Working Papers

Working PapersRamachandran, Kavil., Jha, Rachna. "Collapse of Institutions: Missing Links on Agency and Stewardship, Symphony and Learning for Family Businesses"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >The ongoing turmoil in the global financial market and collapse of a number of organizations raise questions about the adequacy of the existing theories in their present form to explain organizational survival at all times, particularly in turbulent times. Two such theories are the Agency and Stewardship theories that have captured the attention of family business researchers in recent years. However, most of the literature on family business has focused on either of the theories, exploring largely their relevance to explain behavior of family business owners and/or managers or the challenges of setting up, growing and sustaining a family business. A substantial amount of work has been done on agency theory, which like any other theory has its own limitations. Although the stewardship theory has been successful in filling some of the gaps left by agency theory, it is no panacea to the several other gaps, especially in explaining the governance challenges involved in creating a lasting family business. Unfortunately, the question here is not to choose the best out of the two approaches, but to understand how well the best of both approaches can be integrated to ensure long term success, growth and sustenance of family businesses. Earlier research has shown that businesses are largely driven by principal-agent relationships, particularly when organizations grow in size and complexity, while the families are largely driven by stewardship principles. Since businesses are extensions of families to begin with and often are spun off later on while retaining the umbilical cord, family businesses have a great opportunity to learn from these two entities (business and family) and the basic principles that drive them, and strengthen their DNA to build lasting businesses as well as families. We revisit both the theories in this paper and discuss how a symbiotic relationship between agency and stewardship values in some family businesses cannot only prevent collapse of organisations such as Lehman Brothers that once was family controlled but also make them last longer than others. The paper attempts to show how the right blend of agency and stewardship at different stages of the organizational lifecycle, in combination with the familial context can go a long way in minimizing agency costs and building sustainable and viable organizations.

Working PapersRamachandran, Kavil., Bhatnagar, Navneet. "Familial Socio-political Influences on New Venture Creation in Family Business"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >New venture (NV) creation has been extensively studied in Entrepreneurship literature (Perrow, 2002). However, recent discussion on NV has moved to ecosystems such as family businesses (Sharma et al., 2014). As a business family grows, creating new business ventures becomes crucial for family business sustainability (Zahra, Hayton & Salvato, 2004). Family plays an important role in NV creation (Rodriguez et al., 2009). Though it is critical for family business sustainability, researchers have regularly emphasized that our understanding of the actual venture creation process in family business requires further exploration (Steier, 2009). particularly, the role played by the socio-political forces within the family in NV creation process is an area that is not understood well. This paper is an attempt to address this crucial gap in literature. The key questions we researched are: (i) Besides commercial viability, what other considerations influence NV creation in family businesses? (ii) Why some economically viable NV proposals receive family’s support, while others do not?, and (iii) What influence do family members have on resource allocation to NVs? We report answers to them based on empirical research done on Indian family businesses.

Working PapersRamachandran, Kavil., Bhatnagar, Navneet. "Family Togetherness’ in Governance and Family Business Sustainability "Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >The unique competitive advantage of family firms (Sirmon & Hitt, 2003) is derived primarily from the ‘familiness’ (Habbershon & Williams, 1999) of the business. The controlling family’s beliefs, practices and policies are crucial inputs that shape the ‘familiness’ of a family firm. Familiness is a manifestation of the practice of governance in the family (Ramachandran, 2015). It implies agreement among family members on policies and processes related to the management of the interface between family and business (Carlock & Ward, 2010). Well governed business families focus on implementation of the same on a continuous basis that leads to openness in communication, goal-congruence and overall trust among members (Eddleston et al, 2010). Family togetherness is therefore central to enriching family’s resource-bundle. However, the extant literature does not clearly define the meaning of family togetherness, and its role in family business governance. We find answers to questions such as: What is 'family togetherness? Are there different levels of togetherness in different contexts?, and, What are the key constructs of togetherness that can help improve governance in family business.

Working PapersRamachandran, Kavil., Bhatnagar, Navneet. "New Venture Creation in Family Business: Influence of Familial Socio-political Forces"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Family businesses hugely contribute to economies across the world, yet research on family entrepreneurship is fairly young. Though new venture (NV) creation is important for the survival and growth of a family business, our understanding of NV creation process in the family enterprise context remains limited (Steier, 2009). Extant literature suggests that a standalone entrepreneur’s NV creation process is mainly driven by passion and economic rationale, while in the family business context, the NV creation process is shaped by the interactions of both the family and business systems. A NV has to be a subset of the larger set of family enterprise, and its strategy is driven by the overall strategy of the family. This paper studies the forces that influence NV creation process in family business. In a survey conducted among 120 Indian family businesses, we found that besides economic logic, socio-political considerations within the family also greatly influence the NV creation process and the destiny of individual entrepreneurial passion. These forces of positive and negative energies influence at all three critical stages of NV creation – i.e. opportunity recognition, evaluation and resource allocation. The paper concludes with implications for family firms and suggestions for objective evaluation and resource allocation mechanisms.

