Moving forward: Balancing the financial and emotional costs of business failure

Why do owner-managers delay business failure when it is financially costly to do so? In this paper we acknowledge that delaying business failure can be financially costly to the owner-manager and the more costly the delay, the more difficult the recovery. But we complement this financial perspective by introducing the notion of anticipatory grief as a mechanism for reducing the level of grief triggered by the failure event, which reduces the emotional costs of business failure. We propose that under some circumstances delaying business failure can help balance the financial and emotional costs of business failure to enhance an owner-manager's overall recovery — some persistence may be beneficial to recovery and promote subsequent entrepreneurial action.     

Does Religion Matter to Owner-Manager Agency Costs? Evidence from China

In China, Buddhism and Taoism are two major religions. Using a sample of 10,363 firm-year observations from the Chinese stock market for the period of 2001–2010, I provide strong and robust evidence that religion (i.e., Buddhism and Taoism on the whole) is significantly negatively associated with owner-manager agency costs. In particular, using firm-level religion data measured by the number of religious sites within a radius of certain distance around a listed firm’s registered address, I find that religion is significantly negatively (positively) associated with expense ratio (asset utilization ratio), the positive (reverse) proxy for owner-manager agency costs. This finding is consistent with the following view: religiosity has remarkable effects on the way how an individual thinks and behaves, and thereof can curb managers from unethical business practices. Moreover, my findings suggest that the negative association between religion and owner-manager agency costs is attenuated for firms with strong external monitoring mechanisms such as higher Marketization and high-quality auditors. Furthermore, after separating Buddhism from Taoism, my finding indicates that above conclusions are only available for Buddhism, suggesting that different religions may have asymmetric influence on owner-manager agency costs. Above results are robust to various measures of religiosity and a variety of robustness checks.     

Manager-Employee Relationships: Guided by Kant's Categorical Imperative or by Dilbert's Business Principle

The relationship between Employer and Employees is a central one in the world of business. While an important relationship, it is one that is often a source of tension for the workplace. Employers are seemingly in constant mistrust of workers, while workers often look upon their bosses as "less than competent". In the American world of business today, should this "adversarial" relationship continue or should the Employer–Employee Relationship be governed by different rules. Immanuel Kant's Categorical Imperative offers some insights into the way this relationship should be viewed. Also, the philosopher Alfred North Whitehead has some important points to add to the discussion of this crucial business relationship. A look at the case involving Malden Mills Textile Plant and its CEO Aaron Feuerstein will be used to launch this discussion.     

The capital structure and investment decisions of the small owner-managed firm: Some exploratory issues

In the burgeoning literature on small firm financing, the problem of underidentification in respect to the supply of, and demand for, capital has not been fully resolved. In an attempt to progress this issue, the current paper looks at some of the issues influencing the demand for finance in small firms which are owner-managed. The paper is primarily exploratory in nature and argues that a greater emphasis might usefully be placed on the cost of capital dimension in future research into small business financing. In particular, it is suggested that where the objective of an owner-manager is to maintain control of the firm, interdependent investment and financing strategies may be chosen to control the small firms cost of capital. This in turn indicates that the tendency for some small firms to invest sub-optimally and exhibit slower than average growth may not be primarily determined by limitations on their supplies of finance. On the demand side, it may well be that in addition to equity aversion, a suboptimal capital structure decision is made in the form of a reduced demand for debt. In other words, given the level of equity that an owner-manager chooses, debt may not be fully expanded to the capacity limit consistent with value maximisation.     

