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Family businesses- introduction and the Israeli point of view

Family businesses- introduction and the Israeli point of view. IDC, 16.9.08 Nava Michael-Tsabari Haifa University haela5@zahav.net.il. Structure of presentation. • Definitions • Some facts & figures • Family system &/vs. business system • 2 basic models

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Family businesses- introduction and the Israeli point of view

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  1. Nava Michael-Tsabari, Haifa University, Israel Family businesses- introduction and the Israeli point of view IDC, 16.9.08 Nava Michael-Tsabari Haifa University haela5@zahav.net.il

  2. Structure of presentation • Definitions • Some facts & figures • Family system &/vs. business system • 2 basic models • Israel – facts & figures • Some thoughts Nava Michael-Tsabari, Haifa University, Israel

  3. Nava Michael-Tsabari, Haifa University, Israel

  4. Family businesses in the world Nava Michael-Tsabari, Haifa University, Israel

  5. Nava Michael-Tsabari, Haifa University, Israel

  6. :Some of the oldest family businesses Nava Michael-Tsabari, Haifa University, Israel

  7. ? Nava Michael-Tsabari, Haifa University, Israel

  8. Defining a family business • Ownership • Management • Multi generations Nava Michael-Tsabari, Haifa University, Israel

  9. One definition for example: • Intention to maintain family control • Unique, inseparable, and synergetic resources and capabilities arising from family involvement • A vision set by the family and intended for trans-generational pursuance • Pursuance of such a vision (Chrisman, Chua & Sharma, 2003) Nava Michael-Tsabari, Haifa University, Israel

  10. Methodological problems: • 28 studies with 28 different definitions for a family business (Miller, Le Breton-Miller, Lester, & Cannella Jr., in Press) Nava Michael-Tsabari, Haifa University, Israel

  11. Maybe it is a continuous variable: The F-PEC scale: • Power • Experience • Culture (Astrachan, Klein & Smyrnios, 2002) Nava Michael-Tsabari, Haifa University, Israel

  12. Family Businesses - facts & figures • About 90% of all small businesses • In Israel – 392,000 active companies 375,000 (96%) small or medium companies Nava Michael-Tsabari, Haifa University, Israel

  13. Family businesses are prevalent around the world 85% Italy 84% Germany 75% Spain 96% USA 90% Brazil 75% Australia Nava Michael-Tsabari, Haifa University, Israel Source: ifera 2003

  14. Not only small businesses: • 30-40% of big companies • 37% of S&P 500 in the US Nava Michael-Tsabari, Haifa University, Israel

  15. Family businesses as an academic field • Over 90 universities in the US and Europe with centers for research and study • The Family Business Review celebrates 20 years • IFERA – International Family Enterprise Research Academy – since 2000 Nava Michael-Tsabari, Haifa University, Israel

  16. Family businesses as an academic field • Part of entrepreneurship? • Bias of the business focus: a family business vs. a business family • Interdisciplinary: management, finance, strategy, entrepreneurship, law, psychology, family studies, sociology, social psychology, organizational behavior, etc. Nava Michael-Tsabari, Haifa University, Israel

  17. Current debate in the literature • Several recent studies find that family businesses financially outperform non-family businesses, especially the 1st generation (e.g. Anderson & Reeb, 2003, Villalonga & Amit, 2006) • Mixed results – because of different definitions? because of different types? Nava Michael-Tsabari, Haifa University, Israel

  18. “Types” of family businesses – an empirical study Westhead & Howorth, 2007 Nava Michael-Tsabari, Haifa University, Israel

  19. More questions: • What makes the family business unique? • What gives the family business a competitive advantage? Nava Michael-Tsabari, Haifa University, Israel

  20. A family business= family+business Nava Michael-Tsabari, Haifa University, Israel

  21. A family business= family+business Nava Michael-Tsabari, Haifa University, Israel

  22. The dualistic approach The family system The business system • Emotional content • Familial needs • Seeks stability • Business function • Business demands • Management of changes The two systems differ in goals, belonging, decision making, priorities, evaluation of performance, rewards and continuity (Carlock & Ward, 2001, Fleming, 2000, Kepner, 1983) Nava Michael-Tsabari, Haifa University, Israel

  23. Disadvantages of the dualistic approach • Encouragement of extremity and opposition • Stereotypical views – professional/emotional, masculine/feminine • Unclear boundaries Nava Michael-Tsabari, Haifa University, Israel

