Contributions and findings of the study

The purpose of this study is to contribute to and expand the existing body of theory on family business and ownership. There are several important contributions in this study and its findings. First, this study has broken new ground, since the areas covered by this empirical research remained unexplored until now. Secondly, a method developed for capturing the development of family business portfolios was developed particularly for this study. Data is more complex and mixed than the conclusions reached in most of the previous conceptual and empirical research, which has been limited. This method could be useful for future research, since it assists in developing and broadening the scope of any future studies in this area.

Thirdly, it advances understanding by clarifying ownership constructs in family businesses.

This is done by investigating how ownership changes influence family business structures over time.

This study reveals the links between dimensions of ownership and how they give rise to portfolio business development within the context of family businesses. The field of family business has not explicitly identified ownership changes involving the family, and there is a lack of integration between ownership research and portfolio business research in a family business context (Habbershon et al., 2003; Sharma, 2004). Taking into account previous theoretical developments in the family business literature from the ownership point of view and considering the empirical evidence provided thus far as to the effects of a family business ownership structure on portfolio business performance, one of the study’s objectives was to unravel how changes in family ownership affect a family business. This study endeavours to contribute to research on ownership changes and portfolio businesses and study their interaction within the context of family businesses.

Handler (1989) points out that knowledge should not be limited to its theoretical implications but to the practical value of that theory. To contribute to practice, this study endeavours to develop a framework that helps family firms identify the nature of their ownership changes and the advantages that can be harnessed to develop family business ownership activities and sustain this across generations. Research in the field has determined that only a small number of family businesses survive to the third generation (Sharma, 2004), and so a contribution of this nature is of practical value to new and emerging family firms. A noteworthy contribution of the present dissertation is that all empirical results are obtained

through the use of specific methods developed for this study. By using this methodology, it was possible to reveal the problems that arise when investigating the effects of ownership changes on portfolio development. This study has also contributed to the development of an understanding of the family business. Findings from research can provide this development:

the findings of this study anticipate a better understanding of ownership changes in family firms and their influence on portfolio development within the business. It can also raise awareness among academics and institutions about family firms as a discipline and area of interest.

This dissertation draws a picture of changes in family ownership and their effect on family businesses. The research problem was presented in the form of the research question:

• How do families use ownership in family businesses?

This study revealed a number of observations through two different case firms.

Analyses within the cases identified the ownership changes in the family businesses that affected the family business and stimulated portfolio development across generations. The main findings of these analyses culminated in the proposed conceptual relationships that form the core discussion of this chapter. The overall findings of this study, along with the propositions developed, are illustrated by the conceptual framework in Figure 21. It presents a theoretical model, interpreted from the data that identifies how ownership changes are composed of three drivers: family, business, and individual. These drivers emerge based on various forces identified in Chapter 3, and are directly or indirectly related to changes in family business ownership. This relationship is the driver behind portfolio formation.

Figure 21. Conceptual relationships in ownership changes

The focus of the model is on ownership changes in the family business system based on three drivers: family, individual, and business. Changes in one driver may cause changes in the others, which leads to shifts in family ownership and business ownership. Business performance grows more complicated, shaping the business towards a portfolio business that includes both core family business and individual business elements. The companies owned in the portfolio can be interrelated, and they may be evaluated in terms other than merely financial ones. The general goal of research based on this model is to identify family, individual, and business drivers and their inter-relationship. The model presents ownership as a dynamic element that is used as a tool for developing business portfolios.

The influence of these drivers and their effect on ownership changes provides a clear theoretical frame for assessing the impact of ownership changes on business portfolio development. The main unit of analysis in this study was the family business system, within which there are subunits: the family, the business, and the individual. From the case findings, some major propositions can be drawn, and these propositions are discussed in the following four sections:

• Family business is an open system

• Family business is changing constantly

• Owners use ownership as a tool

• Owners play different roles in a family business

• Several ownership roles exist in different businesses

• Business develops through a portfolio structure

• Research requires a longitudinal point of view

7.1.1 Family business is an open system

Even though a family business is regarded as the main issue to focus on in research on family businesses, the family business does not necessarily form the only possible core of the relevant system setting. Family business is also a subsystem of larger systems, for example business and socio-cultural systems. This, along with the notions in the case presented, offers a basis for critically reconsidering the hierarchical order of the entities present in family business system models. This may eventually have implications for the theoretical interpretations of family businesses.

As an open system, the family business system is in constant interaction with its environment through each subsystem, such as businesses and family members. Through this dynamism, the family business system grows both in size and complexity. On the one hand, the analysis shows that the family running the business system keeps changing constantly as family relations and the business changes. On the other hand, the family members are also entrepreneurs who make individual decisions on the allocation of their entrepreneurial spirit and ownership. This leads to a new type of systems thinking in family business research. The system includes the family on a collective level, conducting business and securing continuity.