Capital structure decision making: A model for family business

Most theoretical and empirical studies of capital structure focus on public corporations. Only a limited number of studies on capital structure have been conducted on small-to-medium size enterprises (SMEs), and this deficiency is particularly evident in investigations into factors that influence funding decisions of family business owners.Theory indicates that there is a complex array of factors that influence SME owner-managers' financing decisions. Recent family business literature suggests that these processes are influenced by firm owners' attitudes toward the utility of debt as a form of funding as moderated by external environmental conditions (e.g., financial and market considerations).A number of other factors have been shown to influence financing decisions including culture; entrepreneurial characteristics; entrepreneurs' prior experiences in capital structure; business goals; business life-cycle issues; preferred ownership structures; views regarding control, debt–equity ratios, and short- vs. long-term debt; age and size of the firm; sources of funding for growth; attitudes toward debt financing; issues relating to independence and control; and perceived risk and attitudes toward personal risk.Although these factors have been identified, until now there does not appear to have been any attempts to develop empirically-based models that show relationships between these factors and family business owners' financing decisions. Utilizing theories derived from divergent disciplines, this study develops an empirically tested structural equation model of financing antecedents of family businesses. Participants of our study involved a random sample of 5000 business owners who were mailed a 250-item Australian Family and Private Business questionnaire developed specifically for this investigation.Notably, our findings reveal that firm size, family control, business planning, and business objectives are significantly associated with debt. Small family businesses and owners who do not have formal planning processes in place tend to rely on family loans as a source of finance. However, family businesses in the service industry (e.g., retailers and wholesalers) are less likely to use family loans as are those owners who are planning to achieve growth through new products or process development. Use of capital and retained profits is likely for family businesses planning to achieve growth through an increase in sales but less is likely for family businesses in the manufacturing sector and lifestyle firms. In addition, debt and family loans are negatively related to capital and retained profits. Equity is a consideration for owners of large businesses, young firms, and owners who plan to achieve growth through increasing profit margins. However, equity is less likely to be a consideration for older family business owners and owners who have a preference for retaining family control.Our findings suggest that the interplay between multiple social, family, and financial factors is complex. In addition, our findings indicate the importance of utilizing theories that also help to explain behavioral factors (e.g., owners' needs to be in control) that affect financial structure decision-making processes. Practitioners and researchers should consider the dynamic interplay among business characteristics (e.g., size or industry), behavioral aspects of business financing (e.g., business objectives), and financial factors (e.g., gearing levels) when working with and researching family enterprises.     

Same Boundary Management Preference,Different Outcome: Toward a Gendered Perspective of Boundary Theory Among Entrepreneurs

Work‐family boundary research debates whether family demands should be integrated or separated from work demands. Our thesis is that the impact of boundary management preferences on business performance depends on the entrepreneur's gender. We also investigate how family‐to‐business support and business location alter the gender and boundary management preference interaction. Results show that an integration preference enhances business performance for men regardless of family‐to‐business support or business location. A segmentation preference aids women's business performance, especially among those with high family‐to‐business support and an independent business. An integration preference yields greater business performance for women with an at‐home business.     

Marketing Professional Services to Family Businesses

ABSTRACT

Theory from the new field of family business studies, tested empirically here, indicates that family business procurement processes for professional services is significantly different from that of other companies. Family businesses engage in more informal processes, involve family members who are not employees as influencers in the buying center, require a greater investment on the part of their suppliers and take longer to reach a decision. As a result of these process distinctions, marketers of professional services targeting smaller to medium sized businesses should be prepared to address the special needs of family business owners.     

Aligning Private Business Development and Economic Growth in Nigeria

Abstract

This paper examines the different factors that have influenced the development of new types of entrepreneurship in Nigeria since 1986. It analyzes the problems Nigerians confront in trying to run small businesses as a result of the structural adjustment policy that was proposed by the World Bank and International Monetary Fund, and adopted by the military government in 1986. The major questions addressed in this study are: what are the economic and political situations in Nigeria between 1980-1997 and how have these situations forced the people of the nation to be entrepreneurs? What obstacles do entrepreneurs face in starting small businesses in Nigeria? What are the different types of entrepreneurship that have resulted in Nigeria due to the structural adjustment policies of this period?

The paper demonstrates that economic difficulties were the major reasons for those who started their business between 1986 and 1995 in Nigeria. This supports the notion that entrepreneurship should not be viewed as a function of opportunity but rather as a function of cultural perception of opportunity and the need to maintain continuous family income. Policy implication and topics for future research are discussed.     

Personal networks and firm competitive strategy—A strategic or coincidental match?

