SBANC Newsletter
April 12, 2005
Issue
367-2005
QUOTE
"It is not the strongest of the species that survive, nor the
most intelligent, but the one most responsive to
change."
-- Charles
Darwin
FEATURE PAPER
Predictors of Longevity in Small Family
Firms: An Exploratory Study
This paper was presented by Ritch
L. Sorenson, Keith H. Brigham, Thomas E. Holubik and Robert L. Phillips
of Texas Tech University at the 18th Annual USASBE/SBI National Conference
on January 18th, 2004, in Dallas, Texas.
Family firms serve as a major
source of economic growth and wealth creation in the U. S. economy;
however, fewer than 30% of family businesses survive to the second
generation and only 15% survive to the third. Prior research has
identified some issues related to family business survival, primarily
larger family businesses, but only a small amount of research has
examined issues related to longevity of small family businesses. The
purpose of this paper was to identify and test a set of variables that
were related to the longevity of small family firms. Drawing on previous
research in the entrepreneurship and family business literatures, we
identified a number of potentially relevant variables for inclusion in
our predictive model. Our final model included a total of 13 variables.
These ranged from firm variables such as demographics, performance,
planning, and operating philosophies to CEO characteristics. Based on
longitudinal data collected from 209 family businesses and using
hierarchical regression analysis, we identified several variables in our
model that that were significantly associated with the longevity of the
firms in our sample. Our analyses indicated that the number of
employees, profitability, and succession planning were positively
related to firm longevity. However, business growth (measured through
employee growth), formal planning, and an entrepreneurial orientation
were negatively associated with longevity. CEO characteristics had
little influence. Implications of these results for both practitioners
and researchers are addressed.
INTRODUCTION
Family firms are a major source
of economic growth and wealth creation in the U. S. economy (Shanker
& Astrachan, 1996). They employ about 85% of the U.S. workforce and
have created 80% of new jobs in the last two decades. Over one-third of
the firms in the Fortune 500 list are family-controlled, as are 60% of
all publicly held companies in the U. S. There are 35,000 U. S.
family-owned businesses with annual revenues exceeding 25 million
dollars (Poza, 2003). But fewer than 30% of family businesses survive to
the second generation and only 15% to the third. Why do some family
businesses survive while others fail? While research has identified some
issues related to family business survival, primarily in larger family
businesses (see Ward, 1987), little research has examined issues related
to longevity of small family businesses. The purpose of this paper is to
identify and test a set of variables that may be linked with longevity
of small family firms.
SURVIVAL
The
search for variables that would predict the survival of new and/or small
business has been prominent in the entrepreneurship literature. In 1995,
Lussier’s review of 20 studies on survival identified 15 commonly used
non-financial ratio variables. The most frequently used variables,
initial capital and management experience (70 percent of the reviewed
studies), but results were mixed. In fact, the significance and even
direction of influence of many of the 15 variables varied greatly. At
this point there is no robust model of survival across different
contexts.
This study uses data originally
gathered for a 1997-1999 study (Brigham, Sorenson, & Hoelscher,
2003) that examined survival in small family businesses and we later
made a followup survey to track family firms that had survived to
2002.
Read the Entire
Paper...
TIP OF
THE WEEK
Family
The family is the
most important social institution for many consumers, strongly
influencing values, attitudes, self-concept—and buying behavior. For
example, a family that strongly values good health will have a grocery
list distinctly different from that of a family that views every dinner
as a gourmet event. Moreover, the family is responsible for the
socialization process, the passing down of cultural values and norms to
children. Children learn by observing their patterns, and so they will
tend to shop in a similar pattern.
Decision-making
roles among family members tend to vary significantly, depending on the
type of item purchased. Family members assume a variety of roles in the
purchase process. Initiators are the ones who suggest, initiate, or
plant the seed for the purchase process. The initiator can be any member
of the family. For example, Sister might initiate the product search by
asking for a new bicycle as a birthday present. Influencers are those
members of the family whose opinions are valued. In our example, Mom
might function as a price-range watchdog, an influencer whose main role
is to veto or approve price ranges. Brother may give his opinion on
certain makes of bicycles. The decision maker is the member of the
family who actually makes the decision to buy or not to buy. For
example, Dad or Mom is likely to choose the final brand and model of
bicycle to buy after seeking further information from Sister about
cosmetic features such as color and imposing additional criteria of his
or her own, such as durability and safety. The purchaser (probably Dad
or Mom) is the one who actually exchanges money for the product.
Finally, the consumer is the actual user—Sister, in the case of the
bicycle.
Marketers should
consider family purchase situations along with the distribution of
consumer and decision-maker roles among family members. Ordinary
marketing views the individual as both decision maker and consumer.
Family marketing adds several other possibilities: Sometimes more than
one family member or all family members are involved in the decision;
sometimes only children are involved in the decision; sometimes more
than one consumer is involved; and sometimes the decision maker and the
consumer are different people.
Children can have
great influence over the purchase decisions of their parents. In many
families, with both parents working and short on time, children are
encouraged to participate. In addition, children in single-parent
households become more involved in family decisions at an earlier age.
Children are especially influential in decisions about food and eating
out. Therefore, food companies listen closely to what children want.
Children also are more interested in entertainment than food. Therefore,
McDonald’s and Burger King spend about $4 billion annually on toys for
their kid meals; Quaker Oatmeal now features hidden treasures; Heinz
ketchup is available in funky purple; and Parkay margarine comes in
shocking pink and electric blue. Both the ketchup and the margarine come
in squeezable bottles designed to allow small hands to create pictures.