Working PapersLampel, Bhalla, Ajay., Ramachandran, Kavil. "The Family Firm as an Inter-Institutional System:New Venture Creation in Indian Family Firms"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >This paper advances the nascent literature on institutional logics by outlining the theory of family firm as an inter-institutional system. We specifically examine justifying family logic for the decision to allocate resources for a new venture in a family firm. Using case studies of thirty-six NVs in eight Indian family firms at different stages of evolution our findings suggest that within family firms, resource allocation to new ventures requires justification fitting the family’s Economic, Expertise, Reputation and Attachment (EERA) logic. We propose that the family EERA logic enables family members acting as NV champions to more openly frame NV opportunities in terms of their personal preferences than non-family managers. When screening these NV opportunities, family firms are also more likely to compromise on economic criteria and give preference to nurturing family expertise and attachment logic. Family members acting as NV champions are also under lesser constraints to justify NV performance-corporate alignment to secure additional resources at implementation stage.

Working PapersRamachandran, Kavil., Ray, Sougata. "Corporate Governance and Role of Board of Directors in Family Business"Thomas Schmidheiny Centre for Family Enterprise
Working PapersRamachandran, Kavil., Bhatnagar, Navneet.,Kancharla, Manjusha.,Phadke, Sayali. "Family Business Performance and Survival through Macroeconomic Crises - A Study on Post-Economic Liberalization Era in India (White paper)"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >Indian economic landscape had been traditionally dominated by a strong public sector, owing to the socialist leaning economic system that it adopted soon after independence in 1947. Besides the government owned companies, many family owned businesses formed a significant part of the Indian economy. Indian economic reforms were initiated in 1991, to liberalize policies and move towards a market-oriented economy. As part of the reforms, many industrial sectors were opened up for competition, markets were de-regulated, import tariffs and taxes were reduced and foreign investment was permitted. All these changes transformed the Indian economy and brought challenges to family businesses that they had never faced before. Suddenly, family businesses that were used to operate in a protected economy that was a seller's market with little competition were to face global competition. This was a big change that forced businesses across several ownership groups to adjust to the new realities and transform themselves. This study was aimed to analyze and understand how Indian family businesses performed during the two decades since the reforms were initiated in 1991. Additionally, the study was aimed at understanding if there were any significant patterns across times and geographic zones. Large macroeconomic disturbances are a threat to the survival of business. Major economic upheavals in the recent past had seen the collapse of iconic business organisations. Though all businesses aim to secure their long-term survival, this is an important objective for family businesses because of their core objective of ensuring a lasting family legacy. However, literature on family business survival through macroeconomic crises is sparse. Therefore this paper attempts to study the performance and survival of family businesses across three prominent macroeconomic crises of the last two decades and tries to understand the underlying patterns.

Working PapersRamachandran, Kavil. "Krishna's Dilemma"Read Abstract >Close >The case presents a typical decision situation faced by managers. The context is the students'convocation of an academic institute. The organisers have to decide the most appropriate venue that can accommodate the institute's growing class of students and their parents. The case discusses several available alternatives and explains their merits and demerits to help the readers arrive at an appropriate solution.

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Working PapersRamachandran, Kavil., Ray, Sougata.,Chakrabarti, Amit Baran. "New Venture Creation By Family Business Groups: Evidence From India"Thomas Schmidheiny Centre for Family EnterpriseRead Abstract >Close >The purpose of this paper is to examine the impact of family business group characteristics on new venture creation in India. Design/methodology/approach – Using a multiple regression model, this study examines the effect of family business group characteristics (public listing, age, and size) on new venture creation in a sample of 16455 new projects initiated by 1659 Indian firms. Findings – First, FBG firms on average have higher positive impact on new venture creation. Second, firms that are listed or are bigger in size or are older enhance the positive impact of FBG membership on the number of new ventures undertaken. Finally we found that older and bigger firms are conservative in terms of the size of projects undertaken. Originality/value – Too little is known about the effect of family business group characteristics on new venture creation in emerging markets such as India.

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