Enterprising through Familipreneurship for Economic Growth

Enterprising through Promoting Familipreneurship for Sustainable Poverty Reduction, Employment Generation and Economic Growth.

Abstract: This paper proposes Family Enterprise as a means of Enterprising through promoting Familipreneurship for sustainable Poverty Reduction, Employment Generation and Economic Growth. Familipreneurship means entrepreneurship of a family gained through Family Environment; it’s a way of life lived through as a Family. Family is the ultimate institution of mankind and is always sustainable as an economic unit. History started from the family, we have to go back to the family to go back to the future. This paper proposes Familipreneurship Education for Enterprising and urges continuous study on Familipreneurship to capture its salient features and dimensionalities for replication.

Key Words: Family Enterprise, Familipreneurship, Enterprising, Poverty reduction, Economic Growth.

Introduction

This paper is a conceptual argument based on real-life experiences for using enterprising as a means of poverty reduction which affects directly on employment generation and economic growth. It urges to promote Familipreneurship as a tool for enterprising. Familipreneurship means entrepreneurship of a Family gained through family environment; it’s a way of life to be a Family. Family is the ultimate institution of mankind. It is always a profitable institution as an economic unit itself which probably made it sustainable throughout the history. Families are largely based on emotional and moral obligations which are the largest social capital of mankind as well. History started from the family, we have to go back to the family to go back to the future.

 Available information shows that about a century ago most of the enterprises were Family Enterprise, still on an average 70 percent of total enterprises are Family Enterprise, in USA its about ninety percent, in Europe about eighty percent, similar picture is prevailing in other parts of the globe. Familipreneurship enable us creating Family Enterprise from a little capital, especially finance capital. Promoting Familipreneurship may the best way for enterprising. This paper proposes Familipreneurship Education for Enterprising and urges continuous empirical study on Familipreneurship from the perspective of a family as an entrepreneurial unit, not the lone individual hero, and through this way bridges the knowledge gap in entrepreneurship literature in context of creating Family Enterprise.

Poverty reduction, employment generation and economic growth

Despite vigorous multidimensional efforts worldwide poverty is still the biggest enemy of mankind. Existence of poverty paves the way for several consequent problems which affect all sphere of life. In many countries like Bangladesh prevalence of poverty is increasingly alarming. Ensuring poverty reduction will enhance all other development process and eliminate many other problems. Our experience of overall poverty reduction is very depressing. Dream of sending poverty to museum begin to shrink; especially after starting contemporary controversy of microcredit, recognized as most powerful tool to fight against poverty, is deepening this desolation. Poverty, unemployment and economic growth are integrated and interdependent socio-economic phenomenon.

Promotion of enterprise is one of the tested and trusted ways for sustainable poverty reduction, employment generation and economic growth as well as wealth creation for the future generation. Many countries are doing well adopting this policy in their national economic development agenda. Post-war Europe and some emerging Asian countries may be the best example. Many developing countries are adopted this policy. But most of the efforts are towards existing, promising and profitable enterprise, distinguishing as SMEs. Institutional effort of creating new enterprise is very poor; there is no standardized system of creating new enterprise. Seemingly finance capital is the key element of creating enterprise but this view does not agree with our experiences. Our experience shows that finance capital alone can’t create enterprise, even it is not the most important element for enterprising yet our financial investment towards new enterprise creation is very little. There are common understanding that inadequacy of land, labor, capital, technology, knowledge and entrepreneurship are the obstructs for enterprising. Familipreneurship reduces these obstructs.

Family enterprise as a form of enterprise

Family enterprises, irrespective of scale of operation, legal form, industrial activity, have been the backbone of socio-economic growth. Historically, family firms are, for the most part, enduring institutions and families and business have always existed to a large extent in tandem (Morck and Yeung, 2002; Narva, 2001). Their importance parallels socio-cultural advances and technological advances. In market economies family businesses are a fundamental source of job creation. Globally percentage of enterprises owned or controlled by families is an average around seventy percent.

