Family Businesses in Transition Economies

Family businesses represent the majority of companies and are an important source for the generation of jobs in most countries. Longevity is very important for the family businesses and for economies as a whole. Succession is one of the most difficult decisions for the family business, and one of the most important. When business leadership transitions are not well structured they may cause expensive legal issues leading to the sale or eventual loss of the business. This chapter presents a review of some general, but very important issues, related to family businesses.

Transition to a market economy involves profound economic changes, and sometimes—but not necessarily—political change as well. In Europe, economic transition was coupled with political transformation, the resulting context being unprecedented and remaining unique. Central to transition are the cultural assumptions of a social system. Rapid regulatory reform does necessarily lead to rapid or easy transition unless mindset adapts simultaneously.

Process of transition is most simply defined as a process which includes moving from centrally planned to market oriented economy. There is no uniqueness about which countries are transitional ones, as their geographical, cultural, economic and overall social context disables forming of one unique sample that would fit in every analysis. The main aspects of transition process are liberalization, macroeconomic stabilization, privatization and legal and institutional reforms. Our definition of institutions assumes Douglass North’s concept of institutions which defines institutions as the rules or regulations (humanly devised constraints) that structure political, economic and social interaction while institutional environment comprises institutions (formal and informal ones) and an enforcement mechanism. The quality of institutions in this chapter is measured by World Governance Indicators. The subject of this chapter is the analysis of quality of institutions and institutional environment in five Western Balkan countries and analysis of implications of institutional environment on overall standard of living and competitiveness of these countries. Our results indicate that Western Balkan countries lag significantly behind Central European countries in terms of institutional quality. The widening gap between the standard of living in Western Balkan countries and Central European countries in last 10 years indicates that the crucial problem in Western Balkan countries is the speed of reforms.

Family businesses account for a major share of small-sized firms in several economies. Taking into account the global economic situation this trend is expected to continue. With the goal of better understanding the process of transferring the business to the next generation, which ensures a long-term success, expectations of student’s with family business background were investigated. This particular research addresses the issue of an individual’s perception of entrepreneurship and the related factors that influence individual’s decision on whether to build a career as an employee, a successor of family business or as an independent entrepreneur. Some Western and some South-Eastern European were separately analysed population for the purpose of comparative study. The results show important differences between investigated populations. It has been anticipated that differences are caused by historical, cultural and educational backgrounds. This challenging area is raising a lot of sub-questions for possible future research.

Family businesses constitute an important part of the economies in Central and Eastern Europe. However, there is a lack of understanding about differences between family and non-family businesses in this context. This study investigates differences in management practices between Bulgarian family and non-family SMEs. To detect real rather than sample differences we apply multivariate statistical techniques that controls for the effects of a number of contextual variables as recommended by Jorissen et al. (Family Business Review 18(3):229–246, 2005). The chapter ends with discussion of the empirical findings and research and practical implications.

The chapter examines the processes of formation and development of small family enterprises, as in Moldova, the family business is created and developed mainly as micro and small enterprises. Since the activity of family businesses is not legally regulated and is not considered by the statistics in the Republic of Moldova, primarily the results of surveys and interviews with entrepreneurs, conducted by the authors during the realization of international projects and studies carried out in the National Institute for Economic Research of the Academy of Sciences of Moldova in the period 2001–2013 served the basis for writing this material. The chapter describes the barriers for family businesses, conditioned by their access to certain types of resources and other limiting factors from the external environment. Simultaneously, additional opportunities of the family SMEs are observed, arising through cooperation of the efforts and resources of family members, which allows increasing the assets of family businesses and partly compensating the shortcomings of the activity of business support institutes.

This contribution aims to broaden our understanding of factors affecting innovativeness of successors in family businesses in transition economies. In-depth literature review was conducted and three main constructs were identified as having considerable impact on successors’ innovativeness and that are: entrepreneurialism, knowledge transfer and creation, and social capital. We applied a multiple-case study approach and the main research findings of ten cases of Slovenian family businesses are discussed. We developed six propositions that provide a basis for further empirical testing of factor influencing successors’ innovativeness and innovation ability of family businesses in transition economies.

Family business represents the most common form of the company ownership and management organization. According to the most recent research of the International Family Enterprise Research Academy, between 80 and 95 % of all private companies worldwide belong to the family businesses and generate more than 75 % of GDP while employing more than 85 % of the total number of employees. The average life span of family business is 24 years which clearly demonstrates the generation change issue in the family businesses, and consequently—growth and sustainability issues. Beside the ownership function, the family business entrepreneur also carries out management functions by leading and directing the family business. The performance of this function is reflected in the vital decision making on the work processes and results towards achieving sustainable growth. The function is regularly performed by the owner but in recent times it has been partly or completely transferred to the professional managers. Accordingly, the two entrepreneurial functions bear distinctly recognized risks associated with their performance. During the transfer of ownership and leadership in the family businesses, the crucial entrepreneurial and managerial risk is by its nature non-transferable and internally conditioned. Being inevitable in such a situation, additionally burdened with growth, sustainability and innovation imperatives, the risk requires an expert analytical and critical approach by use of all available research methods and techniques for its best estimate. The biggest entrepreneurial and managerial risk lies in the resistance to changes or, in this case, the postponement of ownership and leadership transfer decision-making. Such an approach will only increase the problems unique to family businesses such as the problem of the successor legitimacy and authenticity, rigidity, non-transparent communication related to the transfer planning, etc. On the other side, a well-led transfer with adequate approach to the associated risks can result in the company transformation into a growing or dynamic venture.

