MAKERERE UNIVERSITY

SUCCESSION PLANNING AND SURVIVAL OF FAMILY BUSINESSES

BY

ISMAEL NKAMBWE

2008/HD10/14357U

A DISSERTATION SUBMITTED TO THE POSTGRADUATE SCHOOL IN

PARTIAL FULFILLMENT OF THE REQUIREMENT S FOR THE

AWARD OF THE DEGREE OF MASTER OF

BUSINESSADMINISTRATION OF

MAKERERE UNIVERSITY

SEPTEMBER, 2010

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DECLARATION

I, Ismael Nkambwe, declare to the best of my knowledge that this research report is my own

original work and has not been published and/or presented for any other degree award to any

other University or institution of higher Learning before.

Signed: --------------------------------------------------- Date: ---------------------------

ISMAEL NKAMBWE

2008/HD10/14357U

iii

APPROVAL

This is to certify that this dissertation had been submitted with our approval as University

Supervisors.

Signed: ----------------------------------------------- Date: ………………………………

Dr. Joseph Ntayi

Makerere University

Signed: ---------------------------------------------- Date: ……………………..

Dr. Isaac Nkote Nabeta.

Makerere University

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DEDICATION

I dedicate this research report to the Almighty God, who always opens opportunities for me, my

Late father Hajj Ali Nkambwe, Mother Mrs. Madeenah Nazziwa and my wife Habeebah Ismael .

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ACKNOWLEDGEMENT

Newton the great scientist, once said, “if I have been able to see further than others, it is because

I have stood on the shoulders of giants.” This report would not have been possible without the

efforts of a number of people whose great contribution made a difference and strengthened me

when researching. I wish to extend my sincere and gratitude, to my supervisors Dr. Joseph Ntayi

and Dr. Isaac Nkote N., for their time, advice and guidance accorded to me, and never got tired

of guiding me and correcting my short falls and showing me the right way I needed to complete

the dissertation. I will always incline to work with you. Thank you very much may Allah bless

you abundantly. I can not forget to express my appreciation to the Principal and Management of

Makerere University Business School who enabled me to pursue a Degree of Masters of

Business Administration

I will forever be beholden to my research respondents for the time they took filling my

questionnaires and their willingness to give me the vital information that was necessary for the

study. Devoid of this magnanimity, my proposal would have remained a wonderful dream

Lastly and most importantly, I wish to thank the almighty Allah for giving me health, wisdom

and knowledge that enabled me do this research work and for the continuous support where I

could not handle.

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LIST OF ABBREVIATIONS

USSIA: Uganda small scale industries Association

CEO: Chief Executive Officers

vii

TABLE OF CONTENTS APPROVAL ......................................................................................................................................................................................................................... iii

DEDICATION ..................................................................................................................................................................................................................... iv

ACKNOWLEDGEMENT .................................................................................................................................................................................................... v

LIST OF ABBREVIATIONS ............................................................................................................................................................................................. vi

TABLE OF CONTENTS ................................................................................................................................................................................................... vii

LIST OF FIGURES AND TABLES ................................................................................................................................................................................... ix

ABSTRACT .......................................................................................................................................................................................................................... x

CHAPTER ONE ................................................................................................................................................................................................................... 1

INTRODUCTION................................................................................................................................................................................................................. 1

1.1 Background ..................................................................................................................................................................................................................... 1

1.2 Statement of the Problem ............................................................................................................................................................................................... 3

1.3 Purpose of the Study ....................................................................................................................................................................................................... 4

1.4 Objectives of the Study................................................................................................................................................................................................... 4

1.5 Research Questions ......................................................................................................................................................................................................... 4

1.6 Scope of the Study .......................................................................................................................................................................................................... 5

1.7 Significance of the Study................................................................................................................................................................................................ 5

1.8 Conceptual Framework................................................................................................................................................................................................... 6

CHAPTERTWO: LITERATUREREVIEW ………………………………………………………………………………………………………….8 2.1 Introduction………………………………………………………………………………………………………………………………………..8

2.2 Succession Planning ................................................................................................................................................................................................. 8

2.2.1 The Concept of Succession Planning ...................................................................................................................................................................... 8

2.2.2 Training ...................................................................................................................................................................................................................... 10

2.2.3 Family involvement ................................................................................................................................................................................................... 12

2.2.4 Succession management ............................................................................................................................................................................................ 12

2.3 Entrepreneurial Orientation .......................................................................................................................................................................................... 13

2.3.1 The Concept of Entrepreneurial Orientation ............................................................................................................................................................ 13

2.3.12 Proactiveness ............................................................................................................................................................................................................ 14

2.3.3 Risk Taking ................................................................................................................................................................................................................ 15

2.3.4 Competitive Aggressiveness ..................................................................................................................................................................................... 17

2.3.5 Innovativeness......................................................................................................................................................................................................... 18

2.3.6 Autonomy ................................................................................................................................................................................................................ 19

2.4 Organizational Learning ............................................................................................................................................................................................... 20

2.5 Family Business Survival ............................................................................................................................................................................................. 23

2.6 Succession Planning and Survival of Family Business .............................................................................................................................................. 25

2.7 Succession Planning and Organization Learning........................................................................................................................................................ 25

2.8 Succession Planning and Entrepreneurial Orientation ............................................................................................................................................... 26

2.9 Succession Planning, Entrepreneurial Orientation, Organization Learning and Survival of Family Business ...................................................... 27

CHAPTER THREE............................................................................................................................................................................................................. 29

3.0 METHODOLOGY ....................................................................................................................................................................................................... 29

3.1 Introduction ............................................................................................................................................................................................................ 29

viii

3.2 Research Design .................................................................................................................................................................................................... 29

3.3 Study Population ..................................................................................................................................................................................................... 29

3.4 Target Sample Size and Sampling procedure ......................................................................................................................................................... 29

3.5 Data Sources ........................................................................................................................................................................................................... 30

3.6 Data Collection Instruments................................................................................................................................................................................... 30

3.7 Measurement of Variables ..................................................................................................................................................................................... 31

3.8 Reliability and the validity of the variables................................................................................................................................................................. 31

3.9 Data Processing and Analysis ................................................................................................................................................................................ 32

3.10 Limitations faced ................................................................................................................................................................................................... 32

CHAPTER FOUR ............................................................................................................................................................................................................... 33

PRESENTATION OF FINDINGS .................................................................................................................................................................................... 33

4.1 Introduction ................................................................................................................................................................................................................... 33

4.2 Sample Characteristics ........................................................................................................................................................................................... 33

4.2.1 The response Rate ...................................................................................................................................................................................................... 33

4.2.2 Age Group .................................................................................................................................................................................................................. 34

4.2.3 Gender ........................................................................................................................................................................................................................ 34

4.2.4 Marital status .............................................................................................................................................................................................................. 35

4.2.5 Number of years worked in the Organization .......................................................................................................................................................... 35

4.2.6 Highest Level of education attained ......................................................................................................................................................................... 36

4.3 Sample characteristics of family businesses ............................................................................................................................................................... 36

4.4 An examination of succession planning in family businesses. .................................................................................................................................. 38

4.5 The correlation analysis of the study variables ........................................................................................................................................................... 41

Table 4.8: Pearson correlations .......................................................................................................................................................................................... 41

4.5.1 Succession planning and Organizational learning in family business.................................................................................................................... 41

4.5.2 Entrepreneurial orientation and survival of family business................................................................................................................................... 42

4.5.3 Organizational learning and survival of family business ........................................................................................................................................ 42

4.6 Magnitude of the regression Coefficients.................................................................................................................................................................... 43

4.7 Regression analysis on the components of Succession Planning .............................................................................................................................. 44

CHAPTER FIVE ................................................................................................................................................................................................................. 46

DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATION........................................................................................................... 46

5.1 Introduction ................................................................................................................................................................................................................... 46

5.2 Discussion of Findings ................................................................................................................................................................................................. 46

5.2.1 Objective One............................................................................................................................................................................................................. 46

5.2.2 Objective Two ............................................................................................................................................................................................................ 47

5.2.3 Objective three ........................................................................................................................................................................................................... 47

5.2.4 Objective four............................................................................................................................................................................................................. 48

5.3 Conclusion ..................................................................................................................................................................................................................... 49

5.4 Recommendations................................................................................................................................................................................................... 50

5.5 Areas for Further Research .................................................................................................................................................................................... 51

REFERENCES .................................................................................................................................................................................................................... 52

APPENDIX 1 ...................................................................................................................................................................................................................... 59

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LIST OF FIGURES AND TABLES

Fingure 1.1: Conceptual frame work ................................................................................................... 6

Table 1: Target Sample Size .............................................................................................................. 30

Table 2: Reliability and Validity ....................................................................................................... 31

Table 3: Age group of the respodents................................................................................................ 34

Table 4: Gender of the repondents..................................................................................................... 34

Table 5: Marital status of the respondents. ....................................................................................... 35

Table 6: Number of years worked in the organisation .................................................................... 35

Table 7: Highest education attained ................................................................................................. 36

Table 8: Factor Analysis of succession planning ............................................................................ 39

Table 9: Pearson correlations. ............................................................................................................ 40

Table 10: Regression analysis ............................................................................................................ 42

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ABSTRACT The purpose of this study was to investigate the relationship between Succession Planning,

Entrepreneurial Orientation, Organizational Learning and Survival of family Businesses. The

study was guided by the following research objectives, to examine how succession planning is

done in family businesses, to examine the relationship between succession planning and

organizational learning in family business, to investigate the relationship between organizational

learning and survival of family businesses, to examine the mediating influence of organizational

learning on succession planning, to examine the mediating influence of entrepreneurial

orientation on succession planning.