Probably the secret of family firms’ long lasting resides exactly in the capability of transforming weak points into strong points, by investing in human capital, developing distinctive competences, encouraging long-term investments, following with persistence the mission. The reciprocal relationship between families and business often evolves from the natural dynamics of both entities being in close proximity to each other, particularly in the case of the home-based business (Heck et al., 1995).  Families and the family home, in fact, often serve as transparent incubators for the germination of business ideas and endeavors both in and out of the home as well as the storefront or factory. The birthplace of entrepreneurial ventures is often in the home. Families and businesses tend to move in parallel, with success in one leading to success in the other.

So as an enterprise, strength of family enterprise is proven. Recent studies on family entrepreneurship have only addressed the traditional issues of individual entrepreneurs in the family. Family enterprise will flourish in future for its inherent qualities. If we can create a family enterprise it will be continued or diversified by next generation. Creating family enterprise could be an effective strategy for sustainable poverty reduction, employment generation and economic growth. And this process could be institutionalized through formal Familipreneurship Education.

Family enterprise and entrepreneurship in existing literature

Though Family businesses predate recorded history (Colli, 2003), formal educational and research programs on family-owned firms are recent phenomena (Hoy and Verser, 1994; Wortman, 1994). Recent growing awareness, made family business studies growing at a rapid pace (Hoy and Sharma, 2006).

Family business research draws attention to better understand continuity and succession as well as expansion of existing business, particularly investigates resource shedding and reconfiguration. Entrepreneurship literature has focused on the creation of new venture/enterprises, especially through new endeavor and innovation. But perspectives, features and forms of entrepreneurship in context of creating new venture/enterprise/venture by family in an economy where inadequacy of resources is strongly prevalent are not well studied or missed or ignored. Especially in the case of using family enterprise as a tool of poverty reduction is remained untested.

While sociologists and political scientists have paid some attention to this question, this is an issue vastly ignored by the economists. Even though the latter do recognize the role of the family in economic decisions, there is not systematic empirical evidence isolating the importance of culture, as measured by the strength of family ties, on economic outcomes (Alesina and Giuliano 2007). In small, isolated primitive societies, the kinship system in itself can meet most of the basic individual and social needs (Martinson 1970). Family firm pursues both economic and noneconomic outcomes to sustain the business across future generations (Pearson, Carr, and Shaw 2008). Family businesses are the engine that drives socio-economic development and wealth creation around the world, and entrepreneurship is a key driver of family businesses and entrepreneurial family businesses are a primary source of job creation (Pistrui et al., 2006).

Evidence suggests that over time family firms are often more successful than nonfamily firms (Anderson & Reeb, 2003; Miller & Le-Breton-Miller, 2005). However, the mechanisms by which family firms outperform nonfamily firms are still unknown (Stanley 2010).

Few researchers have noted the connections between entrepreneurship and the family (Gartner, 2001; Upton and Heck, 1997) and have been entirely omitted by most entrepreneurship researchers (Aldrich and Cliff, 2003; Rogoff and Heck, 2003). Moreover, entrepreneurship research literature has given little attention to the interrelatedness of families and businesses (Davidsson and Wiklund, 2001; Shane and Venkataraman, 2000; Timmons, 1999). Entrepreneurship research, in particular, rarely acknowledges the underlying family dynamics. Some recent attention has been given to family ownership and its relationship to the ongoing performance (Anderson and Reeb, 2003). Both entrepreneurship and family business researchers view the business system as important and examine traditional topics such as strategy, management, production, labor, performance at business stages such as start-up, growth, maturity and exit (Rogoff and Heck, 2003). Moreover, family business research uses family systems theory while entrepreneurship is rooted in economics, management, strategy, finance, psychology and sociology.

Family as an agent of enterprising

Family as an entity is the oldest, largest in number, longest in existence organization of human history. Families are unique among social systems in that they are permanent, based more on obligation than contractual agreement, and membership is often determined by biology (Giudice,Peruta, and Carayannis 2011). Future generations carry on their ancestor’s knowledge and experience of togetherness both culturally and arguably, genetically. Familiness, especially in southern part of the world, is so powerful, effective and long lasting that family as an organization throughout the history exists without any oral or written constitution or standard norms. Matrix relations among the family members enable them to combine and best utilize their personal and collective financial, human, physical, social, knowledge, cultural, natural and intangible capital. 

Anterprise skills are not fixed personality traits but can be learned and developed through experience. Relationships should be a source of considerable strength in family businesses (Milton, 2008). Relationships play an important role within most organizations. Within family firms, relationships may be a pivotal, insufficiently recognized, source of unique competitive resources (Sirmon & Hitt, 2003). In essence, “entrepreneurs are family products.”

