New Venture Creation in Family Business: Influence of Familial Socio-Political Forces
Posted: 6 Sep 2017
Date Written: January 4, 2015
Abstract
Family businesses hugely contribute to economies across the world, yet research on family entrepreneurship is fairly young. Though new venture (NV) creation is important for the survival and growth of a family business, our understanding of NV creation process in the family enterprise context remains limited (Steier, 2009). Extant literature suggests that a standalone entrepreneur’s NV creation process is mainly driven by passion and economic rationale, while in the family business context, the NV creation process is shaped by the interactions of both the family and business systems. A NV has to be a subset of the larger set of family enterprise, and its strategy is driven by the overall strategy of the family. This paper studies the forces that influence NV creation process in family business. In a survey conducted among 120 Indian family businesses, we found that besides economic logic, socio-political considerations within the family also greatly influence the NV creation process and the destiny of individual entrepreneurial passion. These forces of positive and negative energies influence at all three critical stages of NV creation – i.e. opportunity recognition, evaluation and resource allocation. The paper concludes with implications for family firms and suggestions for objective evaluation and resource allocation mechanisms.
Keywords: Family Business, Entrepreneurship, New Venture, Innovation, Diversification, Start-up
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