Promotions for food products aimed at children include a Web site that
illustrates how to build a fort with French fries and
books that teach children to count using Cheerios, M&Ms, and Oreos.
Children influence purchase decisions for many more products and
services than food. Even though they are usually not the actual
purchasers of such items, children often participate in decisions about
toys, clothes, vacations, recreation, automobiles, and many other
products.
Hair,
Joseph H., Charles W. Lamb, and Carl McDaniel. Marketing. 8th
ed. Manson: Thompson South-Western, p.
173-175.
CONFERENCES
The Family Firm Institute
The The Family Firm
Institute is holding its FFI Interdisciplinary Spring Seminars at the
Ramada Plaza Hotel, Chicago-O'Hare on April 27-29, 2005.
For more
information, visit: http://www.ffi.org/
The CIBER Research Institute
The The CIBER Research
Institute will hold its EABR Conference (business & economics) and
TLC Conference (teaching methods, styles, and administration) at the
Aressana Hotel in Santorini Island, Greece. Presentation dates will be
June 20-22, 2005.
For more information, visit: http://www.CIBERinstitute.org
International Association for Computer
Information (IACIS)
The International Association for
Computer Information (IACIS) is holding its IACIS Pacific 2005
Conference at the Grand Hotel in Taipei, Taiwan on May 19-21, 2005. The
theme for the Conference is "Technology and Information Security Issues
in Knowledge-Based Organizations."
For more information, visit: http://www.iacis.org/web/pacconf.htm
Marketing Education Resource
Center
The Marketing Education Resource Center is
holding its 2005 Conclave and Professional Conference at the Renaissance
Seattle Hotel, Seattle, Washington on June 23-26, 2005. Conclave
programming will include an abundance of information from six
conferences.
For more information, visit: http://www.mark-ed.org/conclave/default.htm
The Professional MBA Seminar
The Professional MBA
Seminar is a two-day market planning, product planning and financial
planning seminar. This business seminar is a practical, and
cost-effective version of the multiple-week, multiple-thousand dollar
executive programs, offered by some of the major business schools. The
seminar will be held at Marriott Courtyard San Jose Airportis on April
6-7, 2005.
For more information, visit: http://www.professionalmba.com/
CALL FOR PAPERS
Institute
for Small Business & Entrepreneurship
The Institute for Small
Business & Entrepreneurship will hold its 28th National Conference
at the Hilton Hotel, North Promenade, Blackpool, Lancashire, Blackpool,
UK on November 1-3, 2005. The theme is: "ILLUMINATING ENTREPRENEURSHIP:
the theory and practice of enterprise creation and development."
Submission Deadline: April 30, 2005
For more information, visit:
http://www.isbe2005.org/
The CIBER
Institute
The CIBER Institute is holding its 2004 European Applied
Business Research(EABR) Conference and the European College Teaching
& Learning(TLC) Conference in Athens, Greece at the Marriott Hotel
on June 13-17, 2005.
Submission Deadline: May 14, 2005
For more
information, visit: http://www.ciberinstitute.org/
IPSI-2005 BELGRADE
IPSI will hold IPSI-2005
BELGRADE at the Hotel International (Intercontinental), Serbia on June
2-5, 2005. Topics include: Education, Computer science and engineering,
B2B, B2C, E-Business Management.
Submission Deadline: April 15,
2005
For more information, visit: http://belgrade.internetconferences.net/
IPSI-2005
MONTENEGRO
IPSI will hold its International IPSI-2005 Montenegro
Conference at the Hotel Sveti Stefan, Montenegro on October 1-8, 2005.
Topics include: Education, Computer science and engineering, B2B, B2C,
E-Business Management.
Submission Deadline: June 30, 2005
For more
information, visit: http://www.internetconferences.net/montenegro2005/index.html
Direct Marketing Educational Foundation
The
Direct Marketing Educational Foundation will hold its 17th Annual DMEF
Educators' Conference at the
Atlanta Marriott Marquis, Atlanta,
Georgia on October 16-19, 2005.
Submission Deadline: May 2,
2002
For more information, visit: http://www.educatorsconference.org
The SBANC Newsletter
is provided as a service to the members of our affiliates: Academy
of
Collegiate Marketing Educators (ACME), Association
for Small Business& Entrepreneurship (ASBE), Decision Sciences
Institute (DSI), Federation of Business Disciplines (FBD), International
Council for Small Business Congress (ICSB), Institute
for Supply Management, The International Small Business Congress
(ISBC), Marketing Management Association (MMA), Small Business Administration
(SBA), Service Corps of Retired Executives, Small Business Institute
(SBI), Society for Marketing Advances (SMA), United States Association
for Small Business& Entrepreneurship (USASBE), U.S. Department
of Veterans Affairs and Western Decision Sciences Institute (WDSI).
If you are interested in membership or would like further information
on one of our affiliates, please see our web site at http://www.sbaer.uca.edu
SBANC
STAFF
Main Office Phone: (501) 450-5300
Dr. Don B. Bradley III, Executive Director of
SBANC & Professor of Marketing
Direct Phone: (501) 450-5345, E-mail: mailto:"donb@uca.edu"
Esther Mead, Co-Lead Development Director,
E-mail: mailto:"esthersbanc@yahoo.com"
Ashley Ford, Development Intern, E-mail: mailto:"amf03002@uca.edu"
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