The family is now seen as the competitive advantage in long run business success because it facilitates the development of future leadership and enhances annual shareholder return, return on assets, annual revenue growth and income growth. Despite these logical keys to superior performance, surprising little study has been made of the family’s role. (Heck et al., 2006).  More recent entrepreneurship research places the entrepreneur(s) within a social context that is, in part, the family (Aldrich and Cliff, 2003) and has more equally focused on both the family and business (Stafford et al., 1999). The family is a critical element in the mix of resources that the entrepreneur needs at every stage of a venture (Rogoff and Heck, 2003).

Therefore, families are not just simply a group of individuals, but these individuals through family interactions and transactions create unique system or group attributes that are more than the sum of individuals and their attributes (Heck et al., 2006). These unique interactions make family businesses different. Both the family and the business are social systems which are purposive and rational. These two social systems transform available resources and constraints via interpersonal and resource transactions into achievements. The importance and powerful influence of family in all aspects of entrepreneurship and business has recently been highlighted (Rogoff and Heck, 2003). Families provide a sense of personal identity and a basis for a well developed community (Miller, 2001; Shepherd and Patzelt  2011). Families can be a source of resiliency, adaptability, trust, creativity and stress buffer. The household can serve as opportunity platform and incubator (Morris H. et. al. 2010).

Considering this, family as an organization of one or more individuals is more capable rather than an individual to create a new venture/enterprise. Just as individuals have brains and beliefs, families (organizations) have “cognitive systems and memories . . . world views and ideologies”

Elaboration of research questions

In these sections of literature discussed above we examine the relationship among enterprising and the potentialities of family enterprise as a tool of poverty reduction, employment generation and economic growth and then assert the dynamics of family and family enterprise. We bring forward our research keeping in mind two hypotheses:

Hypothesis 1

Enterprising is the best way of poverty reduction, employment generation and economic growth.

Hypothesis 2

Family Enterprise is the best form of enterprise in context of resource constrain.

To summarize the intentions of the paper we seek to unpack the underlying dimensionalities of family in the establishment of family enterprise by addressing a research questions:

What is the best way of creating Family Enterprise?

Methodology

The family business is a context that enables unscripted temporal performances by founders. Characteristics of the venture creation experience are examined, and underlying dimensions are analyzed and empirically investigated. Building on social capital theory, experiences of founders of family businesses are explored.

This study has been conducted as additional task of professional responsibilities as a banker during the period of 2003 to 2010 at Dhaka and Chittagong, Bangladesh. Primary data and information collected as part of professional responsibilities for various purposes and then it is shorted according to our study needs. Around 5 hundreds new enterprise creation and 1 thousand existing enterprises are observed in multiple levels as real-life experiences. In-depth interviews were held with the founders of family enterprise and other members of that family with subsequent follow-up visits. Collected subjective experiences and data were analyzed objectively and closely monitored enterprise creation process as part of the process. Long discussion and interaction were held to capture the experiences of family enterprise creation. A large number of cases were studied. Existing literatures on family, family enterprise and entrepreneurship reviewed extensively to generate conception in line with the practices.

Given the lack of any comprehensive entrepreneurship theory (Venkataraman, 1997), proximity to the phenomenon of interest is a way to enrich the field of entrepreneurship (Zahra, 2007). Thus, rather than using deductive reasoning to formulate hypotheses, our explicit aim was to develop insights from proximity to the entrepreneurs behind creation of enterprises. Indeed, our realization of Familipreneurship emerged inductively through our data collection and analysis process. This confirms the appropriateness of qualitative research for revealing substantive issues that have rarely been addressed in entrepreneurship (Gartner & Birley, 2002).