The study was cross sectional and used a sample of 186 registered family businesses was

selected from a total of registered family businesses in Kampala. The respondent was

purposively selected from each family business. A cross sectional research design was adopted

which involved descriptive, correlation, factor analysis and regression approaches. Findings

revealed that there was a significant positive relationship between all the study variables of

Succession Planning, Entrepreneurial Orientation, Organizational Learning and Survival of

family businesses. Results from the regression analysis showed that Succession Planning,

Entrepreneurial Orientation and Organizational Learning significantly predicted 29.4% of the

Survival of family businesses.

It was recommended that Family businesses should ensure that there is proper succession

planning processes if the survival of such firms is to be achieved. It was also recommended that

family firms should carry out appropriate mentoring of new employees and knowledge sharing

among the family members as well as employees of the firm.

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CHAPTER ONE

INTRODUCTION 1.1 Background

Succession planning entails a long term and more extensive approach towards the training,

mentorship and replacement of key individuals (Rothwell, 2001; Wolfe, 1996). Succession in

family firms looks at transference of leadership from one family member to another (Ibrahim,

2003). Planning for succession helps family firms to survive for generations (Ibrahim, 2003).

When plans for succession are carried out well, it increases the likelihood of co-operation among

stakeholders in businesses, therefore enhancing the chance of a smooth and effective succession,

(Morris, 1997; Sharma, 2001)

Family businesses are owner operated and managed ventures with family members

predominantly involved in the administration, operations and strategic determination of

corporate destiny (Poutziouris, 2000). It is estimated that over two-thirds of all businesses world

wide like Linden and co limited, Robert Dickson and Lesley Antiques are owned or managed by

families (Gersick, 1997). More than 80% of businesses in Europe and United States are believed

to be family owned and these include Walmart.com, Mars limited, Saarland (Flintoff, 2002).

Family businesses play an important role to economies employing the majority of the workforce,

creating the most new jobs and generating a significant proportion of the gross domestic product

(Astrachan & Shanker, 1996). Even though family businesses are as important as they are

driving force behind economic development, their survival rate is very low compared to non-

family firms (Ellis & Ibrahim, 2006). It is estimated that less than one-third of family firms

survive into the second generation and only 13 percent survive through the third generation

(Beckhard & Dyer, 1983; Heck, 1999; Ward, 1987). This is attributed to poor technical skills,

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financial management and poor succession planning practices though little has been said about it

(Trent, 1999)

The concepts of entrepreneurial orientation and organizational learning are also important for

family business survival and they can be understood as is the processes, practices, and decision

making activities that lead to the development and delivery of new and innovative products or

services that can differentiate a firm from others in the market (Chen, 2006; Garcia Moles, 2006;

Jambulingam, 2005; Lumpkin & Dess, 1996; Naldi, 2007). Miller (1983) offers specific

dimensions for characterizing entrepreneurial orientation describing an entrepreneurial firm as

one that engages product marketing innovation, undertakes somewhat risky ventures, and is first

to come up with proactive innovations, beating competitors to the punch.

Organizational learning is where people continually expand their capacity to create the results

they truly desire. Where new and expansive patterns of thinking are nurtured, where collective

aspiration is set free and where people are continually learning how to get together (Senge,

1990). Organizational learning focuses on survival and prospers in the market, improvement and

innovation (McConnel-Imbriotis, 2004)

In Uganda, nearly 90% of the private sector businesses are family owned, (USSIA, 2009)

employing over 80% of the total workforce in the country (NPA, 2005).

Many of these family businesses have not been able to survive for generations. For instance

Mayanja and sons was a family cattle farm in wakiso district and it was performing well when

the owner Hajji Mayanja was still around and after his death, the family members failed to run

the farm and later collapsed. The son who was managing the business even left the country for

London (Achika, 2010).

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Also other family businesses like Nyange Dry Cleaners on Uganda house, Vacculag tyre

retreading, centre for trade promotion, Jimmy Katumba and Ebonies limited, Diary Farm of Late

Samson Kisseka and Godom Construction Uganda limited were all family businesses which

collapsed after the death of their founders. This could be attributed to inappropriate succession

planning, entrepreneurial orientation and organizational learning (Ibrahim, 2004)

Though many Family businesses in Uganda have failed, but those with Ugandan Indian founders

or linkage like Mukwano group companies, Madhvan and Mehta have been able to withstand the

challenge of succession planning, entrepreneurial orientation and organization learning making

them to survive beyond the first generation with promising performance though some with still

the influence of founders in decision making like Mukwano. For the case of Mukwano, he

trained his sons and they are now the one running the businesses. Hence making Mukwano group

of companies to survive from first generation to second generation.

This research seeks to investigate whether succession planning has a relationship with the

survival of family businesses in Uganda concentrating on Kampala District.

1.2 Statement of the Problem

It is estimated that less than one-third of family firms survive into the second generation and only

13 percent survive through the third generation (Beckhard & Dyer, 1983; Heck and Trent, 1999;

Ward, 1987). This could be attributed to unsatisfactory succession planning, organizational

learning, (The Monitor, 1998), and inappropriate entrepreneurial orientation, (Walter, 2004).

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1.3 Purpose of the Study

The purpose of the study is to establish the relationship between succession planning and

survival of family businesses, succession planning and entrepreneurial orientation, succession

planning and organizational learning, succession planning, entrepreneurial orientation and

survival of family business and succession planning, organizational learning and survival of

family businesses with a focus on selected family businesses in Kampala District.

1.4 Objectives of the Study

i) To examine what constitutes succession planning in family businesses.

ii) To examine the relationship between the components of succession planning and survival of

family businesses.

iii) To examine the relationship between succession planning and organizational learning in

family business.

iv) To examine the relationship between organizational learning and survival of family

businesses.

1.5 Research Questions

i) What constitutes succession planning in the family businesses?

ii) What is the relationship between the components of succession planning and survival of

family businesses?

iii) What is the relationship between succession planning and organizational learning in family

businesses?

iv) What is the relationship between succession planning and survival of family businesses?

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1.6 Scope of the Study

Subject Scope

The study focused on succession planning as an independent variable to determine survival of

family businesses as dependent variable, among selected family businesses in Kampala District.

Geographical Scope

The study was carried out in Kampala district because it has the highest concentration of family

businesses in Uganda. This provided a reasonably large and representative population for the

study.

1.7 Significance of the Study

i) Provide guidance to spouses and other relatives in maintaining good relationships both as a

family unit as well as business colleagues/ subordinates.

ii) Lift up consciousness and understanding of the role of succession planning in existing family

businesses for renaissance and survival of these businesses. The study will therefore benefit

family business owners in an attempt to promote their businesses across generations.

iii) Benefit institutions of higher learning especially those that train in business and enhance

further research in this area.

iv) Generate information for government, policy makers on problems of family businesses and

how to improve their survival and overall contribution to Uganda’s economy.

v) Ascertain and explain the importance of succession planning and survival of family business

in Uganda.

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1.8 Conceptual Framework

The conceptual framework was developed from existing literature as illustrated in Figure 1. The

model illustrates the relationship between succession planning, entrepreneurial orientation

dimensions, organization learning and the survival of family businesses.

Figure 1: Conceptual Framework

Source: Developed based on review of literature on family businesses by various scholars.

Ibrahim, (2003); Flintoff, (2002); Wolfe, (1996); Rothwell, (2001); Walter, (2004);

Succession Planning

Entrepreneurial Orientation

Survival of family business

Organization learning

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Young-Ho Nam-1990, Serrano et al (2005), Beckard & Dyer (1983), Bowman (1991), Dess et al

, (1997); Habbershon et al (2003) and Mintzber & Quinn (1999).

Description of the Conceptual Model

The model examines the relationship between succession planning, entrepreneurial orientation,

organization learning and survival of family businesses in Uganda.

This is supported by literature for example of Miller (1993), Ocasio (1999), Pitcher, Cherim &

Kisfalvi (2000) who argue that Succession planning is crucial to the success and continuity of a

business from one generation to another. Martin and Lumpkin (2006) found that family firms

that want to survive across generations and remain successful need to strengthen their

entrepreneurial orientation.

Barney, (2002) suggest that family ties provide an advantage in opportunity identification

because of family members greater willingness to share information with each other. Handler,

(1994) asserts that the low resilience and high failure rate among first generation family firms are

as a result of un satisfactory succession planning and poor organization learning. Though such is

common in small and privately held firms (Low and MacMillian, 1988), family dynamics

exacerbate governance problems (Dyer and Handler, 1994) and make the family firm especially

vulnerable.

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CHAPTERTWO

LITERATUREREVIEW

2.1 Introduction

This chapter presents a review of available articles and research papers on Succession planning

and Survival of family business. It is divided in to six parts, part one is introduction of the

chapter, part two deals with Succession Planning of Family Business; part three discusses

Entrepreneurial Orientation of family business Owners and family members; part four deals with

Organizational learning among family Businesses; part five truckles Family Business Survival

and part six is the conclusion of the chapter.

2.2 Succession Planning

2.2.1 The Concept of Succession Planning

It helps to ensure the stability and tenure of personnel. It is perhaps best understood as any effort

designed to ensure the continued effective performance of an organization, division, department

of work group by making provision for the development, replacement and strategic application

of key people over time. Succession planning and management should support strategic planning

and strategic thinking and should provide an essential starting point for management and

employee development programs (Rothwell, 2001). McCauley & Wakefield (2006) looks at

succession planning as a process that leads management to define and address talent

management strategies as they prepare the organization, and people, for the future. They

suggested that succession planning is about managing talent in order to meet current and future

organizational requirements. It is people process that organizations implement to ensure their

people are properly value, nurtured, and developed.

