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Research Papers
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Published
Conference papers
- Ramachandran, Kavil with Raveendra Chittoor, Sougata Ray and Ajay Bhalla “Family Business Groups and Corporate Entrepreneurship : Evidence from Indian Firms”, August 2011 - Paper presented at the Academy of Management conference, San Antonio, US
In this study we examine the effects of ownership by family business groups (FBGs) on the intensity of corporate entrepreneurship (CE) in firms. We explore two research questions – (1) Do firms belonging to FBGs display higher CE than stand-alone firms? (2) What are some of the critical factors explaining the heterogeneity in CE intensity within FBG firms? Drawing on resource-based theory and extant research on business groups and family firms, we argue that since firms belonging to FBGs benefit from resources endowments at both group and family level, they have an edge in stimulating CE. We test our predictions using a panel dataset of 1518 Indian firms and 2972 new projects completed by them during the period 2001-2009. We find that firms belonging to FBGs display higher degree of CE than stand-alone firms. Further, greater the size of owner FBG, higher is the degree of CE displayed by the firm and FBG firms that are publicly listed exhibit higher CE intensity. Our findings also show that the regional roots of FBG firms significantly influence their CE efforts. Our study contributes to the research on entrepreneurship in family firms and integrates the research streams on business groups and family businesses
- Ramachandran, Kavil with Alexander Mathew, “Professionalisation of family business: A conceptual framework”, August 2011 - Paper accepted for presentation at the Family Business Symposium Australia
Family businesses are the most prevalent form of business enterprise worldwide and a key driver of the global economy. About two third of all businesses worldwide are family owned or controlled. Though pervasive, however, the life span of family businesses is relatively short. Most family businesses do not survive beyond two to three generations. Of those who manage to survive and grow, the primary reason for their longevity is the professionalization of the business. The way professionalization is managed is the decisive factor that eventually determines the long term survival of the family firm. Despite its significance, nevertheless, studies on the professionalization of family business are relatively scarce. There is hardly any consensus among scholars about the need, the effects and process of professionalization of family-owned firms. Moreover, there is a lack of clarity on how professionalization of family business is different when compared to that of the non-family firms. Even though different theories such as agency theory, stewardship theory, life cycle theory, and resource-based view (RBV) of firm theory are frequently invoked in the discussions of the professionalization of family business, we are not aware of any framework that integrates the key insights of these diverse theoretical streams to guide the conceptual development and empirical study on the topic. Building on the extant literature, we attempt to advance an integrated conceptual model to better understand the professionalization of family business. Based on a life cycle perspective, we describe professionalization as an imperative for any growing business, family or non family. We distinguish the life cycle development of non-family vs. family business systems, and then discuss the implications for professionalization. We argue that the key challenge to professionalization is the effective management of the overlapping areas between the sub-systems, which we call the No Man’s Land (NML). To better understand the process of professionalization of family business, we suggest the analogy of cushioning. Cushioning is provided to protect fragile objects that would otherwise get damaged while moving from one place to another. Like a cushion, multiple support mechanisms facilitate the smooth process of professionalization. The three key mechanisms are: board of directors, family council and professional management systems each addressing the challenges of managing (cushioning) the NML on different fronts: ownership-management overlap, ownership-family overlap, and family-management overlap. A mentor pool will further cushion the organizational transformation. Using two case studies we illustrate the empirical validity of the model. We discuss the implications and provide some directions to advance research in this domain.
- Ramachandran, Kavil with Ajay Bhalla and Joseph Lampel, “Keeping it within the family or letting it go: corporate venture selection in Indian family businesses”, December 2010– Accepted for presentation at Asian Academy of Management, Macau
How do family firms select new ventures, and how does the resource allocation process differ when a family vs. non-family member champions the venture? Case studies of eight Indian family firms with combined proposals of thirty-six new ventures, twenty-nine of which were selected provide evidence of the new venture and resource allocation process. We propose that the degree of formality applied by the family to guard its socio-emotional, economic assets and family talent influences the resource allocation for new ventures. The relationship between business relatedness and venture selection is shown to vary depending on whether the family firm is founder-controlled, sibling partnership or a cousin-consortium.
- Ramachandran, Kavil with Ajay Bhalla and Joseph Lampel “Building Corporate Venture Engine in Indian Family Firms”,September 2010- Strategic Management Society 30th Annual International Conference, Rome
How do family firms select new ventures, and how does the resource allocation process differ when a family member champions the venture? Case studies of eight Indian family firms with combined proposals of thirty-six new ventures suggest that family economic, expertise, reputation and attachment (EERA) logic plays a critical role in the new venture creation process. We propose that the EERA agenda influences the degree of relational governance applied to select new ventures. The relationship between business relatedness and venture selection is shown to vary depending on the EERA agenda of the family firm, and whether it is founder-controlled, sibling partnership, or a cousin-consortium
- Ramachandran, Kavil with Ajay Bhalla and Joseph Lampel "New venture creation and Diversification Strategies of Family Business Groups in India”, June 2010, Paper presented at the 30th Babson College Entrepreneurship Research Conference, Lausanne.
