Komala Efendy Thesis

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  • THE NATURE OF INTRA-FAMILIAL CONFLICT

    IN LARGE-SCALE PRIVATELY-HELD FAMILY

    BUSINESSES IN INDONESIA

    Komala Inggarwati Efendy

    Master of Management, University of Indonesia

    A thesis submitted in partial fulfilment of the requirements for the degree of

    Master of Business (Research)

    School of Management

    School of Business

    Queensland University of Technology

    June, 2013

  • ii

    Keywords

    Family business, intra-familial conflict, intra-generational conflict, intergenerational conflict,

    senior generation involvement, generational differences, perception gaps, conflict escalation,

    conflict handling strategies, negative emotions, non-family employees.

  • iii

    Abstract

    Family businesses represent the majority of firms and play a major economic role

    worldwide. Their survival is often threatened by conflicts between family members working

    together in their firms. Intra-familial conflict in family businesses is a complex issue that requires

    a comprehensive and a multifaceted approach. However, surprisingly little is known about the

    nature of intra-familial conflicts in family businesses. This study investigates the complexity of

    the conflicts in family top management teams and in particular the dimensions of the conflicts

    and their escalation.

    The literature review shows that studies on family business conflicts are limited and their

    results are inconclusive. Using a Critical Incident Technique (CIT) approach, this study collects

    data from individual and group interviews with 23 family and non-family employees of six large-

    scale privately-held family businesses in Indonesia. Most of the participants reported various

    incidents of conflict between the family members in their firms. Their accounts provide a rich

    description of conflicts in family businesses which includes the focus of conflict, the parties, their

    reactions, the outcomes, and the process of escalation.

    The study develops new taxonomies of these conflicts as well as a theoretical model to

    explain how family business conflicts escalate and become destructive. An inductive content

    analysis reveals two important issues: the dynamics of intergenerational conflicts and the

    escalation process of conflicts. For the first issue, this research suggests that in multigenerational

    and multimember family businesses, conflicts are more likely to be intergenerational than intra-

    generational due to the role of senior members in daily business operations, generational

    differences, and a perception gap that exist between generations concerning each others

    competencies in doing the business.

    For the second issue, the set of factors contributing to conflict escalation is related to how

    family members handle the conflict, how they manage their emotions, and how they are able to

    avoid non-family employee involvement. The results indicate that the use of a dominating

    strategy in dealing with conflict, as well as the expression of negative emotions are more likely to

    cause escalation. The recent study contributes new evidence to the study of family business

    conflicts. It is important to address the fact that often the involvement of non-family employees

    in a conflict leads to conflict escalation.

  • iv

    The study results and proposed model contribute to the development of a more

    comprehensive theory of conflict in family businesses. There are practical implications for

    people involved in family businesses at all levels, whether they are owners, family members,

    employees, or business consultants.

  • v

    Table of Contents

    Keywords ...............................................................................................................................................ii

    Abstract ................................................................................................................................................ iii

    Table of Contents .................................................................................................................................. v

    List of Tables ..................................................................................................................................... viii

    List of Figures........................................................................................................................................ x

    Statement of Original Authorship ....................................................................................................... xi

    Acknowledgements .............................................................................................................................xii

    Chapter 1: Introduction ......................................................................................................................... 1

    Background........................................................................................................................................ 1

    Statement of the Problem ................................................................................................................. 3

    Purpose of the Study ......................................................................................................................... 3

    Rationale ............................................................................................................................................ 4

    Research Questions ........................................................................................................................... 4

    Context of the Study ......................................................................................................................... 4

    An Overview of Indonesia and Family Businesses in Indonesia ................................................... 5

    Scope of the Study ............................................................................................................................ 7

    Thesis Outline.................................................................................................................................... 8

    Chapter 2: Literature Review ............................................................................................................. 10

    Organizational Conflict .................................................................................................................. 10

    Approach of the Study .................................................................................................................... 11

    The Dimensions of Organizational Conflict.................................................................................. 11

    Focuses of Conflict ..................................................................................................................... 12

    Causes of Conflict ....................................................................................................................... 12

    Level of Conflict ......................................................................................................................... 14

    Hierarchical Level of Conflict ................................................................................................... 14

    Responses to Conflict ................................................................................................................. 14

    Effects of Conflict ....................................................................................................................... 16

    Severity of Conflict..................................................................................................................... 17

    Escalation of Conflict ................................................................................................................. 18

    Theory of Family Business Conflict .............................................................................................. 19

  • vi

    Research in Family Business Conflict ........................................................................................... 21

    Summary of the Literature Review ................................................................................................ 28

    Chapter 3: Research Methodology ..................................................................................................... 29

    Population ........................................................................................................................................ 29

    Sampling Method ............................................................................................................................ 30

    Data Collection ................................................................................................................................ 31

    Informed Consent ............................................................................................................................ 32

    Confidentiality ................................................................................................................................. 32

    Data Analysis .................................................................................................................................. 34

    Chapter 4: Research Findings and Discussions ................................................................................. 37