Our paper employs a multiple case studies approach which is suitable for “how and why” questions and for research that involves observations over time (Yin, 1994). To identify appropriate participants we conducted searches within diverse socio-economic setting for start-up  and existing enterprises for long time. Whilst initial data was gathered from official documents of Bangladesh Krishi Bank we selected a large numbers of case studies. According to theoretical sampling, “extreme” cases enable easier observation of the phenomenon and facilitate pattern recognition (Eisenhardt & Graebner, 2007). As the paper seeks to portray the details of the rich and complex setting, a few cases are deemed adequate (Langley, 1999). These cases where developed by a further round of interviews with the founders and other family members. Our analysis follows an iterative ‘back and forth’ approach between data and existing theories (Van Maanen et al. 2007). This method of comparison (Eisenhardt, 1989) permits inductive theory building as evidence is accumulated overtime to achieve theoretical replication (Yin, 1994). In line with Charmaz’s (2006) explanation of the social constructionist approach to theorizing reality is not considered as singular and concrete, thus insights into what the entrepreneurs believe is real for them were sought. By focusing on these few cases it becomes possible to provide enough evidence using both “power and proof” quotes (Pratt, 2008) so the reader can envisage the real-life experiences of the entrepreneurs in context of family enterprise creation.

Results and discussions

In Bangladesh, Chak Bazar, and Khatunganj, is the two largest wholesale markets in dominated by ‘Kuttis’ and ‘Sowdagors’. Define ‘Kutti’ and Sawdagar in brief.  They are mostly illiterate but uphold strong entrepreneurial knowledge and skills inherited from their families/ancestors. So they are dominating the context from generation to generation. Most of them do not have any formal entrepreneurial education or training; only reason behind their success is Familipreneurship; entrepreneurship gained through family environment. Their practical knowledge of enterprise is gathered through ‘doing’, although even the exceptions do not complete their secondary level education, and then starts enterprise or venture with other family members. In most cases they are successful. In many cases founder of a family enterprise did not have any formal education let alone enterprise education, but they did very well in their job. Once a family enterprise is created, the next generation carries this on because of inherent Familipreneurship. If next generation fails to carry on, then easily they can start their alternatives because of their entrepreneurial qualities created through Familipreneurship.

Knowledge of Familipreneurship could be captured through study on Enterprise Families. We have to chalk out those special features of those families that made them successful. Context of Familipreneurship is unique in nature since it is live and continuous and interactive. It involves the whole family as a business organisation. Once it is started, it goes on for ever. Knowledge on Familipreneurship gathered is mostly transferable.

Through Familipreneurship Education an every single individual of a family achieves the power and capacity to combine, transform and utilize personal and family wealth and scattered resources into capitals. Knowledge and skills of Familipreneurship is transferable through generation to generation. Familipreneurship creates a natural environment of generating and transferring indigenous knowledge and skill to reach their personal and collective goal which will accelerate the whole enterprising process as well as economic development. Promoting Familipreneurship could be the best solution to create new family venture/enterprise in a less or under or least developed economy where inadequacy of resources is strongly prevalent.

Limitations of this paper

This paper does not use any structured method rather it implies a set of methods to capture the dilemma of enterprise creation in context of Bangladesh. Information was collected from diverse socio-economic and demographic setup but not tested in multiple countries. A number of enterprise creation processes were observed for a long time but did not analyze aggregated data. To gain insight and be able to offer an explanatory model, a qualitative research approach was used because creation of enterprise is a temporal experience.

Recommendation for Future research and Study

One may have different social, economical or occupational identity, but all are belonging to a family. If the families are addressed as an intervening point it not only ensure the benefit it will continuously and increasingly add value to society. As an institution family is contributing maximum benefit to the society, which is commonly remaining uncounted. Family bonding is highly define and explicit than any other forms of organization. Family is the first place to learn for individuals and the fundamental unit of our social construct. Our learning begins from family first. The lessons, learnt from family, are most influencing and effective for individuals. Our basic life skill and mind set grows from family culture which have ever lasting and enormous effects on rest of life. Culture of a society mostly depends on them families' culture of that society, individual characteristics of a person drastically influenced by other family members’ character.

If we take the family as a level of analysis and intervention, it would open a new horizon of our entrepreneurship knowledge. Continuous empirical study is needed to encode and theorize the dimensionalities of Familipreneurship. It will enhance our understanding to help the practices of family enterprise. Our study shows that Familipreneurship not only contributes during the process of family enterprise creation but also contributes later process also. Exploring Familipreneurship may describe the reasons behind outperforming of family enterprise which is still unknown in a theoretical basis.

