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THE EFFECT OF FAMILY CULTURE ON FAMILY BUSINESS: A RESEARCH ON FAMILY BUSINESS IN ISTANBUL CHAMBER OF COMMERCE

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Title: THE EFFECT OF FAMILY CULTURE ON FAMILY BUSINESS: A RESEARCH ON FAMILY BUSINESS IN ISTANBUL CHAMBER OF COMMERCE


1
  • THE EFFECT OF FAMILY CULTURE ON FAMILY BUSINESS
    A RESEARCH ON FAMILY BUSINESS IN ISTANBUL CHAMBER
    OF COMMERCE
  •  
  • Canan Çetin
  • Ata Özdemirci
  • Erkan Taskiran
  • Esra Dinç Özcan
  • Marmara University, Turkey

2
Research Questions
  • What is the effect of family culture on
    organizational culture?
  • What is the effect of family culture influence on
    business and founder/ceo centralisation on firm
    performance in family business?

3
CORPORATE CULTURE
  • In recent years, the term corporate culture has
    been used widely to describe shared attitudes,
    beliefs, values and expectations that interact to
    create behavioral norms within the work
    environment.
  • Today, the companies are required to set own
    values which are different from the other
    companies which are not easily imitated by the
    others in order to align with rapidly changing
    environment conditions. This necessity forces
    companies to have distinct beliefs, norms and
    values.

4
CORPORATE CULTURE
  • The notion of organizational culture has been
    very important in the studies for the last
    decade. In spite of disagreements over some
    elements of definition and measurement,
    researchers seem to agree that culture may be an
    important factor in determining how well an
    individual fits an organizational context.

5
CORPORATE CULTURE
  • All the organizations have their own cultures
    when they share some specific values and this
    structure helps values align with the behaviors.
    Within this context, the companies who have
    strong organizational culture can observe the
    positive impacts of culture over the companys
    performance.

6
CORPORATE CULTURE IN FAMILY BUSINESSES
  • In family businesses the role of culture is
    stronger than in non family firms as family
    members tend to maintain and strengthen the
    founders value over the long term. (Casillas,
    Acedo and Moreno, 2007).
  • Family businesses are accepted to be the
    milestones of the economy especially in
    developing countries. Although theoretical
    efforts to describe family business have been no
    single definition exists.

7
CORPORATE CULTURE IN FAMILY BUSINESSES
  • Brun de Pontet, Wrosch and Gagne (2007) defines
    family business as a company whose ownership and
    management are concentrated in one family, with
    at least one member of the family at the helm of
    the business and another being groomed or
    considered for eventual leadership.
  • With another definition, family business can be
    described as the business in which the family
    owns a significant part of the business and the
    family members are highly involved in the
    management and control of the business.

8
CORPORATE CULTURE IN FAMILY BUSINESSES
  • Family businesses contribute a significant
    portion of the gross domestic production and
    employment. In many countries, family businesses
    contribute a substantial amount to their gross
    national production and provide the reduction of
    unemployment. It is evident that family
    businesses play a major role in most countries
    economic development.

9
CORPORATE CULTURE IN FAMILY BUSINESSES
  • Organizational culture in the area of family
    business is especially complex, and thus the
    culture emerges not only from the relationships
    that exist at the heart of the firm itself, but
    also with regard to family members.

10
FAMILY CULTURE
  • The family as a social unit achieves cohesion
    through the sharing of values, beliefs,
    perceptions, and expectations among its members.
  • Each family has own culture unwritten operating
    rules that govern relationships, communication
    and decision-making.
  • Family culture plays an important role in the
    operation in the business and the way owners make
    their decisions.

11
FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES
  • It is expected from the family businesses to
    share the values and beliefs among the members of
    family and the executives so as to be rapidly
    institutionalized and developed. In family
    businesses, sustainability is the main process
    that aims at sharing the values, beliefs and
    norms and ensuring competent family leadership
    across the generations (Mazzolo, Marchisio and
    Astrachan, 2008).

12
FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES
  • All families construct their family paradigms
    according to their beliefs on life. This paradigm
    has an effect on ways of solving problems and
    families viewpoints of relationships, and most
    of the time it determines not only the culture of
    the family but also the culture of the family
    business . (Akdogan and Mirap, 2008)
  •  

13
FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES
  • The fact that the family has authorization to
    control and own the firm, familys values and
    vision will be present in the firm. If owners can
    deeply inculcate values in family members that
    are conducive to organizational success, the
    family business may have a competitive edge.