This article is based upon the premise that the personal network of the owner-manager is the most important resource upon which he or she can draw in the early days of the firm's development. This is particularly the case as the concept of personal networks is sufficiently general to include dimensions that include, for example, attention to customers, understanding of the business, market orientation, or stress on quality. As such, it is intuitively obvious that the nature and use of these networks must impinge upon the resultant strategy adopted in the firm, albeit often implicit rather than explicit. However, as yet there is no empirical evidence to support this conclusion. Therefore, this article probes one question: how do the characteristics of the owner-manager's network relate to the competitive strategy of new ventures? Clearly, within this, we expected to find relationships that were logically consistent.The research was conducted in two counties in England that possessed similar industrial structures and equal rates of new firm formation. A list of firms was obtained from local business directories, and all 629 firms that fit the criteria were contacted by telephone. Validation of the firms at this point resulted in a significant reduction in those that fit the sampling criteria.Four hundred twenty-three firms were mailed an 11-page questionnaire resulting in a 52% response rate.Preliminary analysis of the strategy variables identified six components that were consistent with previous literature. These were labeled as marketing differentiation, product innovation, market segmentation, distribution, growth through outside capital, and differentiation through quality. Correlation of these components with the networking characteristics of propensity to network, network activity, network density, network intensity, and content of network exchanges supports our proposition that entrepreneurs differ in their networking activities according to the competitive strategy pursued by the firm.Further classification of the owner-managers into strategic clusters demonstrates that most firms appear to follow multiple patterns of strategic behavior. Moreover, the comparison with the networking characteristics shows that owner-managers appear to differ in a logical manner in the use of their networks. Bailey, Montera, and Cardow (1992) argue that a firm's resource base consists of financial, physical, and human resources, and that the manner in which those resources interact is determined by the firm's strategy. Previous research on entrepreneurial networks has shown the amount of time and energy the owner-manager devotes to the development and maintenance of contacts. The underlying assumption of social-network theory is that through a personal network, the owner-manager of a new venture gathers access to critical resources, which for a variety of reasons the new firm does not possess internally. Consequently, this research has argued that this resource base cannot be ignored when attempting to understand the concept of “strategy” among new and small firms. In fact, this resource base may play a dominant role in formulating as well as implementing “strategy.”     

Conciliating Work and Family: A Catholic Social Teaching Perspective

Although work–family conflict is highly relevant for both families and businesses, scarce attention has received from business ethics perspective. This article focuses on the latter, presenting a set of relevant insights from Catholic Social Teaching (CST). After reviewing the foundations and principles presented by CST regarding work–family relationships, a set of normative propositions are presented to develop work–family policies and for a correct personal work–family balance. It is argued that business responsibility with employees’ family should be considered as a part of Corporate Social Responsibility. In addition, the applications of these principles and propositions can lead to a mutual enrichment of both business and family.     

The Categories,Rules, and Demonstrations of Guanxi in Chinese Society

ABSTRACT

Purpose: Guanxi is one of the most important success factors in China. Because of differences in Eastern and Western relationships, it is essential to investigate the system of guanxi in China. Based on the differential mode of association (chaxugeju), the present study aims to construct a framework for the mechanism of guanxi in Chinese society.

Methodology/approach: A questionnaire survey of middle and senior managers was conducted to test the proposed hypotheses. A sample consisting of 212 middle or senior managers who worked in China and had direct interactions with business partners was used. The participants were mainly from firms in the pharmaceutical technology, telecommunication, and retailing industries.

Findings: Guanxi categories, guanxi rules, and guanxi demonstrations were found to be correspondingly related. Business partners who had family guanxi applied the rule of need and presented intimacy interactions, whereas partners who had acquaintance guanxi often followed the rule of favor and demonstrated higher levels of reciprocity. These two corresponding paths positively influenced the strength of guanxi: The partners were more willing to sacrifice self-interest for and provide high priority in resource allocation to each other. Business partners who had stranger guanxi used the rule of equity and built trust relationships, which had negative impacts on the strength of guanxi.

Practical implications: Because guanxi affects the performance of companies in China, maintaining guanxi networks with business partners is an important but challenging task for managers, especially for those from non-eastern cultures. The current study suggests that it is essential for managers to identify different types of guanxi (family, acquaintance, or stranger) by differential intimacy and distance, and to apply different rules when interacting with partners with different guanxi. To be specific, managers should follow the rule of need with business partners who have family guanxi, and their guanxi should be demonstrated as intimacy interaction. When doing business with acquaintances and friends, managers should mainly follow the rule of favor, and their guanxi should be demonstrated as reciprocity interaction. When doing business with strangers, managers should follow the rule of equity and emphasize trust. This correspondence also has an influence on how managers make decisions according to the strength of guanxi with different partners based on the guanxi type. In short, guanxi affects the degree of willingness to sacrifice self-interest for, and to prioritize resource allocations to, business partners.     

The Ten Commandments Perspective on Power and Authority in Organizations

Power and authority in terms of the Ten Commandments (TCs) are discussed. The paper reviews the TCs in Christianity, Judaism, and Islam. The treatment and basis for power and authority in each religion are clarified. Implications of power and authority using the perspective of the TCs are provided. The paper suggests that in today's business environment people tend to be selective in identifying only with certain elements of the TCs that fit their interest and that the TCs should be viewed as general moral guidelines.     