Our work on individual-level drivers of creating enterprise suggests possible interesting insights for several areas of literature. Our research also moves to expand discussions on the role of family in entrepreneurship literature more broadly. We believe this finding opens opportunities for further research into the role of family in creating enterprise.  Our paper has only looked at the process during the pre-launch and in the early days of new ventures, it would therefore, be valuable to probe the way in which they maintain and expand their enterprises in diverse socio-economic contexts.

 Conclusions & implications

Creating family enterprise as a means of enterprising for sustainable poverty reduction, employment generation and economic growth is largely untested. Our reviews reveal that family enterprise as a form of enterprise bears immense potentials which remained unexplored. We propose to use family enterprise as a tool for enterprising which directly affect employment generation and economic growth of a developing country.

Morris H., et. al. (2010) shows that the venture creation experience involves the interplay among affective, cognitive, and physiological responses as events are "lived through".  Surprisingly little is known about the early stages of family firms. Our study found that knowledge of Familipreneurship is generated and transferred through family by family. Family members learn enterprising education by ‘doing’ in family environment. One or more individuals take the lead but all other family members are integral part of it. Familipreneurship enables them to utilize their social capital in enterprising, as a result they are able to establish and run their enterprise profitably. If we can capture the features of Familipreneurship it will help us to use it in creating new family enterprise. Familipreneurship knowledge does not derive from any formal system rather it’s a indigenous system of learning. It is completely consistent with Sophocles’ (400 BC) observation “One must learn by doing the thing, for though you think you know it – you have no certainty, until you try.”

References:

Aldrich, H.E. and J.E. Cliff (2003), ‘The pervasive effects of family on entrepreneurship: toward a family embeddedness perspective’, Journal of Business Venturing, 18(5), 573–96.

Alesina and Giuliano (2007), in “The Power of the Family”, Harvard Institute of Economic Research Discussion Paper No. 2132 , IZA Discussion Paper No. 2750

Anderson, R. & Reeb, D. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. Journal of Finance, 58(3), 1301–1327.

Charmaz, K. (2006) Constructing Grounded Theory, Sage Publications: London.

Colli, A. (2003), The History of Family Business: 1850–2000, Cambridge: Cambridge University Press.

Davidsson, P and J.Wiklund (2001), ‘Levels of analysis in entrepreneurship research: current research practice and suggestions for the future’, Entrepreneurship Theory and Practice, 25(3), 81–99.

Eisenhardt, K. M. and M. E. Graebner (2007). "Theory Building from Cases: Opportunities and Challenges." Academy of Management Journal 50(1): 25-32.

Eisenhardt, K. M. (1989). Building Theories from Case Study Research. Academy of Management Review, 14(4), 532- 550.

Gartner, W.B. & Birley, S. (2002). Introduction to the special issue of qualitative methods in entrepreneurship research. Journal of Business Venturing, 17(5), 387-395.

Gartner, W.B. (2001), ‘Is there an elephant in entrepreneurship? Blind assumptions in theory development’, Entrepreneurship Theory and Practice, 25(3), 27–39.

Giudice,  Peruta, and  Carayannis (2011), Knowledge and the Family Business: The Governance and Management of Family Firms in the New Knowledge Economy (Innovation, Technology, and Knowledge Management), Springer New York Dordrecht Heidelberg London

Heck, R.K.Z., A.J. Owen and B.R. Rowe (eds) (1995), Home-based Employment and Family Life, Westport, CT: Auburn House.

Heck et al. (2006), “The family’s dynamic role within family business entrepreneurship”  in Work” Handbook of Research on Family Business” Ed. Poutziouris, X. Smyrnios, and B. Klein, Cheltenham and Massachusetts, Edward Elgar Publishing Limited and Edward Elgar Publishing, Inc.

Hoy, and Sharma (2006), “Navigating the family business education maze”, in Work” Handbook of Research on Family Business” Ed. Poutziouris, X. Smyrnios, and B. Klein, Cheltenham and Massachusetts, Edward Elgar Publishing Limited and Edward Elgar Publishing, Inc.

Hoy, F. and T.G. Verser (1994), ‘Emerging, business, emerging field: entrepreneurship and the family firm’, Entrepreneurship Theory and Practice, 19(1), 9–23.

Langley, A. (1999) Strategies for Theorizing from Process Data. Academy of Management Review, 24(4): 691-710.