Family businesses are possible even when the family and family members own several companies, which may differ from each other very drastically. The system is built of smaller pieces, such as the individual businesses owned either together by the family or individual family members. Furthermore, the businesses require their special maintenance and management, which has implications at the family level and for individual family members.

This notion also has implications for the notion of familiness. Family business-specific resources stem not only from a definite “family business”, but also from the outside that

business, from the collective family system, and from independent individual actions and resources. This implies that ownership exhibits the characteristics of an open system.

Subsequently, the phenomenon of family business development contains both collective and individual reasoning and decisions concerning the control of and responsibilities for businesses. Ownership is often defined and treated as a relationship between the owner and the object. A contextual view of ownership builds on the idea that ownership is concerned with human beings and ownable objects within an environment, that is, in a context, and furthermore, that the fundamental character of ownership is the power–

influence position it gives to the owner in the social–material context. This study suggests that ownership should be included in the models as a more dynamic and guiding element directing the development of the family business system than has been understood so far.

7.1.2 Ownership is a dynamic element and used as a tool

Ownership matters to business success and is particularly vital for family businesses for different reasons. First, family firms may have different goals than publicly owned companies, in that non-performance-oriented goals, such as employment for family members, may take precedence over the goals of growth and profitability (Chua, Chrisman, and Steier, 2003). Second, compared to non-family firms, family businesses have a greater potential for long-term conflict among the actors involved (Morris et al., 1997). Finally, the process of ownership succession is far more important for family firms than non-family businesses because of a stronger link to firm survival (Robinson and Gupta, 1996). Changes in ownership take place least often in family business, but usually these changes are dramatic. Different generations of owners exhibit different interests, management styles, and objectives. Each generation of leadership brings to the business new strategic ideas that build on underlying, long-held competencies developed for earlier strategies (Ward, 1997). Based on the empirical study presented here, the answers and findings regarding family business ownership show that owners use their ownership in a dynamic way that shapes family business portfolios and supports business development. It is evident that ownership is a dynamic element in a family business including several layers important to take into account in research. In this case, it also possible that family ownership creates value for all of the firm’s shareholders as well as for the family. Ownership is in constant interaction with the material and social environment, and there a several stages in the life cycle of single ownership relationships. Ownership changes can be used in the development of the business, developing relationships between

family members, or providing family members with the ability to carry out their individual ventures. The creation of an ownership relationship also often entails an exit plan. Therefore, it is appropriate to claim that there is a need for further research on the concept of ownership.

7.1.3 Family business develops through portfolio business

There is a positive relationship between ownership changes and portfolio development in family-controlled businesses. In this study, portfolio formation was possible to recognize and understand on the basis of the longitudinal empirical research. Evidence from existing portfolio business studies offers only limited insight into the motivations and processes associated with portfolio entrepreneurship, especially in family businesses. It is likely that portfolio ownership – as a complex and dynamic process – takes different forms and performs different functions for entrepreneurs in different circumstances and contexts (Carter and Ram, 2003). Research should also focus on evolution of the process, developments in the family and the business. In this study, family members acted as portfolio entrepreneurs inside the family by expanding the original business while at the same time establishing entirely new businesses with other family members or joint businesses with non-family members. Family members may be interested in continuing the family business in some other sector, for example an industry more familiar to the successor because of his or her interests. In such cases, the same family may own several firms in several industries. Family members are owners of the original family business and also investors in the new businesses.

7.1.4 Significance of research methodology

The contribution of this study was examining ownership of family businesses over the long run. Novel value is additionally found in the research method, since few qualitative longitudinal studies of ownership have been conducted, and family business ownership has not been examined from this viewpoint before. The lack of research on portfolios in family business strongly supports the use of a qualitative methodology (Cruz and al., 2008; Carter and Ram, 2004; Rosa and Scott, 1999). Qualitative studies make it possible to investigate not only experiences of the past but also prospects for the future. Qualitative studies enable exploration of causality and generation and testing of theory. Even though there are several challenges to conducting case research – it is time consuming, there is a need for skilled interviewers, it results in a limited set of cases, and questions exist regarding its rigor as research method – the results of such case research can have a very high impact.

The small business sector is complex; many quantitative studies rely on combinations of different sources of data to get a better view of the phenomena of multiple ownership. Rosa and Scott (1999) note that even though there are many sources of data in the UK, the problem lies in identifying the owners of larger companies, where ownership details often have to be painstakingly researched. There are policy implications involved in shifting the unit of analysis from the firm to the entrepreneur (Rosa and Scott, 1999). Qualitative studies involving genealogical techniques would be particularly helpful in unravelling the complexities implied by these measures. Qualitative studies from the entrepreneurial point of view could explain better the full hierarchical complexity of multiple ownership and inter-firm linkages. This review revealed only a few longitudinal studies, whereas others were snapshot portrayals of the situation at a given point in time. In family businesses, the development of portfolio takes time. This study suggests that there should be more concentration on longitudinal methodologies to accommodate the dimension of time.