14
FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES
  • Considering the companies in our country, Turkey,
    especially the companies whose family orientation
    has been maintained, it can be easily observed
    that they have their own cultural structures and
    these structures have been a major topics of
    various researches in the last decade.
  • The main purpose of this research is to
    investigate comprehensively the effect of family
    culture upon the organization culture and
    performance.

15
Hypothesis
  • H1 Family culture effects organizational culture
  • H2 Family culture effects firm performance
  • H3 Family culture influence on business effects
    firm performance
  • H4 Founder/ceo centralisation effects firm
    performance

16
METHODOLOGY
  • The type of the research is hypothetic research.
    Data collection method is survey. Sample
    selection method is coincidental.
  • The universe of the study is the family firms in
    Istanbul Chamber of Commerce which are at least
    10 years old and which have minimum capital of
    250000 TL?150,000 .
  • Its estimated that the population of the
    universe is approximately between 15000 and
    20000.

17
METHODOLOGY
  • We made face-to-face survey with the executives
    who are family members on charge and we also used
    mail and telephone survey for reaching maximum
    participation.
  • We used factor analysis to determine the
    dimensions of the measures. We also made K-S test
    for normal distribution and Cronbach Alpha test
    for reliability.

18
Measures
MEASURE DEVELOPERS ITEM NUMBER
FAMILY CULTURE INFLUENCE ON BUSINESS (FCI) Koiranen, 2002 12
FOUNDER / CEO CENTRALISATION Borgatti, 1999 12
FAMILY CULTURE / ORGANIZATONAL CULTURE Denison, 2001 12/ 12
19
Measures
  • Also
  • 2 control questions about the family effect on
    business (share amount of family, family members
    in board of directors)
  • 1 control question about the participants
    relatedness to the family
  • 8 questions about the firms perceived
    performance
  • 8 questions about the demographics are asked to
    the participants.
  • Likert Scale-5 is used in all questions

20
Factor Analysis and Reliabilities
  • We made expletory factor analysis for
    establishing the sub dimensions of measures.
  • All factors have passed the KMO Measure of
    Sampling Adequacy and Bartlett test of Sphericity
    which means that our data set is appropriate for
    factor analyses.
  • Principal components and varimax method are used
    in analysis. For all measures, items which have
    factor weight below 0,50 unique items in a
    factor items with close factor weights are
    leaved out of evaluation.
  • After these processes, factors which have initial
    eigenvalues over 1,00 and Cronbach Alpha over
    0,65 are

21
Factor Analysis and Reliabilities
  • FAMILY CULTURE
  • 2 factors (Cumulative Extraction Sums 74,32)
  • Power of Family Culture (Cronbach Alpha0,936)
  • Value Attributed to Individuals (Cronbach
    Alpha0,883)

22
Factor Analysis and Reliabilities
  • ORGANIZATIONAL CULTURE
  • 2 factors (Cumulative Extraction Sums 70,02)
  • Power of Organizational Culture (Cronbach
    Alpha0,876)
  • Value Attributed to Individuals (Cronbach
    Alpha0,849)

23
Factor Analysis and Reliabilities
  • FAMILY CULTURE INFLUENCE ON BUSINESS
  • 2 factors (Cumulative Extraction Sums 74,32).
  • Participation of Family (Cronbach Alpha0,921)
  • Support of Family (Cronbach Alpha0,922)

24
Factor Analysis and Reliabilities
  • FOUNDER / CEO CENTRALISATION
  • 1 factor (Cronbach Alpha0,942)

25
Factor Analysis and Reliabilities
  • FIRM PERFORMANCE
  • 2 factors (Cumulative Extraction Sums 72,545)
  • Concrete Performance (Cronbach Alpha0,908)
  • (sales, financial performance, profitability,
    market share, reaching goals)
  • Abstract Performance (Cronbach Alpha0,715)
  • (handling difficulties, HR quality and meeting
    expectations)