Martinson (1970), in “Family in society”, Dodd, Mead & Company, Inc. New York, USA

Miller, D. & Le-Breton-Miller, I. (2005). Managing for the long run: Lessons in competitive advantage from great family businesses. Boston: Harvard Business School Press.

Miller, J. (2001). Family and community integrity. Journal of Sociology and Social Welfare, 28, 23–44.

Milton (2008), Unleashing the Relationship Power of Family Firms: Identity Confirmation as a Catalyst for Performance Entrepreneurship Theory and Practice, 32(6),1063-1081

Morck, R. and B. Yeung (2002), ‘Family control and the rent-seeking society’, unpublished paper presented at the 2002 Theories of the Family Enterprise Conference, Wharton Business School, Philadelphia, PA.

H. Morris, A. Allen, F. Kuratko, Brannon(2010), “Experiencing family business creation: differences between founders, nonfamily managers, and founders of nonfamily firms”, Entrepreneurship Theory and Practice, 34(6), 1057-1084

Narva, R.L. (2001), ‘Heritage and tradition in family business: how family-controlled enterprises connect the experience of their past to the promise of their future’, in G.K. McCann and N. Upton (eds), Destroying Myths and Creating Value in Family Business, Deland, FL: Stetson University, pp. 29–38.

Pistrui et al., (2006),” Family and cultural forces: shaping entrepreneurship and SME development in China”, in Work” Handbook of Research on Family Business” Ed. Poutziouris, X. Smyrnios, and B. Klein, Cheltenham and Massachusetts, Edward Elgar Publishing Limited and Edward Elgar Publishing, Inc.

Pratt, M. G., K. W. Rockmann, et al. (2006). "Constructing Professional Identity: The Role of Work and Identity Learning Cycles in the Customization of Identity Among Medical Residents." Academy of Management Journal 49(2): 235-262.

Rogoff, E.G. and Heck, R.K.Z. (2003), ‘Evolving research in entrepreneurship and family business: recognizing family as the oxygen that feeds the fire of entrepreneurship’, Journal of Business Venturing, 18(5), 559–66.

Shane, S. and S. Venkataraman (2000), ‘The promise of entrepreneurship as a field of research’, Academy of Management Review, 25(1), 217–26.

Shepherd and  Patzelt  (2011), The New Field of Sustainable Entrepreneurship: Studying Entrepreneurial Action Linking “What Is to Be Sustained” With “What Is to Be Developed”, Entrepreneurship Theory and Practice, 35(2),137-163 

Simon, D. and M. Hitt (2003), ‘Managing resources: linking unique resources, management, and wealth creation in family firms’, Entrepreneurship Theory and Practice, 27(4), 339–58.

Stafford, K., K.A. Duncan, S.M. Danes and M. Winter (1999), ‘A research model of sustainable family businesses’, Family Business Review, 12(3), 197–208.

Stanley (2010), "Emotions and Family Business Creation: An Extension and Implications",Entrepreneurship Theory and Practice, 34(6), 1085–1092

Timmons,J.A.(1999),New Venture Creation, Boston,MA: Irwin McGraw-Hill.

Upton, N.B. and R.K.Z. Heck (1997),"The Family Business Dimension of Entrepreneurship", in D.L Sexton and R.W. Smilors,ed.Entrepreneurship:2000, Chicago, IL:Upstart,243-266

Van Maanen, J., S. Rensen, J. B., & Mitchell, T. R. (2007). Introduction to Special Topic Forum: The Interplay between Theory and Method. Academy of Management Review, 32(4),1145-1154.

Venkataraman, S. (1997). The distinctive domain of entrepreneurship research: An editor’s perspective. In J. Katz & R. Brockhaus (Eds.), Advances in entrepreneurship, firm emergence and growth: Vol. 3, 119–138. Greenwich, CT: JAI Press.

Wortman, Jr, M.S. (1994), ‘Theoretical foundations for family-owned businesses: a conceptual and research based paradigm’, Family Business Review, 7(1), 3–27.

Yin, R.K. (1989), Case Study Research: Design and Methods, London: Sage.

Zahra, S.A, (2007). Contextualizing Theory Building in Entrepreneurship Research. Journal of Business Venturing, 22(3), 443 452.