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Succession planning helps family firms to assure continuity by preparing leaders for key

executive positions; engaging the senior management team in a disciplined process of reviewing

the corporation’s leadership talent; putting the diversity issue on the corporate agenda; guiding

the development activities of key executives; re-examining corporate and business unit structure,

processes, and systems; aligning with other Human Resource activities that support the

leadership renewal process (Bruer, Leibman & Maki, 1996). Succession planning should not be

viewed as a single event. It should be viewed as a process that begins with recruiting and hiring

of individuals and then developing them along their career path. Succession planning should be

well planned, deliberate process (Marshall, 2005). The ability to identify and develop strong

leaders will ensure the success of organizations and maintain their competitiveness in the market

place (Krauss, 2007).

In essence, succession planning is about forecasting, managing, and developing family members.

McCauley & Wakefield (2006) contended that, in order for family businesses to be successful

and survive across generations, they must properly assess their current talent, and as part of a

succession process, place the right people in the right roles in order to ensure proper

development.

There is often a fight for power between two generations or between two owners within the same

generation (fowler, 2001). This was supported by Meredith & Abbott (1984) who found out that

the operation of family enterprises tends to be strongly influenced by family interests and may

face special problems as relationships between the family members are not always smooth.

Family support can assist in the establishment and success of a family enterprise; however the

aspects of control, interference by family members or orientation of the enterprise towards non-

business objectives and succession planning may undermine its existence and viability.

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Succession planning for family businesses was reviewed in terms of the following parameter;

2.2.2 Training

According to Brian (2004), all successful businesses without exception are successful by

continuously improving the management skills of their young internal staff. A clearly defined

management training strategy breeds and trains young managers with new ideas and the

management skills required to be successful. It's clear that the greatest resource for intellectual is

your internal staff.

Handler (1994) discussed the importance of business management succession as a process that

may occur early either through planning prior to implementation or by crisis. Management

succession as a process takes place over many years, requiring corporation of all people on the

management team. It occurs in steps involving planning, selection and preparation of the next

generation of managers, transition in management responsibility, gradual decrease the role of

previous managers and finally discontinuation of in puts by previous managers.

In contrast to the above process, management succession can be by crisis. The crisis may be

brought about by the death or disability of the founder, divorce, threat of departure by the heir

apparent or hiring of an out side manager in an attempt to finally fix things gone wrong. In the

absence of design and implementation of a process, succession will almost certainly be by crisis.

Preferably, management succession should be a process not be motivated by crisis nor

characterized by a single event nor marked by a single date on the calendar. Whether succession

is a process or a crisis depends on several characteristics of the business, senior managers and

family.

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Growing, profitable and successful businesses cause managers to think about expanding

opportunities and continuity. Stagnant businesses with disappointing profits cause managers to

concentrate on to day's predicaments.

According to Pat (2006), business continuity planning involves devising a plan that guards

against business disruption in case of unforeseen events. The facility management journal

defines business continuity planning as the process that defines the procedures employed to

ensure timely and orderly resumption of an organization's business cycle through its ability to

execute plans with minimal or no interruptions to time sensitive business or service operations.

According to Erven (2005), each family with a business faces the reality that the business will

eventually end or have new managers. This reality is independent of the founding and previous

managers' successes in building the business and their current success and stature in the

community.

The founder as the most influential person in the organization sets the tone for management

succession, makes the rules and more than any one else and determines success or failure of

succession. Each family business will eventually have a different generation of managers or it

will no longer exist.

The founders' acceptance of this reality under girds and fosters management succession planning.

Rejection of this reality stifles the planning process of the business's continuity. Thomas &

Richard (2003) revealed that in many family businesses, the issue of succession after the parents

or the founder of the business is gone exacerbates long standing sibling tensions. Too often, the

process of selecting the person or persons to take over is not discussed, either because it seems

impossible to resolve or requires difficult and tough decision making.

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2.2.3 Family involvement

Silver (1983), found out that parents in family enterprises instill an early sense of independence

and desire for control in the future entrepreneur. Whatever the relations may be, family dynamics

have an effect on the entrepreneur's abilities to establish organizations, form friendships and

partnerships and seeking support. Kepner (1991) revealed that family enterprises often fraught

with deep tensions and value conflicts among family members due to changes in the

entrepreneurs' family such as death, a new baby , divorce or separation and problems arising

from nepotism and cronyism. This was supported by a group of scholars; Beckhard & Dyer

(1983), Dyer (1986), Kepner (1991) & Levinson (1971) who found out that sometimes when a

husband and wife are business partners, or father and son or daughter are involved in the family

business, it produces unique opportunities and problems in leadership succession as well as

survival.

2.2.4 Succession management

Buchholz & Crane (1990) studied the characterization of effective successions and they found

out that the empirical data and anecdotal evidence are overwhelming on failure in the second

generations of businesses that were successful in the first generation. They report that only 30%

of family businesses in the United States survive to the second generation and only half of these

make it to the third generation and the obvious challenge to family businesses is continuity of

operation. Bowman (1991) assessed the transferring of management in family owned businesses

and found out that there are many reasons why entrepreneurs might not let go of the family

business and primary among these are financial ones. As a business owner, they might be used to

large salaries and benefits. After working hard in the business most of their life, they would want

their retirement years to be comfortable rather than be filled with financial anxieties. Business

13

owners often consider either taking what they need from the company after they retire or

arranging a buy out that will give them the needed liquidity without placing an undue financial

burden to the company.

If the financial security is not secured for their daily operations, they would less likely be able to

retire completely. The founder's successor needs full control and the founder would not probably

let them happen. Also the company might not be in position to provide for the financial needs of

both the out going and in-coming managers and still pursue the strategy that the founder

entrepreneur set for it. Bochholz & Crane (1990) studied the characterization of effective

successions and they found out that the empirical data and anecdotal evidence are overwhelming

on failure in the second and third generations of family businesses that were successful in the

first generation. They report that only 30% of family businesses in the United States survive to

the second generation and half of this makes it to the third generation and the obvious challenge

to family businesses is continuity of operation. Bowman (1990)

2.3 Entrepreneurial Orientation

2.3.1 The Concept of Entrepreneurial Orientation

Entrepreneurial orientation refers to the processes, practices, and decision making activities that

lead to the development and delivery of new and innovative products or services that can

differentiate a firm from others in the market (Dess & Lumpkin, 1996; Jambulingam et al., 2005;

Chen et al., 2006, Garcia Moles et al., 2006, Naldi et al 2007). Some empirical studies suggest

that entrepreneurial orientation is a multi-dimensional construct and can be evaluated from

different perspectives (Covin & Slevin, 1989). Miller (1983) offers specific dimensions for

characterizing entrepreneurial orientation; he describes an entrepreneurial firm as one that

14

engages product marketing innovation, undertakes somewhat risky ventures, and is first to come

up with proactive innovations, beating competitors to the punch. Accordingly, he uses

dimensions of innovativeness, risk taking and proactiveness to conceptualize entrepreneurship.

Dess & Lumpkin (1996) add to other factors which can be considered important in measuring

entrepreneurial orientation: competitive aggressiveness and autonomy. In some studies,

competitive aggressiveness and proactiveness have been treated as the same (Covin, 1990,

Antoncic, 2007). Dess & Lumpkin (1996) by contrast suggest that the two are distinct factors.

While proactiveness refers to a tendency of the firm to act in anticipation of future opportunities,

competitive aggressiveness represents a firm’s propensity to adopt a confrontational posture

characterized by a high degree of competitive intensity aimed at overcoming market adversaries.

An entrepreneurial orientation is potentially important to the success of family firms (Lumpkin

& Martin, 2004). Entrepreneurial orientation has been found to contribute to firm growth and

survival (Becherer & Maurer, 1997) and relates to strong performance in family firms (Lumpkin

& Sloat, 2001). Empirically, the positive impact of entrepreneurial orientation on firm

performance and survival has been supported by several studies (Wiklund et al 2007). Referring

to the various theoretical perspectives explained above, the researcher recognized five

dimensions for the study including proactiveness, risk taking, competitive aggressiveness,

Autonomy and innovation which are discussed below.

2.3.12 Proactiveness

Proactiveness describes the degree to which ventures opportunistically act in anticipation of

future market demands by attempting to shape environmental trends (Dess & Lumpkin 1996),

preempt competition in the market place (Dess & Lumpkin, 2001) and eliminate declining or

unprofitable operations (Venkatraman, 1989). According to Covin & Slevin (1991) proactiveness

15

refers to the extent to which organizations attempt to lead rather than follow competitors in such

key business areas as the introduction of new products or services, operating technologies and

administrative techniques. It suggests both vision and leadership in launching business ventures

or developing new strategic initiatives since it implies an ability to anticipate changes in demand

or other trends that indicate emerging opportunities. Numerous studies on the role of

proactiveness have indicated that it is frequently associated with strong performance in

entrepreneurial firms (Becherer & Maurer, 1997, Covin & Slevin, 1989, Knight, 1997).

Proactive organizations monitor trends, identify the future needs of existing customers, and

anticipate changes in demand or emerging problems that can lead to new venture opportunities

(Becherer & Maurer, 1997). Proactiveness involves not only recognizing changes but also being

willing to act on those insights ahead of the competition (Dess & Lumpkin, 2005). Together with

autonomy and innovativeness, proactiveness is regarded as a more important dimension in

family firms (Nordqvist et al., 2008).

