Ownership and the Desire for Continuity Over Time, the Principal “Drivers” of the Family Business Culture

Abstract

Although the concept of family business has become an increasingly used term in any reference to the economic analysis of productive activity, there is no internationally accepted definition of it. As a consequence, there is no agreement as to what the main pillars are that define the family business. In this study we aim to carry out a thorough literature review in order to determine the main pillars that might bring about academic consensus on this subject and to determine how both the evolution of the family business culture and the evolution of the family influence it. To start with, we should point out that the family business has a particular feature: A family owns or runs it. Specific values and principles from a non-family company will differentiate family companies. Its peculiarity is not its organisational structure or legal form, but the fact that it belongs to a family that runs or controls its decision-making processes. In an initial approach, different authors put forward a three-dimensional definition of the family business: (a) In a broad sense, the family exercises effective control of the strategic direction of the company to prevent the family losing its dominant position as the owner, even though it barely participates in the direct management of the business; (b) In a middle sense, the family business is an enterprise run by the founder or his/her descendants, who exercise legal control of the voting stock, and in which the family has some involvement in management; (c) In a narrow sense, multiple generations of the family participate to a great degree in the business and are involved in the running and owning of it; various family members have important management responsibilities. We analyze different definitions proposed for family business in order to establish whether effectively ownership (as a percentage) by the family and the desire for continuity in passing the company to the next generations are present, or not, in all definitions. Finally, we aim to determine how this affects both the evolution of the family business culture and the concept of the family. With this we can determine whether these two characteristics form the basis of the defining concept of family business, and are the “drivers” of the family business culture.