FAMILY BUSINESS IN SOUTH AMERICA: A GENERATIONAL COMPARISON

MATTHEW SONFIELD, HOFSTRA UNIVERSITY

ROBERT LUSSIER, SPRINGFIELD COLLEGE

PRESENTED BY

ENG. ISLAM ELZAYAT ,MBA,MCT

AGENDA• Introduction

•Research Questions

•Hypothesis

•Methods

•Statistical Analysis

•Result and Decision

INTRODUCTION • This investigation compared first-, second- and third-

generation family businesses in a sample of 210 family

businesses in Argentina and Peru

• Family firms constitute a highly important component of most

countries’ economies

• In the USA, an estimated 80 % of the total 15 million businesses

are family businesses

• Drawing on data from 210 family firms in Argentina and Peru,

this paper reports on an analysis of generational issues

RESEARCH QUESTIONS

Family firms move

beyond the generations ,

Does any changes occur ?

RESEARCH QUESTIONS

Is there are a significant

differences between the

Three generations ?

ARGENTINA • Family business plays a big role on Argentina business

outcome

• Argentina´s family businesses are of great socio-

economic importance because almost 75 % of total

businesses (1,200,000) are family firms

• Approximately 50 % of GNP and 70 % of employment is

contributed to family business, and they control 95 % of

total trade

• Also, 85 % of family businesses are founded by 26 to 28

year old

• 76 % belong to two or more owners

PERU• Peru is a nation with a population size of nearly 29.1

million people

•GDP nearing $ 159 billion in 2010

• the Peruvian economy remained strong throughout the

2008-2009 global economic crisis due to proactive

macroeconomic measures

• 1990’s, the Peruvian government began to actively

encourage SME development through government

sponsored small enterprise development programs and

economic reforms

HYPOTHESIS 1Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to include non-family members

within top management

HYPOTHESIS 2Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to have women family members

working in the firm

HYPOTHESIS 3Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to use a “team-management” style

of management

HYPOTHESIS 4Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to have conflict and disagreement

between family members

HYPOTHESIS 5Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to have formulated specific

succession plans

HYPOTHESIS 6Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to use outside consultants,

advisors and professional services

HYPOTHESIS 7Subsequent-Generation Family Firms

spend more time engaging in strategic

management activities than First-

Generation Family Firms

HYPOTHESIS 8Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to use sophisticated methods of

financial management

HYPOTHESIS 9Top management styles and decisions in

Subsequent-Generation Family Firms are

neither more nor less likely than in First-

Generation Family Firms to be influenced

by the original business objectives and

methods of the founder

HYPOTHESIS 10Subsequent-Generation Family Firms are

more likely than First-Generation Family

Firms to have considered “going public.”

HYPOTHESIS 11Subsequent-Generation Family Firms are

neither more nor less likely than First-

Generation Family Firms to use equity

financing rather than debt financing.

METHODS•The objective of this study was to combine

the data to provide a comprehensive and

large sample of family firms

•The research design was survey research

using both mail and personal interviews

STATISTICAL ANALYSIS•Hypotheses 1-11 compared the dependent

variable among the three generation groups

using a one-way ANOVA test.

RESULTS AND DISCUSSION

RESULTS AND DISCUSSION

The use of outside consultants, advisors

and professional services increased

through the three generational levels, but

only statistically significantly from the

second-generation to the third-generation

level.

RESULTS AND DISCUSSION

The influence of the original business

objectives and methods of the founder

decreased through the three generational

levels, but only statistically significantly

from the second-generation to the third-

generation level.

RESULTS AND DISCUSSION

The likelihood of top management

considering going public increased from

the second-generation level to the third-

generation level (but not form first-

generation level to second-generation-

level).

CONCLUSION

•In summary, this investigation compared

first-, second- and third-generation

family businesses in a sample of 210

South American companies

•Both supporting the authors’ various prior

country studies and yet challenging the

earlier more conceptual literature