  24. The unified systems approach • The family business: two powerful entities that share the same enterprise (Denison et al., 2001) • The business and the family are equal and overlapping systems that move simultaneously towards coexistence, success in one leads to success in the other, and problems or changes in one express in problems or changes in the other (Heck et al., 2006) Nava Michael-Tsabari, Haifa University, Israel

  25. The current view • “Family firms exist because of the reciprocal economic and non-economic value created through the combination of family and business systems. In other words, the confluence of the two systems leads to hard-to-duplicate capabilities or “familiness” that make family business peculiarly suited to survive and grow” (Chrisman, Chua & Sharma, 2003) Nava Michael-Tsabari, Haifa University, Israel

  26. Different point of views Unified Dualistic Nava Michael-Tsabari, Haifa University, Israel

  27. Current view of the overlap • Not only a possible source of conflict • But a source of synergy that gives the family business a competitive advantage Nava Michael-Tsabari, Haifa University, Israel

  28. A cross cultural study (Birley, 2001) • 16 different countries • Owner-managers • 47 statements about attitudes toward the business and the family Nava Michael-Tsabari, Haifa University, Israel

  29. Results: 3 different clusters Nava Michael-Tsabari, Haifa University, Israel

  30. The first generation Overlap of all functions: Family Management Ownership Nava Michael-Tsabari, Haifa University, Israel

  31. The 3 circles model (Gersick et al., 1997) 1 Family 2 3 5 4 7 6 Business Ownership Nava Michael-Tsabari, Haifa University, Israel

  32. Developmental stages - Lansberg (1999) 3rd generation 2nd generation 1st generation only 1/3 Cousins consortium Sibling partnership only1/3 Controlling owner Nava Michael-Tsabari, Haifa University, Israel

  33. Succession is the big issue • Most of the research is about succession • The family usually grows faster than the business • Changes in both systems • Succession – a point in time or a long process? Nava Michael-Tsabari, Haifa University, Israel

  34. Level of analysis Environment Family business Subsystem Individual Pieper & Klein, (2007) Nava Michael-Tsabari, Haifa University, Israel

  35. In Israel: More than 50% of the publicly held firms are family businesses • A young country: most businesses are in the 1st – 2nd generation • Publicly held companies - a study on 1994 data: 34% are family businesses and 18% more are sole owner companies (Lauterbach & Vaninsky, 1999) Nava Michael-Tsabari, Haifa University, Israel

  36. From the list of the 100 most successful publicly held companies 2007: (Globs) Nava Michael-Tsabari, Haifa University, Israel

  37. From the list of the 100 wealthiest people in Israel 2007 (Globs) Nava Michael-Tsabari, Haifa University, Israel

  38. The result: • Many family businesses have changed ownership structure during the last years, and this trend should become even stronger in the near future Nava Michael-Tsabari, Haifa University, Israel

  39. Sales of family businesses in the :last 10 years, some examples Nava Michael-Tsabari, Haifa University, Israel

  40. Who remembers? The Lieber family The Milikovsky family The Fromchenko & Moshevitz families The Moler family The Tavori family Nava Michael-Tsabari, Haifa University, Israel

  41. Thoughts • The Jewish point ? • The Israeli point ? Israel is more family oriented than west and east Europe (Harpaz & Ben-Baruch, 2004): - Higher birth rate - Lower divorce rate - Less extramarital children - More importance of traditional family patterns Nava Michael-Tsabari, Haifa University, Israel

  42. Thoughts • Israel as part of the Middle East ? • “The Middle East is synonymous to family business” (Gupta et al., Culturally-Sensitive Models of Family Business in Middle East, 2008) Nava Michael-Tsabari, Haifa University, Israel

  43. More thoughts • The collectivistic/culture point (Kibbutzim)? • The moral point ? • Israeli wealth more concentrated in 2006: companies controlled by 19 families earned the equivalent of 88% of the country’s budget and 54% of the business-sector domestic product. Within the 19 families, 5 controlled 61% of all wealth, as opposed to 54% in 2005 (The Jerusalem post, 19.7.07) Nava Michael-Tsabari, Haifa University, Israel

  44. Last thoughts • What about “businessness” ? • What is considered a “success” for a family business? • Is it identical with the success of the business family? • Who decides? Nava Michael-Tsabari, Haifa University, Israel

  45. Thank you Nava Michael-Tsabari, Haifa University, Israel

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