (d) business strategy planning was an integral part of the success of private, family-owned businesses. The majority of strategic planning literature in the area of family business focused on succession planning (Zahra & Sharma, 2004). The assumption that family-owned businesses considered more than family succession when developing a strategic plan was critical to the study. The assumption that the participants provided an honest evaluation of the strategic planning processes was based on the assurance of confidentiality and anonymity. The quality of participant responses also hinged on the ability to gain the confidence and trust of the participants. The final assumption was based on the lack of support from the existing literature and the documented need for research in the strategic planning area (Pieper & Klein, 2007; Sharma et al., 1997; Sharma, 2004; Zahra et al., 2004). Scope The study was limited to a qualitative research project using comparative case study methodology in the study of three private, family-owned businesses in the Pennsylvania and southern New Jersey area. The participants were all executive leaders of businesses beyond the first generation. The study was designed to add to the body of family-owned business knowledge by addressing the absence of business strategy literature in the field. Collecting data from three sources, including interviews, and researcher notes, allowed for an in-depth review of each

14

individual case and for a comparison of the themes to develop a business model useful to family enterprises for the purpose of improving sustainability (Yin, 2003). Limitations The study focused on three family-owned businesses with emphasis on the strategic planning, environmental, and leadership influences affecting the sustainability of the company. The companies, all located in Pennsylvania and southern New Jersey, participated in 20 interviews. The study was limited to members of management involved with business strategy development and their perceptions of these processes. The qualitative research relied on planning, execution of protocols, and the ability to minimize bias to produce a generalized business model to assist other private, family-owned businesses focus on sustainability. Delimitations The research was limited to participants who were members of the management team of private, family-owned businesses. Data from non-family businesses was not included as the study was designed to establish models and processes in regard to family businesses and not as a comparison of family and non-family businesses. Each participant played a role in the planning and execution of the business model, the analysis of the environment, and the development of the business strategy. The study used data based on the perceptions and experiences of the participants to establish common strategy development themes among successful, multi- generational family businesses. Summary While family-owned businesses contributed significantly, 60% of the GDP and 65% of employment in the United States (Sharma, 2004), the scant literature exploring strategy development and the failure rate of family firms, 95% fail to reach the third generation

Full document contains 140 pages
Abstract: The purpose of this qualitative, comparative case study was to understand the relationship between business models, strategy planning processes, environmental factors, leadership, and the influence on sustainability in three private, multi-generational, family-owned businesses in New Jersey and Pennsylvania. Twenty executives were interviewed to gain insight to the qualities of the business model that led to sustainability beyond the first generation. The critical component to sustainability was identified as family values and continuation of the family. The findings revealed the importance of implementing an appropriate strategy planning process, establishing an advisory governance board, understanding the maturity level of the industry, acquiring industry knowledge, and establishing relations with suppliers and customers; elements of the Sustainable Family Business Model.