The purpose of this book chapter is to share findings related to succession of family businesses in Republic of Macedonia. In order to gain a better picture of the current situation, problems and perspectives that stand in front of families with respect to succession issue it was conducted a survey. The questionnaire was distributed to the owners of several businesses as well as through e-mail. The questionnaire was distributed to 140 businesses, depending on the size of cities.

The aim of the research is to define and compare important attributes of financial management of family small and medium-sized companies (SMEs) in selected regions of the Czech Republic and Slovakia. The majority of SMEs in the Czech Republic and Slovakia has a character of family companies. These companies have been established on the basis of family capital. Preferable family member worked in them and these companies are managed also preferable by them. In this context, SMEs sector in the Czech Republic and Slovakia may be perceived as the sector of family companies. As the part of this focus, the dependence of financial risks’ perception, relationships with commercial banks, the ability to manage financial risks and the level of entrepreneurial optimism depending on company’ age, owner’s education and company’s size have been examined. Research of entrepreneurs’ opinions in Zlin Region (Czech Republic) and Zilina Region (Slovakia) has been examined in 2013. These regions have similar economic parameters and are distant from each other only few kilometers. Results of our research proved that it cannot be definitely confirmed but neither rejected that financial risk’s perception in Czech and Slovak enterprises is different within a defined groups, i.e. depending on company’s age, owner’s education and company’s size.

In this chapter, using a large representative panel dataset of 8,637 large firms in the European part of Russia and their balance sheet information over the period 2000–2004, we investigate the extent to which Russian firms and in particular a smaller sample of family firms are liquidity constrained in their investment behaviour and how ownership structure changes the relationship between internal funds and the investment decisions of these firms. Family firms differ from nonfamily firms due to the unique influence of family members in ownership, strategic control and succession and play a critical role in most economies throughout the world. We estimate a structural financial accelerator model of investment and first test the hypothesis that Russian firms overall and family firms in particular are cash constrained by conducting random-effects estimation. Our results confirm that firms are liquidity constrained when the ownership structure is not included in the econometric specifications. With regards to the ownership structure and the degree of ownership concentration, we find that companies owned by private individuals and families are less cash constrained, which is in agreement with previous literature. We also find that state-owned companies are less cash constrained, independently of whether their ownership structure is concentrated. No significant impact is found for banks and institutions.

This book chapter contributes to understanding of family firms in Serbia by examining the importance for national economy, business ambient for work and sustained businesses, as well as institutional infrastructure support, educational, innovation and financial support. This chapter seeks to explain resource-seeking internationalization among Serbian family firms, which belong mostly to SMEs, by investigating, based on based on resource dependency theory and the model of entrepreneurial internationalization, whether resource-seeking internationalization can be linked to a family businesses’ resource deficiencies. It researches whether perceived resource constraints in terms of labor, finance and new technology increase the likelihood of family firms to use internationalization as a means to access or acquire the lacking resources, relative to not internationalizing. By binomial logistic regression analysis method used for the testing in the chapter are elaborated the findings which indicate that perceived lack of skilled labor drives family firms to pursue internationalization as a means for accessing labor and that perceived constraints regarding access to finance are an important determinant for family firms to pursue foreign markets as a means to access capital. These results suggest that perceived constraints in terms of skilled labor and finance are pushing firms to overcome internal resource deficiencies through internationalization, as well as that, these firms which are already internationally active to use their international activity as a means to access or acquire these resources. The contribution of the chapter could be seen also in the suggestion that resource-constrained family firms can be considered as entrepreneurial firms that proactively exploit internationalization as a strategy for addressing current resource needs. The findings of the research also support the awareness of the mangers/owners of the family firms of the possibility to use internationalization as a means for overcoming resource constraints, as well as policy makers awareness increase to improve general doing business parameters in the country giving that internationalization could become easier and resources could become more easily transferable across borders.

Having in consideration that almost all family businesses face with the problem of their growth after e period of time especially when they reach its maturity phase they need to enter new markets in order to continue its growth. These and lots of other reason influence family businesses to become part of globalization and follow the trend of most of the successful family businesses in the world who have internationalize their activities. This chapter focuses on the possible strategies that enterprises can use in order to perform in the international markets. The objectives of the study are to examine how to enter in new markets by using the best appropriate strategies in order to achieve competitive advantage in international markets. Expect theoretical analysis and suggestion on strategies for internationalization an empirical research has been done in 75 family businesses in Albania. The final results showed that as the best strategy for the Albanian family businesses for entering in international markets is export strategy, mainly because of the current economic situation in Albania (cheap working force, very qualified working force, etc.) this strategy can produce competitive advantage for Albanian family businesses in entering new markets.

This chapter examines family businesses in the sport industry. The reasons why family owned, managed and operated businesses exist in the sport arena are examined within the theoretical framework of family business. The changing definition of family is discussed in the chapter that leads to an analysis of how the community including family businesses help encourage sport-related activity. The role of sport clubs acting as family businesses is highlighted that includes the importance of family’s in promoting the cohesiveness and community that sport as a service and product entails. The analysis reveals important business and lifestyle considerations of family owned sport businesses. These considerations include the importance of family businesses properly managing sport franchises and sport-related business ventures. This chapter focuses on the reasons why family’s manage sport organizations in terms of community and location preferences in the context of family business evolution. The role of conflict, generational issues and succession plans related to family business in the sport context are also examined. The chapter concludes by stating research and management implications of family owners of sport organizations.

In this chapter is presented a successful story of family business from Kosovo. In this chapter are treated topics such as: history of Albi Group, its business entities, development over the years, governance and succession planning.