Aristotelian virtue and business ethics education

In recent years there has been an increased interest in the application of Aristotelian virtue to business ethics. The objective of this paper is to describe the moral and intellectual virtues defined by Aristotle and the types of pedagogy that might be used to integrate virtue ethics into the business curriculum. Virtues are acquired human qualities, the excellences of character, which enable a person to achieve the good life. In business, the virtues facilitate successful cooperation and enable the community to achieve its collective goals. The cultivation of virtue in students requires imparting knowledge about virtue and training students to be virtuous. A variety of instructional techniques are discussed including using case studies, collaborative and cooperative learning, role-playing, and video presentations. Business educators should emphasize to students that virtue considerations apply both to possible actions they may take and to themselves as moral agents. Since faculty may be viewed as role models, it is especially important that they set proper standards of behavior for students to emulate. Steven M. Mintz is the Dean of the School of Business and Public Administration at California State University, San Bernardino. His accounting ethics casebook, Cases in Accounting Ethics and Professionalism, is in its third edition and is published by McGraw-Hill.     

Succession financing in family firms

Business succession is one of the primary management challenges for family firms. However, many family firms fail at this task because of financial issues. Although a vast number of studies have investigated the succession process, research thus far has failed to determine how and why family firms select particular forms of financing for succession-related expenditures. Accordingly, this study conceptually and empirically investigates succession financing. We introduce a conceptual framework that investigates the reasons behind an owner-manager’s intent to use debt for succession financing. Specifically, our model accounts for general and succession-related personal factors. However, we also include a set of firm-specific financing behavioral controls in our research. The empirical results are derived from a sample of 187 German family firms, and the results highlight financial knowledge, attitudes, succession experience, and succession planning as significant determinants of the owner-managers’ debt usage intentions. The implications and avenues for future research are discussed.     

Strategic and Business Planning Practices of Fast Growth Family Firms

Fast-growth family firms were surveyed about their business and strategic planning practices. Of the 65 fast-growth family firms surveyed, the majority prepare written formal plans. The business plans are in sufficient detail to enable the business to tie planning to actual performance and to adjust management compensation accordingly. The majority of the firms regularly share information with employees regarding comparisons between actual company performance results and goals or planned performance. Further, the majority of the firms describe their business strategy as a high quality producer strategy rather than as a low-cost or time-based strategy. Further, when bringing new products to market, these fast-growth family firms adopt a first mover or early follower strategy. Implications of these findings for growth-oriented family firms are presented.     

Innovation,engagement, and impact measures: Two exploratory studies on the processes and outcomes development

The authors examine the development and implementation of measures for the 2013 Association to Advance Collegiate Schools of Business (AACSB) thematic dimensions of innovation, engagement, and impact (IEI) at two AACSB-accredited business schools. Agreement exists among faculty in Study 1 that IEI should be viewed as interrelated and overlapping concentric circles rather than separate dimensions. Study 2 findings suggest the importance of dialogue with faculty during the implementation process to further clarify the conceptual IEI boundaries. Overall, the authors' findings can assist schools in ensuring that the development and implementation of IEI themes in their institutions are consistent with the AACSB standards.     

Next-generation entrepreneurial identity in family business systems: The influence of role-changing events on the understanding of legacy,individual identity,and transgenerational entrepreneurship of next-generation family business principals

The paper addresses how the understanding of family business legacy, individual identity, and transgenerational entrepreneurship of next-generation principals is affected by role changing events in family business systems. The paper uses the insights of a focus group of 38 next-generation family business principals of ultrahigh-net-worth business families from 14 countries. It corroborates that parents and role models are influencing factors on the understanding and perception of family identity, values, and transgenerational entrepreneurship. Identity inflection points during moments of expected and unexpected role changes, such as family business succession, can either positively or negatively impact the appreciation of a next-generation principal regarding legacy, identity, and transgenerational entrepreneurship. Based on the results of the qualitative interviews and peer group discussions, the findings indicate how identity inflection points affect the preservation of the next-generation family business principal's identity and family identity during a moments of role changes in family businesses and are a bottleneck for transgenerational entrepreneurship.     

