Dr. Peter Jaskiewicz – Robustness of Family Businesses Across Generations

Hi, my name is Peter Jaskiewicz, I’m a faculty member at the Telfer School of Management at the University of Ottawa
and I’m an University Research Chair in Enduring Entrepreneurship. I’m interested in family business because I come from a business family. A family member of mine
very successfully started several music stores and added a chain of music
schools on top of that. However, when he passed away his businesses were
liquidated very rapidly and all family non-family members across several
countries lost their jobs. This tragic incident very much fostered my interest
in family business research. Family businesses are very relevant in general.
Seventy-five percent of all firms in the world are family businesses and they
contribute more than 50 percent to both GDP and employment. From the small
mom-and-pop store around the corner to large corporations such as VW, Walmart,
IKEA or Bombardier, you’re surrounded by family firms.
Despite their prevalence only 30 percent of family firms survive to the second
and only about twelve percent survive to the third generation this warrants a
question, why? In this study, we decided to analyze
the effect of the desire to pass on the business to the next generation on
family firm performance. So is it good or bad to desire to pass on the business to
the next generation? Well there are two perspectives on that question. The first
one is that it’s a very good thing because it implies that the current owners adopt a
long term perspective with the desire to make good investments over time so that
the business is in good shape when they desire to pass it on to the kids in 20
or 25 years. However, there’s also the counter perspective, and it says that it’s a
bad thing to desire to pass on the business to family members because you are always biased towards your family. Aren’t your kids the smartest, best looking and
most promising of course that’s part of our evolution. We are deeply
emotionally attached to our children and desire to create as many opportunities
as possible for them. So applied to the family firm context what does that mean.
Well it means that if you hire your children as managers do you do so
because they’re the most competent and the best able to run the company; or do
you hire them because you simply want to pass on the business to them. Well our
research shows that if you have a strong desire to pass on the business to your
children and you have a lot of family managers that hurts the performance. However, the same desire to pass on the business to the next generation coupled with a
managerial team consisting of many non- family managers is actually good for the
performance. So our advice for family business owners: the desire to pass on the business to the next generation is not a bad thing
as long as it comes with a team of non- family managers if you do so you will
have a better chance of successfully growing and keeping a multi-generational
family firm.

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