2.3.3 Risk Taking

Risk taking deals with the quick pursuit of opportunities, fast commitment of resources, bold

actions (Dess & Lumpkin, 1997; Lumpkin 1998) and relatively large commitment of resources to

uncertain endeavors (Baird &Thomas, 1985). Since Cantillon (1734) who first developed the

term entrepreneur and defined this as a person who bears risk of profit or loss, risk taking has

been viewed as a fundamental element of the entrepreneur (Knight, 1921; Schumpeter, 1934;

Hisrich & Peters, 1998). Risk as the possibility of loss may be viewed as an inherent

characteristic of innovativeness, new business formation and aggressive or proactive actions of

existing firms (Antocic & Hisrich, 2003). Entrepreneurial risk taking suggests a degree of

boldness in the sense that greater risks are expected to result into greater rewards. Thus

16

researchers have examined risk taking in terms of a person’s willingness to pursue or avoid risks

(Pablo & Sitkin, 1992). Astrachan & Shanker (1996) found that family firms that are acquired

via inheritance have lower growth rates, survival and are more concerned with the long run. This

suggests that risk taking by family firms may change with each generation of ownership.

Heavy debt and large resource commitments in relation to a new entry are examples of risky

behavior. Stated formally, risk-taking refers to “the degree to which managers are willing to

make large and risky resource commitments (Friesen & Miller, 1978).

Risk taking firms show a tendency to “take bold actions such as venturing into unknown new

markets” (Lumpkin & Dess, 2001). Recent research in the family business arena draws a more

nuanced picture of risk taking in family firms (Gomez-Mejia, Takacs Haynes, Nunez Nickel,

Jacobson, & Moyano Fuentes, 2007; Zellweger, 2006). These authors find that family firms take

decisions based on reference points. More specifically, Gomez-Mejia et al. (2007) state that for

family firms, the primary reference point was the loss of socio-emotional wealth, hence the

nonfinancial aspects of the firm that meet the family's affective needs such as identity, the ability

to exercise family influence and the perpetuation of the family dynasty. To protect this wealth

family firms have been found to accept a significant risk to their performance and at the same

time avoid risky decisions that aggravate that risk. In addition, Martin and Lumpkin (2003)

found a decreasing level of risk taking as later generations are involved in the business.

Similarly, Nordqvist et al. (2008) view risk taking as a less important dimension in family firms.

Naldi et al. (2007) prove statistically that risk taking in family firms, is smaller than in nonfamily

firms. According to them, it is positively associated with proactiveness and innovation and,

surprisingly, negatively related to financial performance. Rauch et al. (2004) state that risk taking

has a positive but significantly smaller correlation with performance than other Entrepreneurial

17

Orientation dimensions. Furthermore, Zahra (2005) suggests that family ownership and

involvement promote entrepreneurship while long tenures of Chief Executive Officer Founders

do the opposite.

2.3.4 Competitive Aggressiveness

Competitive aggressiveness refers to a firm’s propensity to directly and intensively challenge its

competitors to achieve entry or improve position, that is, to outperform industry rivals in the

market place (Lumpkin & Dess, 1996). Competitive aggressiveness can be reactive as well. This

means for instance that a new entry that is an imitation of an existing product or service would be

considered entrepreneurial if the move implies an aggressive, “head-to-head” confrontation on

the market. According to Lumpkin and Dess (1996) competitive aggressiveness also embraces

non-traditional ways of competing in an industry, such as new ways of distributing or marketing

products. And Martin & Lumpkin (2003) find that as later generations are involved in a family

business, competitive aggressiveness decreases. They claim that the so-called family orientation

(FO) overtakes Entrepreneurial Orientation as the company is passed on through generations.

According to them, the founding generations are more characterized by entrepreneurial concerns,

while later generations are more and more characterized by family concerns, which lead to a

decreasing Entrepreneurial Orientation in terms of competitive aggressiveness, risk taking and

autonomy (Martin & Lumpkin, 2003). Similarly, Nordqvist et al. (2008) propose that

competitive aggressiveness is less important in family firms, in case the three identified dualities

are in place.

The overall objective of competitively aggressiveness is to defend gains previously made and

maintain a strong presence in the market place. While prior research suggests that family firms

have a tendency to be competitively aggressive, family firms are also highly concerned about the

18

family’s name and about caring for the needs of their community, (Astrachan & Shanker, 1996).

As a result, family business may be less rivalrous, especially if too much aggression can be

damaging to a firm’s reputation (Harris, Martinez & Ward, 1994). Thus a family firm’s views on

competitive aggressiveness may shift as subsequent generations of owners to take charge.

2.3.5 Innovativeness

Innovativeness has been argued to represent a defining aspect of firm entrepreneurial behavior

(Covin & Miles, 1999). Higgins (1995) defines innovation as the process of creating something

new that has significant value to an individual, a group, an organization, an industry or a society.

More specifically, he suggests that innovation is the process of taking new ideas effectively and

profitably thought to customers. Carnegie, Butlun, Barrat, Turnbull & Webber (1993) define

innovation as something that is new or improved and done by an enterprise to create significantly

added value either directly for the company or indirectly for its customers. Thompson (1994)

defines innovation as the ability to provide products and services differentiated from the

competition and made profitable by their value to their customers.

From these definitions, a common platform for defining innovation can be derived based on two

key words: newness which also implies being different from the rest, and values or benefits for

customers. Most research suggests that when innovativeness wanes overtime, so does firm

performance and survival (Christensen, 1997). Organizations that highlight exploration,

experiment with innovative products and services and instill a climate of innovativeness are

likely to enjoy stronger performance (Lumpkin et al 2006). By fostering innovation, firms are

better able to find ways of overcoming barriers to performance and survival (Deeds, Kishida &

Schulze 2005).

19

There is typically a continuum of innovativeness, both regarding the scope and pace of

innovation in products, markets and technologies. The central relevance of innovativeness relates

to Schumpeter (1934 & 1942) who emphasized the role of innovation in the entrepreneurial

process in terms of "creative destruction", by which wealth was created when existing market

structures were disrupted by the introduction of new goods or services that shifted resources

away from existing firms and caused new firms to grow. The key to this cycle of activity was

entrepreneurship: the competitive entry of innovative "new combinations" that propelled the

dynamic evolution of the economy (Schumpeter, 1934). In the context of family firms,

innovativeness is regarded as a highly important dimension of Entrepreneurial Orientation for

long-term performance and survival, together with autonomy and proactiveness (Nordqvist et al.,

2008). In addition, family firms that are investing in innovation have been found to have greater

potential for high performance and long term survival (McCann, Leon-Guerrero & Haley, 2001;

Eddleston, Kellermanns & Zellweger,2008).

2.3.6 Autonomy

Autonomy as captured in the Entrepreneurial Orientation construct refers to the independent

action of an individual or a team in bringing forth an idea or a vision and carrying it through to

completion (Dess & Lumpkin (1996). In general, it means the ability and will to be self-directed

in the pursuit of opportunities. In an organizational context, it refers to actions taken free of

stifling organizational constraints. Thus, even though factors such as resource availability,

actions by competitive rivals, or internal organizational considerations may change the course of

new venture initiatives, these are not sufficient to extinguish the autonomous entrepreneurial

processes that lead to new entry: Throughout the process, the organizational player remains free

to act independently, to make key decisions, and to proceed (Lumpkin & Dess, 1996).

20

Martin and Lumpkin's (2003) considerations are also relevant in this context, as these authors

found that the level of autonomy decreases when later generations are on board. Regarding long-

term entrepreneurial performance, autonomy is regarded as an important dimension, as outlined

by Nordqvist et al. (2008). In the same way Dess & Lumpkin (2000) split up the autonomy

dimension into "internal" and "external" autonomy. While internal autonomy is related to

empowering individuals and teams within an organization, external autonomy is related to

external stakeholders such as banks, suppliers, customers and financial markets. The investigated

family firms assigned great importance to external autonomy. Regarding internal autonomy,

family firms are less likely to use formal monitoring and other control mechanisms than non-

family firms, which are good preconditions for individual autonomy (Eddleston, Kellermanns &

Zellweger, 2008).

All in all, Autonomy is about the freedom granting individuals inside an organization to be

creative, to push for ideas and to change current ways of doing things (Dess & Lumpkin 1996)

2.4 Organizational Learning

The concept of organizational learning has attracted a great deal of attention in recent years in

both academic and business circles (Bapuji & Crossan, 2004; Easterby-Smith et al., 2000),

mainly due to the increasingly dynamic and complex economic environment. In spite of its

complexity, reflected in the numerous perspectives proposed, organizational learning might be

defined as the process through which organizations change or modify their mental models, rules,

processes or knowledge, to sustain or improve their performance and survival of family business.

It can also be understood from an academic point of view (Tsang, 1997, Easterby & Lyles,

2003), as the study of learning processes of and within an organization. Particularly,

organizational learning is a process based on individual learning through private and public

21

organizations engaged in creating and obtaining knowledge for the purpose of institutionalizing

it in order to adapt as an organization to the changing conditions of the environment or to change

the environment proactively, depending on its level of development (Castaneda & Fernandez,

2007).

Organizational learning may be looked at as a set of capabilities aimed at collecting, adding

value to and using effectively the internal and external knowledge gained by the firm. As such,

this meta-construct encompasses several different dimensions or sub -constructs and is

positioned transversely inside and outside the boundaries of the firm (Zander, 1992).

Learning is linked also with experience (Nevis et al., 1995) in terms of corrective (or single-

loop), generative (double-loop) or meta-learning (McKee, 1992). It is the idea of “learning-by”

associated with the notion of transferability (Grant, 1996) of tacit and explicit knowledge

(Nonaka, 1994; Kogut and Zander, 1992). As such, learning is viewed as a dynamic process in

the sense that each component of the learning process will reinforce the others without

predominance of one on the others or unidirectional causal links (Kogut & Zander, 1992). As an

example, the collecting capability will influence the “adding-value” capability.

Learning organizations do not happen automatically, but require a deep commitment to building

required skills throughout the work place. Marsick & Watkins, (2000) indicate that a long-term

commitment must be made at the absolute pinnacle of the organization. Catalanello & Redding

(2002) stress that speed, depth, and breadth of learning must be managed at various levels within

the organization. McGill, Slocum and Lei (2003) conclude that learning organizations “learn

from their experiences rather than being bound by” them, whereas Marsick & Watkins, (2000)

postulate that the “learning organization is one that learns continuously and transforms itself”.

