FAMILY BUSINESSES- INTRODUCTION AND THE ISRAELI POINT OF VIEW IDC, 16.9.08 Nava Michael-Tsabari Haifa University [email protected]@zahav.net.il

FAMILY BUSINESSES- INTRODUCTION AND THE ISRAELI POINT OF VIEWIDC, 16.9.08

Nava Michael-TsabariHaifa University [email protected]

1Nava Michael-Tsabari, Haifa University, Israel

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

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Family businesses in the worldCompanyFamily

nameEstablis

hedTurnover

(thousand $)EmployeesGeneration

Wal-MartWalton1962244.51,400,0002

FordFord1903163.4350,3214

MotorolaGalvin192826.697,0003

ViacomRedstone195424.6120,6302

The New York TimesSulzberger1851312,1504

GAPFisher196914.4169,0002

WrigleyWrigley18922.711,2504

MarriottMarriott19278.4144,0002

Johnson&JohnsonJohnson188659,5005

Levi StraussHass18534.112,4005

SamsungLee1938142229,0002

FIATAnali189961186,4923

Peugeot CitroenPeugeot188257198,600

C&ABrenninkmeijer18414.830,0006

HeinekenHeineken186410.757,5574

BarillaBarilla18773.77,300

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:Some of the oldest family businesses

CompanyFamilyEstablished

YearsCountryGeneration

KikkomanMogo & Takanashi

1613395Japan17

ZildjanZildjan1623385USA15

BirkenstockBirkenstock

1774234Germany

EfratTaperberg

1870138Israel6

DuPontDu Pont1802206USA

Lombard Odier Darier Hentsch

Lombard & Odier

1796212Switzerland

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?


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Defining a family business

• Ownership

• Management

• Multi generations

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One definition for example:

1. Intention to maintain family control2. Unique, inseparable, and synergetic

resources and capabilities arising from family involvement

3. A vision set by the family and intended for trans-generational pursuance

4. Pursuance of such a vision

(Chrisman, Chua & Sharma, 2003)

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Methodological problems:

• 28 studies with 28 different definitions for a family business

(Miller, Le Breton-Miller, Lester, & Cannella Jr., in Press)

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Maybe it is a continuous variable:

The F-PEC scale:

• Power• Experience• Culture

(Astrachan, Klein & Smyrnios, 2002)

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Family Businesses - facts & figures

• About 90% of all small businesses

• In Israel – 392,000 active companies 375,000 (96%) small or medium

companies

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Family businesses are prevalent around the world

96% USA

75% Australia

90% Brazil

84% Germany75%

Spain

85% Italy

Source: ifera 2003

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Not only small businesses:

• 30-40% of big companies

• 37% of S&P 500 in the US

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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

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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.

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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

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“Types” of family businesses – an empirical study

TypeDescription%

Average “stereotypical” family firm

Family ownership and control, focus on family objectives and multi-generations

60.7

Professional family firmOpen family firmCousin consortium family firm

More non-family management and directors, diluted ownership and control, importance of other objectives

39.3


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Westhead & Howorth, 2007

More questions:

• What makes the family business unique?

• What gives the family business a competitive advantage?


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A family business= family+business

In a family

GoalsSupport, continuity, wellbeing

BelongingBirthright, everyone, forever

ValuesLove, sharing, fairness

RewardsCaring, love, support


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A family business= family+business

In a business

GoalsMaximize profits

BelongingHired employees

ValuesHard work, professionalism, persistence

RewardsAccording to performance, economic


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The dualistic approach

The family system The business system


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1. Business function

2. Business demands

3. Management of changes

1. Emotional content

2. Familial needs

3. Seeks stability

The two systems differ in goals, belonging, decision making, priorities, evaluation of performance, rewards and continuity(Carlock & Ward, 2001, Fleming, 2000, Kepner, 1983)

Disadvantages of the dualistic approach

• Encouragement of extremity and opposition

• Stereotypical views – professional/emotional,

masculine/feminine

• Unclear boundariesNava Michael-Tsabari, Haifa University, Israel

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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)


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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)


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Different point of views

Unified Dualistic

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Current view of the overlap


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• Not only a possible source of conflict

• But a source of synergy that gives the family business a competitive advantage

A cross cultural study (Birley, 2001)

• 16 different countries• Owner-managers• 47 statements about attitudes toward

the business and the family


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Results: 3 different clustersFamily Out (33.5%)Family In (28.3%)Family –Business

Jugglers (38.2%)

Do believe that:• Children should not be introduced to the business at an early age• Management successors should not be chosen from the family• The business is not stronger with family members involved• Children’s education should not be geared towards the business

Do believe that:• Children should be introduced to the business at an early age• Management successors should be chosen from the family• The business is stronger with family members involved• Children’s education should be geared towards the business• Children should receive shares in the business in equal parts

Are generally neutral about all these issues


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The first generation

Overlap of all functions:

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FamilyManagementOwnership

The 3 circles model (Gersick et al., 1997)

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1

2 3

Family

Ownership

Business

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Developmental stages - Lansberg (1999)

3rd generation

2nd generation

1st generation

only 1/3

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Controlling owner

Sibling partnership

Cousins consortium

only 1/3

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?


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Level of analysis


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Family business

Environment

Subsystem

Individual

Pieper & Klein, (2007)

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)

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From the list of the 100 most successful publicly held companies 2007: (Globs)

GenerationFirms

1st generation entrepreneurs

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1st + 2nd 19

2nd 2

2nd + 3rd 4

Business partnerships21

Non-majority firms18Nava Michael-Tsabari, Haifa University, Israel

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From the list of the 100 wealthiest people in Israel 2007 (Globs)37


GenerationFirms

1st generation entrepreneurs

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1st+ 2nd 19

2nd 22

2nd + 3rd 10

The result:

• Many family businesses have changed ownership structure during the last years, and this trend should become even stronger in the near future


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Sales of family businesses in the :last 10 years, some examples

familyCompany namegenerationindustry

Reccanati familyIDB, Discount bank3rdHolding, banking

Moschevitz familyElite2ndfood

Dankner familyDankner Investments

2nd

Oron familyGali1stfootwear

Wertheimer familyIscar1st+ 2ndTooling

Isenberg familyIsrael Corp.2ndholding

Baranovitch familyConstruction2ndconstruction

PackerPacker Plada1ststeel

ProperOsem2ndfood

RabinovitchRabintex2ndArmy equip.Nava Michael-Tsabari, Haifa University, Israel

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Who remembers?


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The Milikovsky family

The Fromchenko & Moshevitz families

The Moler family

The Tavori family

The Lieber family

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

patternsNava Michael-Tsabari, Haifa University, Israel

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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)


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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)


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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

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Thank you


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Documents

FAMILY BUSINESSES- INTRODUCTION AND THE ISRAELI POINT OF VIEW IDC, 16.9.08 Nava Michael-Tsabari Haifa University [email protected]@zahav.net.il