26
Descriptive Statistics
FACTOR N Mean Std. Deviation
POWER OF ORGANIZATIONAL CULTURE (POC) 106 3,8825 ,64730
VALUE ATTRIBUTED TO INDIVIDUALS IN ORGANIZATIONAL CULTURE (VIOC) 106 3,4830 ,68054
POWER OF FAMILY CULTURE (PFC) 106 3,8311 ,74584
VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE (VIFC) 106 3,4170 ,71985
FAMILY PARTICIPATION IN BUSINESS (PARTICIPATION) 106 3,8097 ,78795
FAMILY SUPPORT IN BUSINESS (SUPPORT) 106 3,8538 ,70784
CENTRALIZATION 106 3,5778 ,83085
CONCRETE FIRM PERFORMANCE 106 3,6759 ,68679
ABSTRACT FIRM PERFORMANCE 106 3,7484 ,61172
27
Correlations Between Factors and Demographics
Age Education Professional Seniority Firm Seniority
POC ,198 ,277 ,591 ,453
VIOC ,266 ,423 ,495 ,365
PFC ,029 ,384 ,395 ,304
VIFC ,140 ,659 ,432 ,325
FAMILY PARTICIPATION ,266 ,269 ,518 ,384
FAMILY SUPPORT ,151 ,119 ,438 ,277
CENTRALIZATION ,345 ,150 ,515 ,371
CONCRETE FIRM PERFORMANCE ,033 ,277 ,311 ,264
ABSTRACT FIRM PERFORMANCE -,018 ,393 ,298 ,126
28
Correlations Between Factors and Demographics
The perception of power of organizational culture
and family culture, value attribured to
individuals in organizational culture and family
culture, family participation and family support,
centralization and firm performance rises by age,
education and seniority. This means that an
optimistic point of view appears by age,
education and seniority.
29
Correlations Between Factors
  1 2 3 4 5 6 7 8 9
1. POC 1
2. VIOC ,609 1
3. PFC ,859 ,459 1
4. VIFC ,718 ,760 ,754 1
5. FAMILY PARTICIPATION ,631 ,586 ,526 ,601 1
6. FAMILY SUPPORT ,701 ,208 ,750 ,411 ,578 1
7. CENTRALIZATION ,719 ,579 ,517 ,604 ,849 ,550 1
8. CONCRETE FIRM PERFORMANCE ,178 ,392 ,057 ,334 ,430 ,141 ,444 1
9. ABSTRACT FIRM PERFORMANCE ,500 ,581 ,401 ,666 ,236 ,065 ,379 ,525 1
30
Correlations Between Factors
We see very high positive correlations between
the factors, it means that we need multi
regression and hierarchycal regression tests for
avoiding collinearity problem
31
Analysis of the Hypothesis
Multi Regression Test for Hypotesis 1 Family
culture effects organizational culture

  POWER OF ORGANIZATIONAL CULTURE (POC) POWER OF ORGANIZATIONAL CULTURE (POC) VALUE ATTRIBUTED TO INDIVIDUALS IN ORGANIZATIONAL CULTURE (VIOC) VALUE ATTRIBUTED TO INDIVIDUALS IN ORGANIZATIONAL CULTURE (VIOC)
  ß Sig. ß Sig.
POWER OF FAMILY CULTURE (PFC) ,638 0 -,240 ,006
VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE (VIFC) ,147 ,031 ,906 0
Adjusted R2 ,744 0,600
N 106 106
F 153,545 79,699
Sig. 0 0
S.E. ,327 ,430





32
Analysis of the Hypothesis
Multi Regression Test for Hypotesis 2 Family
culture effects firm performance


  CONCRETE FIRM PERFORMANCE CONCRETE FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE
  ß Sig. ß Sig.
POWER OF FAMILY CULTURE (PFC) -,449 ,001 -,235 ,034
VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE (VIFC) ,672 0 ,843 0
Adjusted R2 ,183 ,457
N 106 106
F 12,743 45,142
Sig. 0 0
S.E. ,621 ,451




33
Analysis of the Hypothesis
Multi Regression Test for Hypotesis 3 Family
culture influence on business effects firm
performance


  CONCRETE FIRM PERFORMANCE CONCRETE FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE
  ß Sig. ß Sig.
FAMILY PARTICIPATION ,523 0 ,298 ,012
FAMILY SUPPORT -,161 ,138 -,108 ,359
Adjusted R2 ,187 ,045
N 106 106
F 13,07 3,477
Sig. 0 ,035
S.E. ,612 ,598




34
Analysis of the Hypothesis
Regression Test for Hypotesis 4 Founder/ceo
centralism effects firm performance


  CONCRETE FIRM PERFORMANCE CONCRETE FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE
  ß Sig. ß Sig.
CENTRALIZATION ,444 0 ,379 0
Adjusted R2 ,189 ,136
N 106 106
F 25,468 17,477
Sig. 0 0
S.E. ,619 ,569