Learning, then, is comprised of various components that require management. Just like any other

22

process within the organization, such as communication or decision making, learning must be

managed successfully (Slocum and Lei, 2003).

In to day’s business environment, most people agree that the organization’s ability to learn faster

than competitors is a significant source of competitive advantage (Stata, 1989; Senge,

1990;Urich et al, 1993; McGill & Slocum,1993; Slocum et al ,1994; Nevis et al, 1995). Crossan

& Hulland(2001) and Bontis et al (2002) test empirically that there is a positive relationship

between the organizational learning at all levels and business survival. Thus, a successful

organization is one that can assimilate new ideas and transfer those ideas in to action faster than

competitors (Ulrich et al, 1993).

Organizational learning allow family firms to identify the existence of four constructs which are

integrally linked to the learning process: acquisition of knowledge through external sources or of

internal development; distribution; through which knowledge is spread among all the members

of the organization; interpretation, which allows individuals to share and incorporate aspects of

their knowledge which are not common to all of them, gaining in such a way shared

understanding and coordinating decision taking and finally organizational memory, which tries

to stock knowledge for future use, either in organizational systems; designed for this purpose or

by means of rules, procedures and systems, ( Trussler, 1998).

Hence, the organizational learning process is characterized by a series of essential features. First,

learning is a transformation process which is continuously created and recreated and not an

independent entity to be acquired or transmitted (Kolb, 1984). Second, it is cumulative (Argyris

& Schon, 1978; Teece et al, 1994). That is the amount of knowledge at a certain point in time is

a function of the accumulated knowledge acquired until that moment. Third, it is a process

whose goal is to improve the development of the organization by means of new initiatives. This

23

requires a move from simply putting more knowledge in to data bases to levering the many ways

that knowledge can migrate in to an organization and impact business performance and survival

(Baird & Cross, 1999). Finally it is a system level process that is to say, it embraces the whole of

the organization and not only particular individuals.

2.5 Family Business Survival

The survival of an organization in this vibrant and competitive business environment depends on

how effectively the organization learns to adapt itself to the environment and capitalize on its

resources fully (Lee, 2006). Successful entrepreneurial firms move from start-up, through

expansion and growth, to maturity (Poza, 1988). A family business can have a life beyond its

founding generation (Rosa, Balunywa & Iacobucci, 2006). Long term survival of a firm not

financial performance should be utilized to ultimately judge the success of an organization (de

Gues, 1997; Brenneman, Keys & Fulmer, 1998) Firm survival depends on the ability to adapt

successfully to a changing environment. To ensure survival, organizations formulate appropriate

strategies, and devise ways and achieve these strategies (Eisenhardt & Zbaracki, 1992).

Therefore, renewing family capital through starting new ventures and closing down those that are

less successful enhances survival of a family business (Rosa, Balunywa & Iacobucci, 2006).

Successful ‘living companies’ tend to be tolerant of new and innovative ideas. Instead of fearing

the unknown, these companies thrive on uncertainty and realize that opportunity is often the twin

sister of change (De Gues et al 1997). Even though the environment is constantly changing

around them, these firms maintain flexible strategies and an open minded posture that allows

them to change with the environment. A living company recognizes that it cannot control its

environment, rather it must learn to continuously adapt to it (Kelly 1997).

24

Research on family business survival has been undertaken across a number of countries (Bruderl

et al. (1992) and Strotmann (2007) for studies outside of the UK and US). Despite using a range

of analytical bases several common elements in business survival have emerged fairly

consistently. Survival appears positively related to firm size (whether defined by turnover, assets

or employee numbers) and the length of time that a business has been operating. Some studies

have also indicated that conditional closure rates take an inverted U-shape, rising up to a peak in

the first few years before declining thereafter (Ganguly (1985), Cressy (1996)).

Aside from size and age, studies have differed with regards to the factors influencing survival (or

at least their relative importance). Some have indicated that industry-level factors, in the form of

minimum efficient scale or the developmental stage of that sector, are relatively important

(Audretsch (1991), Audretsch and Mahmood (1995), Agarwal and Audretsch (2001)).

Others have found the scale of financial resources available to the firm to be a key element

(Evans and Jovanovic, 1989). A third set have put forward individual and collective human

capital (measured in a variety of ways) as the most important determining factors (Cressy, 1996;

Taylor, 1999).

Audretsch & Mahmood, (1995) any family firm that wishes to continue its existence as a family

enterprise relies on the next generation. Yet, the paths that connect next generation members

with their family business are not easy to tread – they are fraught with choices and challenges,

largely unexplored. In this context, choices about what kind of business the family wants to

build, the role of the family in a changing enterprise, and the next generation’s roles and careers

in relation to the family and its business has to be established for the firm’s survival.

25

2.6 Succession Planning and Survival of Family Business

Several scholars have investigated the concepts of succession planning and survival of family

businesses (Ellis & Ibrahim, 2006; Lane, 2006; Miller & Le Breton, 2005). Where succession

planning is said to be the transference of business that results from the owner's wish to retire or

leave the business for some reasons, (Martin., 2002), yet family business survival is the

continuity of business in future from one generation to another,(Ibrahim & Ellis, 2004). Over

three decades ago Levinson (1971) noted that succession planning is important to an effective

succession in family firms. Research has since examined the impact of succession planning on

the survival of family firms (Handler, 1992 & 1990; Ibrahim & Ellis, 2006; Kets De Vries, 1993;

Lee, Lim & Lim, 2003; Poutziouris, 1995). The practice of succession planning includes the

quality of the successor, the gradual transfer of power and leadership to the next generation as

well as the participation of family and non-family members in the succession process are critical

to an effective succession process and to the continuity and survival of the family firm from

generation to generation (Ellis & Ibrahim, 2006).

However, Handler, (1989) cited lack of succession planning as a major cause of the high

mortality rate in family businesses and noted that succession planning does not take place in

most family firms. There fore for family business survival to be achieved, family businesses

should start thinking about training successors, transferring ownership and managerial

responsibility in advance, (Dyck,2002; Davis ,1992; Shulman,1991)

2.7 Succession Planning and Organization Learning

Succession planning is a major focus of the literature on family firms (Sonfield & Lussier, 2002).

It involves the preparation of the successor in terms of training and development, (Upton &

26

Heck, 1997). But organizational learning is a tool that facilitates the action improvement process

of an individual, (Fiol and Lyles 1985) or groups in an organization, (Schein, 1996).

Cabrera-Suarez, 2001; Gersick, 1997; McClendon & Kadis, 2004; Kellermanns, 2004; Salvato,

Pernicone & Chirico, 2006) argue that successful succession planning and organizational

learning over time is facilitated by communication and cooperation between and within the

generations of the family business. The succession planning processes may be made possible in

family firms, compared to non-family firms, as a result of the intense social interactions between

family members, (Cabrera-Suarez, 2001; Tagiuri & Davis, 1996). For instance, Tagiuri & Davis

(1996) argue that the emotional involvement, the lifelong common history and the use of a

private language in family businesses enhance communication between family members.

Succession planning necessitate effective exchange of tacit knowledge more efficiently and with

greater privacy compared to non-family businesses resulting in to organizational learning,

(Cabrera-Suarez, 2001;Tagiuri & Davis, 1996),it also develops idiosyncratic knowledge which

remains within the family and the business across generations, (Coleman, 1988; Bjuggren, 2001;

Cabrera-Suarez, 2001; Kellermanns, 2004). In successful multigenerational family firms the

previous and following generation exchange ideas, knowledge and encourage mutual learning

(Cabrera-Suarez, 2001; Handler, 1991; Kellermanns, 2004).

2.8 Succession Planning and Entrepreneurial Orientation

Succession planning involves many factors at both the family and business levels, (Stavrou,

1999). The succession process described in the family business literature includes; preparing the

offspring for their leadership role at an early stage, integrating the offspring into the family

business and finally assuming control of the business (Handler, 1989; Stavrou, 1999; Ward,

27

1987). But Entrepreneurial orientation is concerned with innovativeness, pro-activeness and

openness towards risk (Covin & Slevin, 1989; Miller, 1983). Lumpkin & Dess, (1996) suggest

that entrepreneurial orientation represents key entrepreneurial processes and new venture

launching as well as continuity of business.

Since Succession planning entails the training of family members in to different aspects of

running the firm, (Martin & Lumpkin, 2003; Zellweger, 2008), this works as a catalyst in

necessitating the development of knowledge capacity among family members who may be ready

to take risks, innovate new ideas and make the firm competitive in future, (Eddleston,2008).

Entrepreneurial Orientation might be a satisfactory concept to explain short-term success but will

fail to predict the longer run survival of the firm if separated from succession planning, (Le

Breton-Miller & Miller, 2006). For firms to succeed and survive in future, succession planning

and entrepreneurial orientation have to be delt with properly, (Miller, 2006).

2.9 Succession Planning, Entrepreneurial Orientation, Organization Learning and Survival

of Family Business

Succession planning in family firms deals with the transfer of ownership and management to the

next generation, (Gersick, 1997). It looks at the way firms mentor their leaders in different

aspects of decision making, risk taking and innovativeness, (Dess & Lumpkin, 1996).

Organizational learning considers the way individuals can respond to the needs of the firm,

(Watkins, 1996). It's where people continuous expand their capacity to achieve the various

desires, (Senge, 1996). As employees yarn to achieve different desires, this may necessitate the

survival of the firm.

28

Entrepreneurial Orientation was first developed by Miller (1983) and extended by Lumpkin and

Dess (1994). This has been found to contribute to firm growth, survival and to organizational

success in general (Kellermanns & Eddleston, 2006).

