Emerging from 19th century France, the word ‘Entrepreneur’ has become a buzz term throughout a post crisis world. With a view towards new ways of doing business after being shaken to the core, many turn towards a more entrepreneurial attitude. Family businesses are no exception and constantly strive for innovation and fresh insights. In this article we explore the relevance and relationships of entrepreneurship and corporate entrepreneurship in a family business context.
“I am an entrepreneur!” says the IT geek who set up his company in a garage, says the trader who imports goods from places nobody else has access to, say the brother and sister who run a small chain of restaurants. But what about a fourth generation family business leader? Is he or she an entrepreneur, too? Initially, and in everyday speech, we would probably have to disappoint that family business member, as the word “entrepreneur” is mainly associated with vision-driven innovation, start-up dynamics and risk-taking – hardly family business traits. However, the distinction might not be so easy and as both, entrepreneurs and family businesses are seen as the crucial entities in the global post-crisis recovery, their relationship is well worth examining. Only few business researchers have taken to depicting the complexity of the relationship between the entrepreneur, the family and its next generations. In order to start understanding these crucial bonds and develop a dialogue that will bring mutual benefits, we need to explore a wide variety of aspects.
To understand the roots of the word entrepreneur we need to travel, both in time and space and go to 19th century France. The French word ‘entreprendre’ means undertaking and differentiates the entrepreneur from the businessman by linking it directly to the realisation of projects through individual efforts and organisation. This shows the dynamic and persona-centred character of the word.
More contemporarily, society looks at entrepreneurs simply as individuals or a group of individuals venturing to develop their own business by accumulating and using resources, such as innovation, finance and skills. Business scholars have identified the readiness of the entrepreneur to take risks on the way to realising his business vision and pursue opportunities as one of the most defining characteristics. Typically, entrepreneurs are creative, competitive and dynamic personalities with a vision to succeed.
So, once the entrepreneur has founded and established his company successfully and developed corporate structures, does entrepreneurship end? Is there an entrepreneurial phase that makes place for something new? Certainly, the start-up dynamic of every company at some point flows into more institutionalised structures. However, nobody would dispute the fact that all companies need to remain innovative in order to survive and grow. As large as a company may be, it always has to evolve to meet the increasing or new demands of its customers, to become more efficient or explore new business opportunities.
Since the 1970’s researchers have identified corporate behaviour that was addressing these issues as “corporate entrepreneurship“. Corporate entrepreneurship can be defined as the effort of corporations to generate new business from within their existing structures. It may lead to developing new business ventures, innovating on existing products, services or processes and review of strategies and competitive positioning.
Corporate entrepreneurship is a challenge for each organisation, as traditional roles in the company might have to shift and the company’s control mechanisms might not work properly for the area subjected to change. Furthermore, entrepreneurship always bears the risk of failure – an element that top management will have to balance against the expected gains of such ventures. Another challenge here is that it becomes difficult for managers to create new business opportunities whilst at the same time remaining responsible for the day-to-day conduct of business.
However many challenges a company might face, corporate entrepreneurship is part of every corporate structure, even though it might sometimes not be recognised as such.
Researchers have found two main patterns of corporate entrepreneurship: one is through strategic entrepreneurship which means innovating on the company’s existing strategies through innovation from employees, and another is through corporate venturing, which may be the acquisition of a start-up company or participating in third party ventures.
Entrepreneurship and Family Business
So where is the real connection between family business and entrepreneurship? In non-family controlled companies the relationship with entrepreneurship is rather straightforward and centres on corporate entrepreneurship. Corporate entrepreneurship is the first and foremost way for non-family corporations to interact with the entrepreneurial world.
Entrepreneurship and family business, however, have a far more complex and interesting relationship, due to the special structure of family-owned and –run companies.
The first connection is rather obvious: every family business stems from a visionary individual who ceased a business opportunity, and who spent years and years building the business. Very often, a family business emerges naturally without an actual plan for its inception: out of sheer necessity and because of scarcity of resources, the entrepreneur leverages on any resource he or she has – one such resource is the family. Also, he or she may find an easy understanding of his vision within the family through shared values and up bringing.
The second connection between family business and entrepreneurship, as seen above, is the corporate entrepreneurship in the existing enterprise. Much like in non-family entities, family businesses can work with the existing management team to innovate from within the company. This means that all business owners, be it first, second or 15th generation, have to be entrepreneurs and produce new ideas to keep the business on top, whilst at the same time keeping a stable and consequential conduct of business.
The third connection is one that is unique to family businesses: in a family business, there is a unique pool of talent linked to the business through family ties, which can be an opportunity, both for individual and corporate entrepreneurship. Children growing up in family businesses are witnesses to entrepreneurial behaviour from early childhood and often have a sharpened sense for business. Seeing the parents, aunts and uncles, brothers and sisters involved in business activities teaches the next generation a lot of tricks of the trade and can spark their interest in developing new business ideas on their own. The business not only touches the members directly involved in the conduct of day-to-day business, but has an impact on the life of all family stakeholders. Non-family corporations miss out on this chance, as any family member could have a special skill for driving innovation and entrepreneurship. Now they may chose to use this skill to set up their own business. But, instead observing this from afar, the family business should take advantage of this creative energy. We all know that the environment around an entrepreneur is highly dynamic and can serve to motivate anyone that interacts with it. Family businesses seeking innovation thus have a chance to interact with entrepreneurial spirit and benefit from fresh insights without venturing outside the family.
The way forward
This first glance at the relationship between family business and entrepreneurship shows us a dynamic connection and leaves us with a lot to be discovered. What we should learn first and foremost is that entrepreneurship is at the heart of every family business and that the entrepreneurial spirit should be passed down from generation to generation. It is this spirit coupled with the sustainability and stability provided by the family that will keep driving family businesses to remain leaders in their respective fields.
Tharawat Magazine, Issue 8, 2010