35
Analysis of the Model
Hierarchycal Regression Test for Concrete
Performance

Model Model Unstandardized Coefficients Unstandardized Coefficients Standardized Coefficients t Sig.
Model Model B Std. Error Beta t Sig.
1 (Constant) 2,364 ,267   8,862 ,000
1 CENTRALIZATION ,367 ,073 ,444 5,047 ,000
2 (Constant) 2,833 ,330   8,598 ,000
2 CENTRALIZATION ,467 ,083 ,565 5,619 ,000
2 POWER OF FAMILY CULTURE -,216 ,093 -,235 -2,336 ,021
3 (Constant) 2,709 ,316   8,575 ,000
3 CENTRALIZATION ,356 ,086 ,431 4,164 ,000
3 POWER OF FAMILY CULTURE -,471 ,116 -,511 -4,071 ,000
3 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,438 ,129 ,459 3,402 ,001
4 (Constant) 2,375 ,343   6,927 ,000
4 CENTRALIZATION ,250 ,096 ,303 2,604 ,011
4 POWER OF FAMILY CULTURE -,770 ,174 -,837 -4,432 ,000
4 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,613 ,148 ,643 4,147 ,000
4 FAMILY SUPPORT ,328 ,144 ,338 2,273 ,025





36
Analysis of the Model
Hierarchycal Regression Test for Abstract
Performance


Model Model Unstandardized Coefficients Unstandardized Coefficients Standardized Coefficients t Sig.
Model Model B Std. Error Beta t Sig.
1 (Constant) 1,815 ,217   8,362 ,000
1 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,566 ,062 ,666 9,101 ,000
2 (Constant) 2,353 ,264   8,900 ,000
2 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,654 ,065 ,770 10,029 ,000
2 FAMILY SUPPORT -,218 ,066 -,252 -3,285 ,001




37
CONCLUSION
  • H1 Family culture effects organizational culture
  • This hypothesis is supported at the plt.05 level
    on both dimensions of family and organization
    culture.
  • (The significant effect of power of family
    culture on power of org. culture value
    attributed to individuals in family culture on
    value att. to individuals in org. culture.
  • Also there is a significant negative effect of
    power of family culture on value att. to
    individuals in org. culture).

38
CONCLUSION
  • H2 Family culture effects firm performance
  • This hypothesis is supported at the plt.05 level
    for both dimensions of family culture on concrete
    and abstract performance. Power of family culture
    negatively effects concrete and abstract firm
    performance and value attributed to individuals
    in family culture positively effects concrete and
    abstract firm performance.

39
CONCLUSION
  • H3 Family culture influence on business effects
    firm performance
  • This hypothesis is supported at the plt.05 level
    for one dimension of family culture influence on
    concrete and abstract performance. While family
    participation positively effects firm
    performance, there is no significant relationship
    between family support and firm performance.

40
CONCLUSION
  • H4 Founder/ceo centralization effects firm
    performance
  • This hypothesis is supported at the plt.05 level.
    There is a strong positive effect of
    centralization on firm performance.

41
CONCLUSION
  • According to the results of the hierarchycal
    regression test for concrete performance, the
    most important factor is power of family culture
    that has a negative effect on concrete
    performance, and with the positive effects value
    attributed to individuals in family culture,
    family support and centralization follows it.

42
CONCLUSION
  • According to the results of the hierarchycal
    regression test for abstract performance, the
    most important factor is value attributed to
    individuals in family culture that has a positive
    effect on abstract performance, and family
    support with a negative effect follows it.

43
CONCLUSION
  • So, the effect of family culture is significant
    on the (perceived) firm performance. The effect
    of value attributed to individuals in family is
    positive and very high, and the effect of power
    of family culture is negative and high. Also
    centralization is still the most powerful
    management style in family business. Good
    performance needs valuable individuals more than
    power or influence of family culture, and Turkish
    style still looks like a one mans show.

44
  • THE EFFECT OF FAMILY CULTURE ON FAMILY BUSINESS
    A RESEARCH ON FAMILY BUSINESS IN ISTANBUL CHAMBER
    OF COMMERCE
  •  
  • Canan Çetin
  • Ata Özdemirci
  • Erkan Taskiran
  • Esra Dinç Özcan
  • Marmara University, Turkey
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