Correlates of success in family business transitions

Fundamental differences are identified between the nature and functioning of family-owned and -managed businesses and those that are not familu-controlled. These differences include the time horizons of management, the implications of business failure, the degree of job security, the centralization of decision-making, accountability for decision-making, and the impact of the family system on the business system, among others. It is argued that the most significant of these differences concerns the way in which executive succession occurs, and specifically, unique aspects of the process of intergenerational transfer within family-owned businesses.Based on an initial round of interviews with second- and third-generation family business owners, and a detailed review of the extant literature, a model is proposed consisting of three sets of determinants of successful family business transitions: the preparation level of the heirs, the nature of relationships among family members, and the types of planning and control activities engaged in by the management of the family business. Successful transitions are further hypothesized to influence subsequent company performance.Much of the research to date on family business transitions has tended to be qualitative, case-oriented, and/or anecdotal in nature. The result has been a number of rich insights into the complexities and dynamics of the family enterprise, but limited in terms of the generalizability of the findings. Considerably less attention has been devoted to quantitative studies that employ larger samples and provide empirical tests of relationships between key variables. This lack of attention is traced to inherent measurement difficulties in the family business field, and to the relatively young status of the field itself as a distinct area receiving academic attention. The current study attempts to bridge this gap.The study provides a quantitative assessment of the proposed model using two cross-sectional sub-samples consisting of 209 second- and third-generation family-owned businesses. Both regression and structural equations (LISREL) analyses are employed. The results indicate support for the proposed model. Family business transitions do occur more smoothly when heirs are better prepared, when relationships among family members are more trust-based and affable, and when family businesses engage in more planning for taxation and wealth-transfer purposes. Of these factors, relationships within the family has the single greatest impact on successful transitions. At the same time, smoother transitions do not necessarily result in better post-transition performance by the enterprise. This linkage to performance appears to be more complex. One possibility is that some level of conflict or strife is a prerequisite for the transition to have a significant impact on subsequent performance.Based on these results, family business owners are encouraged to devote relatively more attention to relationship issues, and relatively less to estate and tax planning. It is suggested that a “relationship charter” be developed as a vehicle for strategically managing relationships within the family, much as relationships must be managed with suppliers or customers. Suggestions are also made for further research, and the study's limitations are denoted. Researchers are encouraged to devote efforts to exploring relationships among the exogenous variables in the research model, such as that between preparation levels of heirs and family relationships. Further, the issue of success and failure in second- and third-generation businesses warrants greater attention, including identification of key failure and success factors as well as determination of differences in failure rates for family— versus non-family—owned businesses and isolation of the reasons for such differences.     

Is it the Kids or the Schedule?: The Incremental Effect of Families and Flexible Scheduling on Perceived Career Success

Flexible work arrangements (FWAs) are widely offered in public accounting as a tool to retain valued professional staff. Previous research has shown that participants in FWAs are perceived to be less likely to succeed in their careers in public accounting than individuals in public accounting who do not participate in FWAs (Cohen and Single, 2001). Research has also documented an increasing backlash against family–friendly policies in the workplace as placing unfair burdens on individuals without children. Building directly on a previous study in this journal (Cohen and Single, 2001), this study addresses the issue of whether the documented perceptions toward FWA participants are the result of electing to take part in the FWA or the result of bias against employees with children. The research questions are addressed in a 3 × 2 experimental setting in which we manipulate FWA participation, along with family status and gender of a hypothetical manager in a public accounting firm. Our findings indicate that FWA participants are viewed as less likely to advance and as less committed than individuals without children or individuals who had children but who were not taking part in a FWA. Male FWA participants are viewed as less likely to succeed than female FWA participants. This effect appears to arise from a perception that FWA participants are willing to make sacrifices in their careers to accommodate family needs and thus may not be as committed to making the sacrifices perceived as necessary to meet the rigorous demands of the public accounting environment. This raises the ethical question of what could be done to change the culture in public accounting to foster a substantive support system for individuals who want to balance a family and a career.     

Internet Technologies in China: Insights on the Morally Important Influence of Managers

Within Science and Technology Studies, much work has been accomplished to identify the moral importance of technology in order to clarify the influence of scientists, technologists, and managers. However, similar studies within business ethics have not kept pace with the nuanced and contextualized study of technology within Science and Technology Studies. In this article, I analyze current arguments within business ethics as limiting both the moral importance of technology and the influence of managers. As I argue, such assumptions serve to narrow the scope of business ethics in the examination of technology. To reinforce the practical implications of these assumptions and to further illustrated the current arguments, I leverage the recent dialog around U.S. Internet technologies in China. The goal of this article is to broaden that which is morally salient and relevant to business managers and business ethicists in the analysis of technology by highlighting key lessons from seminal STS scholars. This article should be viewed as part of a nascent yet burgeoning dialog between business ethics and Science and Technology Studies – a dialog that benefits both fields of study.