Family business throughout generation: Innovation

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Discuss the extent to which innovation has enabled some family businesses to survive through many generations Before starting, it would be helpful to provide some definitions in order to clarify the arguments and examples used in this essay. Chambers-Harrap gives us two definitions of the word ‘innovation’; “1 something new which is introduced, eg a new idea or method” and “2 an act of innovating.”[1] This helps us, as it shows that innovation need not necessarily apply as we might initially think only to new ideas in a material sense, like inventions (also innovations in their own right) but also to methods; to the application of new or fresh ideas or techniques. Secondly, and importantly, we should define exactly and thoroughly what is meant by ‘family business’ before proceeding any further.

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The GEEF, the European Group of Owner Managed and Family Enterprises, gives four criteria that may define a family business; “A firm, of any size, is a family enterprise, if: 1. The majority of votes is in possession of the natural person(s) who established the firm, or in possession of the natural person(s) who has/have acquired the share capital of the firm, or in the possession of their spouses, parents, child or children’s direct heirs. 2. The majority of votes may be indirect or direct. 3. At least one representative of the family or kin is involved in the management or administration of the firm. 4. Listed companies meet the definition of family enterprise if the person who established or acquired the firm (share capital) or their families or descendants possess 25 per cent of the right to vote mandated by their share capital.” [2] This definition, technical as it sounds, is a very useful one, for it will help us to appreciate the true range of businesses, both in past and present, which may correctly be defined as family firms. It would be easy to think, at face value, that a ‘family business’ only means one which is run by a whole string of high-profile family members, handed down from generation to generation. Or, we may even visualise only the huge, powerful family-run empires which have existed throughout the ages, such as the ‘dynasties’ David Landes visualises in the introduction to Dynasties; Fortune and Misfortune in the World’s Great Family Businesses; “…many images come to mind, exotic and dramatic, from the silken lineages of Chinese Emperors to the soap-opera magnates of the 1980s television of the same name.” (p.ix)[3] In fact, as Landes himself points out, family businesses are all around us, and their existence is far more common than we may realise, especially if we are only thinking of ‘family business’ in the kind of context shown above; “…statistics show us that the great majority of the world’s enterprises today are family firms.

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