Does ownership structure affect the decision to establish new ventures to diversify? Scholars have documented strong evidence to demonstrate the linkages (Denis et al., 1999). For instance, Ahimud and Lev (1981 1999) using data from Fortune 500 firms show that firms with greater ownership concentration are not only less diversified, but because they suffer from agency problems they also fail to create value. Though the research to examine this question has progressed recently with contributions from Goranova et al. (2007), who made a novel attempt to study if managerial ownership in one time period is associated with subsequent changes in diversification, there has been no specific attempt to examine the linkage between family firms and their decision to establish new ventures to implement diversification strategies.
Since there is little or no separation between the family members making decisions and consequences of those decisions, family firms are likely to make choices, which maximize family’s wealth. Especially, when they are presented with opportunities where expected profitability is higher than their own or there is resource synergies (Merino and Rodriguez, 1997). However since they have a long-term view about their business, and are stewards of family wealth they often take these decisions carefully (Zellweger, Meister and Fueglistaller, 2007; Ward, 1997). Furthermore, much of the research on family controlled businesses are based on data from the Western countries (Sharma, 2004) leaving a gap to study such businesses in emerging market economies such as India where most businesses are family controlled.
This study aims to fill this gap by exploring the strategies adopted by Indian family business groups while creating new ventures in their process of evolving as large conglomerates. Indian stock market is dominated by family business groups that constitute more than 60 percent of the total market capitalization. We also believe that understanding their evolution process and their success/failure strategies can throw light on the future direction of family entrepreneurship.
Papers under review
- Ramachandran, Kavil with Raveendra Chittoor, Ajay Bhalla and Sougata Ray, “Family Business Groups and Corporate Entrepreneurship: Evidence from Indian Firms”,2010 (under review- Strategic Entrepreneurship Journal)
In this study we examine the effects of ownership by family business groups (FBGs) on the intensity of corporate entrepreneurship (CE) in firms. We explore two research questions – (1) Do firms belonging to FBGs display higher CE than stand-alone firms? (2) What are some of the critical factors explaining the heterogeneity in CE intensity within FBG firms? Drawing on resource-based theory and extant research on business groups and family firms, we argue that since firms belonging to FBGs benefit from resources endowments at both group and family level, they have an edge in stimulating CE. We test our predictions using a panel dataset of 1518 Indian firms and 2972 new projects completed by them during the period 2001-2009. We find that firms belonging to FBGs display higher degree of CE than stand-alone firms. Further, greater the size of owner FBG, higher is the degree of CE displayed by the firm and FBG firms that are publicly listed exhibit higher CE intensity. Our study contributes to the research on entrepreneurship in family firms and integrates the research streams on business groups and family businesses.
- Ramachandran, Kavil with Ajay Bhalla and Joseph Lampel, The Family Firm as an Inter-Institutional System: New Venture Creation in Indian Family Firms, 2011 (under review - Organisation Studies)
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.
- Ramachandran, Kavil with Sougata Ray, Raveendra Chittoor and Alexander Mathew, " Ownership and firm performance: A study of top 100 firms after the liberalization of Indian economy”, 2011 (White paper)
Since the liberalization of the India economy in 1991, significant number top 100 firms in the non-financial sector belonged to the three ownership category: state-owned enterprises (SOEs), family-owned business groups (FBGs), and foreign-owned or multinational corporations (MNCs). We used both absolute and relative measures of financial performance to examine the performance of top 100 firms during the period 1992 to 2010 based on their ownership category. We found that on absolute measures, SOEs performed better compared to both FBGs and MNCs; whereas, on relative measures, the government-owned firms SOEs were the least profitable. On relative measures, MNCs were the most profitable and gave higher returns on investment when compared to FBGs and SOEs. FBGs, on absolute measures, performed better than MNCs; while, on relative measures, they were more profitable than SOEs, however, they were less profitable than MNCs.
Working papers
- Ramachandran, Kavil with Rachna Jha "Vitality of Social networks in Building Lasting Organisations: A Resource - based view", 2010
RBV was originally propounded by Penrose (1959) and later developed as a detailed conceptual framework by Barney (1991). The literature on RBV has grown substantially in recent years and research on “dynamic capabilities” has taken the discussion to yet another plain. However, there does not seem to have been any study on the RBV in the context of family businesses.
We believe that a firm’s social contact network is a part of its valuable, rare, inimitable and non-substitutable organizational assets, that can contribute immensely to its long-term performance by providing certain competitive advantages that are sustainable over a long period of time. We observed that family businesses enjoy a competitive edge over non-family businesses in terms of their networking pattern or behavior, which is much more integrated and takes place through three phases of individual life cycle – youth, adulthood and post-retirement.
Unfortunately, we do not find much evidence of interest in exploring the utility of social networks as a valuable resource among RBV scholars. Further, a review of the social network literature reveals that the focus of most of the writings in this field has largely been on the networking behavior of firms during the entrepreneurial phase of their life cycle.
Through this research paper, we have made an attempt to fill some of these research gaps. Our primary interest lies in examining the social networking behavior of family businesses across all phases of an individual life cycle through the RBV lenses.
- Ramachandran, Kavil with Rachna Jha “Collapse of Institutions: Missing Links on Agency and Stewardship, Symphony and Learning for Family Businesses”,2010
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.
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