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New research: next generation external venturing practices in family owned businesses

Many daughters and sons growing up in a successful family business and who have their own entrepreneurial ideas struggle to become autonomous from the family’s business. Most research tends to examine how younger, next generation family members build their careers by engaging in internal venturing as a way of growing their existing family business. What is lacking here is research that looks at the ways in which these daughters and sons rely on external venturing, that is, to start their own business outside the existing family business, to achieve greater autonomy and pursue their independent business ideas.

Research conducted partly at the House of Innovation shows that next generation family members engage in external venturing in five ways: by first obtaining family approval, by bypassing the family, by copying what the family had originally done to build their business, by using the entrepreneurial action of older family members as a template to develop and introduce new ideas, and lastly by creating a venturing space separate from the original family business. These five practices are different enough to justify individual conceptualizations; however, they should be seen as interconnected and inter-related i.e. not exclusive ‘options’ or ‘choices’.

Based on how these five practices are combined, next generation family members may take one of three routes to external venturing.

  • They can imitate the existing family owned business,
  • They can try to surpass the family owned business, and
  • They can split the family owned business.

The identification of these three routes deepens our understanding of the micro-level processes through which next generation daughters and sons engage in external venturing. A combination of these 5 practices in the 3 routes identified above illustrates the interconnectedness but also the autonomy of the next generation individuals to their family’s businesses when they engage in entrepreneurship and create their own new ventures.  Any given external venturing situation can be based on a combination of practices that form a specific route with a possibility for an individual to venture forward for the sake of entrepreneurship.  

Researchers

Marcela Ramírez-Pasillas
Centre for Family Entrepreneurship and Ownership, Jönköping International Business School

Hans Lundberg
Universidad Iberoamericana and School of Business and Economics

Mattias Nordqvist
House of Innovation, Stockholm School of Economics

House of Innovation Family economics Finance Start-up Strategy Economics Article Journal Publication Research

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