How Family Politics Influences New Venture Creation in Family Business

Working Papers
Bhatnagar, Navneet., Ramachandran, Kavil. "How Family Politics Influences New Venture Creation in Family Business", Hyderabad, Telangana, India
Abstract:
Family firms comprise significant part of economies around the globe. Creation of new ventures (NV) is vital for their long-term survival. One of the critical success factors of a NV is the process of setting up of the venture. Yet our understanding of the ‘process’ of NV creation in family enterprise context remains limited (Vogel, 2017; Marion et al., 2015; Steier, 2009). Family as a system has its unique dynamics of socio-political pulls and pushes among its members. These forces constantly influence the functioning of the business system as well since family members are different personalities in several ways. They also exhibit varying degrees of influence on the dominant coalition. These lead to variations in the way each member is perceived and dealt with, by the top decision-makers in the family. We posit that NV creation process in family business context is influenced by socio-political forces within the family. This paper examines those socio-political forces and their influence on the NV creation process in family business. In a survey study of 120 Indian family businesses we found that familial socio-political forces significantly influence the NV creation process. Using factor analysis, we identify seven dimensions of familial socio-political influence such as Political/ Social clout and In-group/ Out-Group effects. Family embeddedness of the NV proposer was found to enhance the family’s support for the NV proposal. We conclude with the implications of the study for family firms and offer suggestions for objective assessments of NV proposals.