Sharma & Morris, (2001), argue that, if succession planning is done well, this may lead to

knowledge sharing among the first and second generation employees of the firm hence survival

of a firm. Successor grooming comes along with appreciating the way an organization operate,

(Ibrahim, 2001). This may also lead to appreciation of risks and hence survival and growth of

family business, (Lumpkin & Dess, 1996; Morris, 1998). Family firms often plan long-term

strategies that might be less risk-taking but that aim instead to promote stability and continuity of

the firm,(Le Breton-Miller & Miller, 2006).

29

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This section spelt out the research design that was used to collect, analyze and interpret the

findings related to succession planning, entrepreneurial orientation, organizational learning and

survival of family businesses. This section specifically addressed research design, sampling,

measurements and data analysis.

3.2 Research Design

The study adopted a cross sectional survey. Correlation and Regression approaches were used to

investigate the relationships between the variables of the study and the extent to which the

independent variable explained the Survival of family businesses.

3.3 Study Population

The study population was made up of selected registered family businesses operating in Kampala

Metropolitan composed of 364 family businesses, (USSIA 2010).

3.4 Target Sample Size and Sampling procedure

The sample size was determined using Krejcie and Morgan Table of 1970. This table gives out

the sample size basing on the population to be studied. In regard to this research, basing on

Krejcie and Morgan table of 1970, a population of 364 has a sample size of 186. After

determining the sample size, the next step was to determine the members to be interviewed in

different firms. This was done through dividing the population in to various stratas and

purposively selecting the Chief executive officer

(C.E.O) from each firm and 5 (five) other key employees. This included;

30

Table 1: Target Sample Size

Sectors Population Sample

Manufacturing 131 97

Trading 130 97

Service 103 80

3.5 Data Sources

Primary Data

The required primary data was collected from the respondents (top management and employees

in the other relevant departments concerning the area of study). This was done through

administering Questionnaires with the help of a research assistant. Respondents were guided

through the questionnaire to ensure accuracy in the data collection.

Secondary Data

The secondary data was used to support the empirical findings of the study. This data was got

from the firm’s financial reports like cash flow statements, balance sheets and income

statements, so as to establish the firms’ survival rate.

3.6 Data Collection Instruments

The primary data was collected by administering questionnaires. The questionnaires contained

structured questions relating to each study variable in the question. The questions relating to

succession planning, Entrepreneurial orientation, organizational learning and survival of family

businesses constructed on an interval scale. The respondents answered on how they agree or

disagree with the statements in the Questionnaire

31

3.7 Measurement of Variables

The independent variable was succession planning and the dependent variable was survival of

family businesses. A structured standard questionnaire was used and all variables measured on

interval scales.

Succession planning. This was measured using dimensions of Training, Business

continuity planning ,family involvement and succession management, (Sharma, 2001;

Ibrahim, 2003)

Entrepreneurial orientation. This was measured based on innovativeness, risk taking, pro

activeness, competitive aggressiveness and autonomy, (Lumpkin & Dess, 2001)

Organizational learning. This was measured using dimensions of knowledge

distribution, internal and external source of knowledge, knowledge interpretation and

organizational memory , (Susana Perez et al,2009)

Survival of family business. This was measured based on longevity as a proxy for success

(Fahed-Sreih, Djourdourrian, 2006) and the number of generations that had owned the

business (Kellermans & Eddleston, 2006).

3.8 Reliability and the validity of the variables

The instrument items were both valid and reliable since the items had Cronbach Alpha Items and

Content Validity Index Values that were above 0.7000.

Table 2: Reliability and the validity of the variables

Anchor Cronbach Alpha Coefficient Content Validity Index

Succession Planning 5 Point 0.918 0.750

Entrepreneurial Orientation 5 Point 0.920 0.762

Organizational Learning 5 Point 0.932 0.773 Survival Of Family Businesses 5 Point 0.651 0.833

32

3.9 Data Processing and Analysis

The data collected was edited for incompleteness and inconsistence to ensure correctness of the

information given by the respondents by use of a computer. Variables were coded and Statistical

package for social scientists (SPSS) were used for data entry and analysis. Multiple Regression

analysis was used to determine how the predictor variables could explain the dependent variable.

This is because there was more than one variable affecting the dependent variable.

3.10 Limitations faced

The study focused on Family businesses. This limited the generalization of the findings

from the study. However, given the limited time period, this study was given a clear

picture of the situation in Uganda which other studies would build on.

There was limited availability of local literature with respect succession planning in

Uganda, more so, on survival of family businesses. However, this was solved by

consultation of foreign literature and reference to other relevant locally published

material.

Some respondents especially Top executives did not give all the required information,

because of fear to expose it to the competitors. This likely caused a biased response.

However, the researcher and the research assistant solved this by spending time with the

respondents to explain to them that the study was basically for academic purposes.

33

CHAPTER FOUR

PRESENTATION OF FINDINGS

4.1 Introduction

This chapter is comprised of the presentation and analysis of findings. It includes descriptive

statistics, factor analysis, correlation analysis and regression analysis. These show the results as

tested by the objective of the study which were;

To examine what constitutes succession planning in family businesses.

To examine the relationship between the components of succession planning and survival

of family businesses.

To examine the relationship between succession planning and organizational learning in

family business.

To examine the relationship between organizational learning and survival of family

businesses.

4.2 Sample Characteristics

This section presents the general characteristics of respondents. Cross tabulations were used to

indicate variations in the respondents' characteristics.

4.2.1 The response Rate

The demographic features of the respondents in the study included the age group, gender, the

level of education, marital status, number of years worked in an organization and how long their

businesses had been in existence. This information is critical to the study since such education

levels, registration of the businesses, number of employees in the business and the business

survival are related to entrepreneurship.

34

4.2.2 Age Group

Table 4.1: Age Group

Frequency Valid Percent Cumulative Percent

Valid

24 yrs & Below 42 29.2 29.2 25 - 34 yrs 50 34.7 63.9 35 - 44 yrs 40 27.8 91.7 45 yrs & Above 12 8.3 100.0

Total 144 100.0 Source: primary data

The findings as reflected in table 4.1 showed that majority of the respondents were dominantly of

the 25 – 34 age group (34.7%), followed by those of 24 years and below (29.2%), followed by

those between 35-44 years (27.8%) and lastly those of 45 years and above age category

constituted 8.3% of the sample. This implies that there was a greater positive response

respondent between the ages of 25-34 years as compared to other age brackets.

4.2.3 Gender

Table 4.2: Gender

Frequency Valid Percent Cumulative Percent

Valid Male 65 45.1 45.1 Female 79 54.9 100.0 Total 144 100.0

Source: primary data

35

The results as reflected in table 4.2 showed that most of the respondents were female (54.9%)

and the male (45.1%). This implies that there was a greater positive Female response rate

representation of respondents in terms of gender compared to the Male.

4.2.4 Marital status

Table 4.3: Marital Status

Frequency Valid Percent Cumulative Percent

Valid

Single 46 31.9 31.9 Married 74 51.4 83.3 Divorced 24 16.7 100.0 Total 144 100.0

Source: primary data

The findings as reflected in table 4.3 showed that most of the respondents were married (51.4%),

followed by singles (32%) and Divorced (17%). This implies that there were a greater number of

people in family business who are married compared to those who are single and that Divorced.

4.2.5 Number of years worked in the Organization

Table 4.4: Number of years worked in the Organization

Frequency Valid Percent Cumulative Percent

Valid

Less than 3 yrs 37 25.7 25.7 3 - 6 yrs 56 38.9 64.6 7 - 10 yrs 44 30.6 95.1 More than 10 yrs 7 4.9 100.0 Total 144 100.0

Source: primary data

36

The results in table 4.4 showed that most respondents in the businesses have worked between 3-6

years (38.9%), followed by those who have worked between 7-10 years (30.6%), those who have

been in an organization less than 3 years (25.7%) and lastly those who have been in an

organization for more than 10 years (4.9%).

4.2.6 Highest Level of education attained

Table 4.5: Level of education Frequency Valid Percent Cumulative Percent

Valid

Diploma 44 30.6 30.6 Degree 52 36.1 66.7 Professional 32 22.2 88.9 Masters 7 4.9 93.8 PHD 8 5.6 99.3 Others 1 .7 100.0

Total 144 100.0 Source: primary data

Table 4.5 shows that as regards the Education level, most of the respondents were Degree

holders representing 36.1%, Diploma holders 30.6%, Professionals 22.2%,PhD holders 5.6%,

masters 4.9% and others 0.7%. This implies that, most people who are in family Businesses at

least they attained a certain level of formal Education.

4.3 Sample characteristics of family businesses

The results in the table below show that the majority of the businesses were partnerships (40.0%)

while the Private Limited Companies comprised 10.0%.

37

Table 4.6: Sample characteristics of family businesses

Count Valid Percent Mean St.

Deviation

Ownership of the Business

Partnership 8 40.0

2.100 0.968 Private Limited 2 10.0

Sole Proprietorship 10 50.0

Total 20 100.0

Period of Running Business

1 - 5 10 50.0

1.650 0.745 6 - 10 7 35.0

11 - 15 3 15.0

Total 20 100.0

Number of employees

11 - 20 8 40.0

2.150 1.137

21 - 30 4 20.0

31 - 40 5 25.0 Over 40 3 15.0

Total 20 100.0

Sector

Manufacturing 8 40.0

1.900 0.852 Service 6 30.0 Trading 6 30.0

Total 20 100.0 Source: primary data Results indicate that most of the family businesses were sole proprietorship businesses (50%),

followed by Partnership family businesses (40%) and lastly private limited liability family

business firms had the least score (10%).

It was also established that family businesses which have been in existence between 1 – 5 years

have the highest score (50%) followed by those between 6 – 10 years which have (35%) and lastly those

between 11 – 15 years scoring (15%).

Family businesses which have between 11 – 20 employees have the highest score percentage

( 40%) followed by those between 31 – 40 number of employees which score (25%), followed by

businesses which have a number of employees ranging from 21 – 30 scoring (20%) and lastly those which

38

have Over 40 employees scoring (15%). Also results showed that majority of the family businesses

were in the manufacturing sector (40%). This is explained by the fact that the researcher used the

Uganda Small Scale Industries Association list as the sampling frame. Both the Service sector

and Trading sector scored the same percentage each (30%).

4.4 An examination of succession planning in family businesses.

Factor analysis was employed to examine the relative nature of the Succession planning in

family businesses. The components of succession planning were subjected to factor analysis to

find out which of the components could prove more significant and how all the components

would contribute to the survival of family businesses basing on their percentage variance.

39

Table 4.7: Character of succession planning

Factor analysis Results: succession planning

Fam

ily

Invo

lvem

ent

Succ

essi

on

Man

agem

ent

Trai

ning

The founder is regularly involved in deciding who to take over control of the business .736

There are clear family agreements on careers .603 The family meets regularly to discuss family and business concerns .674 The family’s values drive family and business actions .612 Family members always decide on who to take control of the firm .707 The family usually address conflicts to protect family relationships and business continuity .573

Family members always identify new business opportunities .622 We always have succession plan for the business .670 We adequately manage fears of differentiating among key managers .661 We are prepared for change in the management of the business .623 We are prepared to let go of power and control at an old age .644 We are prepared to lose work activity after handover .600 People always assume positions basing on merit .590 We train some one to take over for all vital roles in the business. .602 We always have a transition period of training for each role before actual succession take place .684

We gradually prepare children to enter the business .660 We impart skills to siblings who are meant to take over the business .631 We train successors how to make key decisions in the organization .708 The firm always trains successors on how to resolve conflicts among employees .636

Eigen Value 4.725 1.225 1.135 Variance % 47.248 6.125 5.673 Cumulative % 47.248 53.373 59.046

Source: primary data

40

Family Involvement, Succession Management and Training were identified as critical elements

of Succession planning, and explaining about 59% of the variance in Succession Planning. With

Family involvement, the researcher observed that it is very essential to take into consideration

the opinions and views of the business founders when deciding who should take over control of

the business venture (74%), ensuring that family members are always involved in deciding who

to take over control of the firm (71%), family meeting always to discuss family and business

concern (67%), members to always identify new business opportunities (62%), the family’s

values drive family and business action (61%),also relevant was ensuring that there are clear

family agreements on careers (60%) and the family to usually address conflicts to protect family

relationships and business continuity (57%).

Succession management specific issues that should be emphasized if survival of family

businesses is to be improved had to do with ensuring that succession plans for the business are

always in place (67%), adequately managing fears of differentiating among key managers in the

take over process (66%), to let go of power and control at an old age (64%), prepare for change

in the management of the business (62%), preparing to lose work activity after handover (60%)

and always people assume positions basing on merit (59%).

Training issues that should be emphasized if survival of family businesses is to be improved had

to do with ensuring training of successors how to make key decisions in the organization (71%),

always to have a transition period of training for each role before actual succession take place

(68%), gradually to prepare children to enter the business (66%), train successors on how to

resolve conflicts among employees (64%), impart skills to siblings who are meant to take the

business (63%) and train someone to take over for all vital roles in the business (60%).

41

4.5 The correlation analysis of the study variables

A Pearson correlation Analysis was carried out on the study variables to establish how these

variables relate to each other and how these variables can each predict survival of the family

businesses. The results in the table below show the details about the relationships between the

study variables.

Table 4.8: Pearson correlations

1 2 3 4 5 6 7 Training – 1 1.000 Succession management -2 .286** 1.000 Family involvement- 3 .444** .403** 1.000 Succession Planning-4 .745** .739** .813** 1.000

Entrepreneurial Orientation-5 .544** .534** .622** .741** 1.000 Organizational Learning-6 .610** .541** .611** .768** .907** 1.000

Survival Of Family Businesses- 7 .391** .370** .378** .493** .502** .417** 1.000 ** Correlation is significant at the 0.01 level (2-tailed).

Source: primary data 4.5.1 Succession planning and Organizational learning in family business.

A significant positive relationship was noted between succession planning and organizational

learning (r = .768**, p<.01) this shows that when family business founders are regularly

involved in deciding who to take over control of the business, Meetings will be periodically held

to inform all the employees about the latest innovations in the firm thus increasing the level of

organizational learning in family businesses. Further more results indicated that succession

management a component of succession planning was also positively and significantly related to

organizational learning (r =.541**, p<.01). This shows that when succession plans are in place,

employees of family firms will join formal and informal networks from other organizations.

Finding further showed a significantly positive relationship between training and organizational

42

learning which is a component of succession planning (r =.610**, p<.01), this illustrates that

when someone is trained to take over all the vital roles in the business, business systems and

procedures to support innovation will be created. Conclusively, results indicated that components

of Succession Planning i.e. Training (r = .610**, p<.01), Succession Management (.541**,

p<.01) and Family Involvement (.611**, p<.01) were all significantly positively related to

Organizational learning.

4.5.2 Entrepreneurial orientation and survival of family business

Finding indicated that Entrepreneurial Orientation and survival of family businesses are

significantly positively related (r = .502**, p < .01). This demonstrates that if family businesses

give special attention to research and development, act assertively in order to achieve firm

objectives, spends substantially large amount of resources in marketing, always take unrelated

opportunities, a rise in profit level and market share would be achieved. Verdicts also specify that

if family firms employees are free to make decision, encouraged to implement newness, sell new

products/services in new market, Firm’s growth rates would be attained leading to an increase in

the market share hence survival of family business.

4.5.3 Organizational learning and survival of family business

Results indicated that Organizational learning and survival of family businesses are positively

related (r = .417**, p<.01). This implies that if Organizations can easily acquire knowledge from

either internal or external sources, interpret that knowledge, distribute/ share that information

among them selves and maintain a data bank in the organization, this may make employees to be

creative, increase firm’s operation expansion, rise in capital investment hence leading to

continued survival of family business.

43

4.6 Magnitude of the regression Coefficients

Regression analysis was employed to assess the degree to which the succession planning,

Entrepreneurial Orientation and Organizational learning can predict the Survival of family

Businesses.

Table 4.9: Regression Analysis Versions

Unstandardized Coefficients

Standardized Coefficients t Sig.

Model B Std. Error Beta (Constant) 1.423 .162 8.802 .000

Entrepreneurial Orientation .575 .163 .596 3.522 .001 Succession Planning .265 .084 .352 3.142 .002 Organizational Learning .338 .152 .392 2.221 .028 Dependent Variable: Survival Of Family Businesses R Square 0.309 F Statistic 20.577

Adjusted R Square 0.294 Sig. 0.000 Source: primary data Results showed that Succession planning, entrepreneurial Orientation and Organizational

Learning predicted 29.4% of the variance in survival of family businesses (Adjusted R Square =

.294). The remaining 70.6% was predicted by other factors outside the study (Sharma et al,

1997). It was also noted that entrepreneurial Orientation (Beta = .596, sig. < .01) is a better

predictor of family business survival than organizational Learning (Beta = .392, sig. <.01) and

Succession planning (Beta = .352, sig. <.01). This implies that Family business owners should

ensure that Entrepreneurial orientation is carried very well in order to improve survival of family

businesses. The regression model was also valid (sig. <.01).

44

4.7 Regression analysis on the components of Succession Planning

Regression analysis was employed to assess the degree to which the components of succession

planning like training, succession management and family involvement together with other study

variables of Entrepreneurial Orientation and Organizational learning can predict the Survival of

family Businesses.

Table 4.10: Regression analysis

Unstandardized Coefficients

Standardized Coefficients t Sig.

Model B Std. Error Beta (Constant) 1.389 .165 8.426 .000

Training .138 .055 .227 2.521 .013

Succession management .092 .050 .159 1.840 .068

Family involvement .044 .052 .079 .843 .400

Entrepreneurial Orientation .609 .166 .631 3.660 .000

Organizational Learning .368 .155 .427 2.375 .019

Dependent Variable: Survival Of Family Businesses. R Square 0.316 F Statistic 12.557

Adjusted R Square 0.291 Sig. 0.000 Source: primary data Findings showed that components of Succession planning, entrepreneurial Orientation and

Organizational Learning predicted 29.1% of the variance in survival of family businesses

(Adjusted R Square = .291). The remaining 70.9% was predicted by other factors outside the

study (Zellweger, 2008). It was also established that entrepreneurial Orientation (Beta = .631, sig.

< .01) is a better predictor of family business survival than organizational Learning (Beta = .427,

sig. <.01) and the components of Succession planning predict survival of family firms in

different ways, Training (Beta = .227, sig. <.01), Succession management (Beta = .159, sig. <.01)

and Family involvement (Beta = .079, sig. <.01). This implies that, for Family businesses to

45

survive from generation to generation, the owners of such firms should put much emphasis on

Entrepreneurial orientation. The regression model was also valid (sig. <.01).

46

CHAPTER FIVE

DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATION

5.1 Introduction

The study focused on the relationship between succession planning, entrepreneurial orientation,

organizational Learning and survival of family businesses. The study was carried out to find out

whether survival of family businesses can be as a result of succession planning, entrepreneurial

orientation and organizational Learning. This chapter is divided into four sections, discussion of

findings, conclusions, recommendations and areas for further research. These sections are guided

by the study objectives.

5.2 Discussion of Findings

5.2.1 Components of succession planning in family businesses

Results from factor analysis revealed that succession planning have different variables which

however have differently significance in the firm. Findings show that family involvement takes

the biggest percentage (47.248%) compared to succession management (6.125%) and Training

(5.673%). This is in line with Henry (1998) who argued that succession planning in family firms

is composed of different components and they contribute to the continuity of a firm in different

proportions. Martin & Lumpkin (2003) argued that succession planning entails the training of

family members in to different aspects of running the firm and this works as a catalyst in

necessitating the development of knowledge capacity among family members who may be ready

to take risks, innovate new ideas and make the firm competitive in future, Eddleston (2008).

According to the study by Miller (2006), results showed that, family firms world over which

47

carry out proper succession planning, get the best candidates to take over managerial positions in

such firms.

5.2.2 Succession planning and survival of family businesses

Pearson correlation coefficients indicated that there is a significant positive relationship between

succession planning and survival of family businesses. This means that if family business owners

carry out proper succession procedures and preparations, the survival of family businesses from

one generation to another would improve. This is in agreement with Levinson (1971) who noted

that succession planning is important if a family firm is to survive across generations. The study

findings also agree with Handler, (1989) who said that lack of succession planning is a major

cause of the high mortality rate in family businesses and noted that succession planning does not

take place in most family firms. There fore for family business survival to be achieved, family

businesses should start thinking about training successors, transferring ownership and

managerial responsibility in advance, (Dyck,2002; Davis ,1992; Shulman,1991).

5.2.3 Succession planning and organizational learning in family business

Pearson correlation coefficients indicated that there is a significant positive relationship between

Succession Planning and Organizational Learning. This means that as family firms prepare

young generations to take over managerial positions in the firm, different kinds of knowledge is

passed to these young generations hence learning how things are done in an organization and this

would necessitate generation of new ideas from new managers who had just taken up such

managerial positions. This is in line with Cabrera-Suarez (2001); Tagiuri & Davis (1996) who

argue that proper succession planning necessitates effective exchange of tacit and explicit

knowledge more efficiently and with greater privacy compared to non-family businesses

48

resulting in to organizational learning, it also develops idiosyncratic knowledge which remains

within the family and the business across generations, (Coleman, 1988; Bjuggren, 2001;

Cabrera-Suarez, 2001; Kellermanns, 2004). Cabrera-Suarez (2001) argue that effective

succession planning makes people with in the organization to share knowledge among

themselves as a way of preparing other members of the organization who would take over

management of the firm when time comes.

5.2.4 Organizational learning and survival of family businesses

Findings from the Pearson correlation coefficients also indicated that there is a significant

positive relationship between organizational learning and survival of family businesses. This

means that if Family firms encourage their employees to join formal and informal networks from

other organizations, put up Organizational systems and procedures that support innovation,

formal mechanisms to guarantee the sharing of the best practices among the different fields of

the activity and have a data bases to stock their experience and knowledge so as to be able to use

them later on, survival of family businesses would be improved. This is in line with Schofield

(2004) who argued that when employees of family firms learn how organizational systems and

mechanisms work, how a firm can execute its tasks effectively, come up with new business ideas, the

survival of family firms can be assured.

Pearson correlation coefficients also indicated that there is a significant positive relationship

between succession planning, entrepreneurial orientation, organization learning and survival of

Family Business. This means that if an organization there is proper succession planning, this

would lead to entrepreneurial orientation necessitating organizational learning hence survival of

the family firm. This is in agreement with Gersick (1997) who argue that succession planning in

family firms deal with the transfer of ownership and management to the next generation and it

49

looks at the way firms mentor their leaders in different aspects of decision making, risk taking

and innovativeness, (Dess & Lumpkin, 1996).

5.3 Conclusion

It was established from the study that, there was a significant positive relationship between

succession planning and survival of family businesses, a significant positive relationship between

Succession Planning and Organizational Learning, a significant positive relationship between

Succession Planning and Entrepreneurial Orientation and a significant positive relationship

between succession planning, entrepreneurial orientation, organization learning and survival of

Family Business.

The study findings revealed that a significant positive relationship between succession planning

and survival of family businesses implies that if family business owners could properly prepare

for succession, better candidates would fill managerial positions and this would necessitate long

term survival of such family firms.

The study results also showed that a significant positive relationship between Succession

Planning and Organizational Learning implies that if organizations involve all employees of

family firm during the succession planning process, knowledge which would both explicit and

tacit would be passed to different people in the organization there by making such a firm

competitive due to properly well equipped employees taking over managing positions in the

organization.

50

The study results further revealed that a significant positive relationship between succession

planning and entrepreneurial orientation implied that if family firms prepare their employees in

the best way during the succession planning process, such employees would be able to take risks,

be innovative, proactive, and autonomous and practice competitive aggressiveness.

5.4 Recommendations

The study was about the relationship between Succession Planning, Entrepreneurial Orientation,

Organization Learning and Survival of Family Business. Since there was a positive relationship

between succession planning and survival of family businesses, succession planning and

entrepreneurial orientation, succession planning and organization learning, the following

recommendations were made;

Since Succession planning was found to be among the major predictors of family business

survival, family business owners and mangers should pay much attention on how they prepare

their family members and employees of the firm on how to address conflicts to protect family

relationships and business continuity, prepare for change in the management of the business and

prepare to let go of power and control at an old age.

Family business owners should orient their members and employees of the firm on how to be

entrepreneurial in nature. This would be done through giving special attention to research and

development, act assertively in order to achieve objectives, always take unrelated opportunities

and encourage implementing newness.

Organizational Learning should also be put on the forefront if a family business is to survive

across generation. This could be done through encouraging the firm’s employees to join formal

51

and informal networks from other organizations, always putting up formal mechanisms to

guarantee the sharing of the best practices among the different fields of the activity and always to

keep a data base to stock its experience and knowledge so as to be able to use them later on.

5.5 Areas for Further Research

The study concentrated on succession planning, entrepreneurial orientation, organization

learning and survival of Family Businesses. There is need for research in the following areas.

Succession planning and entrepreneurial Traits

Entrepreneurial Orientation and Knowledge management

Entrepreneurial orientation, uncertainty avoidance and firm performance

52

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APPENDIX 1

MAKERERE UNIVERSITY MAKERERE UNIVERSITY BUSINESS SCHOOL

Questionnaire for the research study on Succession Planning and Survival of

Family businesses in Kampala District Dear Respondent; Thank you for volunteering to complete this questionnaire. Your responses are important and your thoughtful considerations are highly appreciated. The purpose of this questionnaire is to facilitate a research on Succession Planning, Entrepreneurial Orientation Organizational Learning and Survival of Family Businesses, by Mr. Ismael Nkambwe who is undertaking a Masters Degree in Business Administration of Makerere University. The study is purely academic; therefore all your responses received will be treated with strict confidentiality and will in no way be linked to you. The findings and recommendations are likely to benefit among others Family Business Owners and their managers. Kindly answer these questions personally so that we can be able to analyze the data accurately. Thank you very much for your co-operation. SECTION A:

BACKGROUND INFORMATION (Please tick appropriately)

a) Age:

24 years and below 25-34 years 35-44 years 45 and above

b) Gender:

Male Female

c) Marital status:

Single Married Divorced Other (Specify)………….

d) Number of years worked in the Organization

Less than 3 years 3-6years 7-10 years more than 10 years

e) Highest education attained

Diploma Degree Professional Masters PHD

Others (Specify………………

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f) Legal status of the Enterprise a. Partnership b. Limited liability

c. Sole Proprietorship d. Other(s) - Specify

g) For how long has this business been in existence? a. Less than a year c. 5 – Less than 10 years

b. less than 5 years d. 10 and above years

h) Number of Employees

a. Less than 5 employees c. Less than 20 employees

b. Less than 10 employees d. 20 employees and above

i) Sector of Business

a. Manufacturing c. Trading

b. Service

SECTION: B

Succession Planning

The table below shows the alternative responses and the number assigned to each response. Please evaluate the

statement by ticking in the box with the number that best suits your response.

Strongly disagree Disagree Not sure Agree Strongly agree

1 2 3 4 5

Training 1 2 3 4 5

01 We train some one to take over for all vital roles in the business

02 We always have a transition period of training for each role before actual succession take

place

03 We gradually prepare children to enter the business

04 We impart skills to siblings who are meant to take over the business

05 We train successors how to make key decisions in the organization

06 The firm always trains successors on how to resolve conflicts among employees

Succession management 1 2 3 4 5

07 We always have succession plan for the business

08 We have a possibility of naming non family members as successors of the business

09 We adequately manage fears of differentiating among key managers in the takeover process

10 We are prepared for change in the management of the business

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11 We are prepared to let go of power and control at an old age

12 We are prepared to lose work activity after handover

13 People always assume positions basing on merit

Family involvement 1 2 3 4 5

14 The founder is regularly involved in deciding who to take over control of the business

15 There are clear family agreements on careers

16 The family meets regularly to discuss family and business concerns

17 The family’s values drive family and business actions

18 Family members always decide on who to take control of the firm

19 The family usually address conflicts to protect family relationships and business continuity

20 Family members always identify new business opportunities

SECTION: C

Entrepreneurial Orientation

Innovation 1 2 3 4 5

01 Our firm give special attention to research and development

02 Our employees are free to spark new idea

03 Our firm considers new idea/approach as very important

04 Our employees participate in firm’s planning

05 Our firm spends large amount of money on new product development

Risk Taking 1 2 3 4 5

06 Our firm acts assertively in order to achieve objectives

07 Our firm typically adopt a very competitive posture

08 Our firm acts boldly in order to achieve objectives

09 Our firm acts promptly to reduce losses

10 Our firm treats usage of new method as very important

Competitive aggressiveness 1 2 3 4 5

11 Our firm invests in high cost projects

12 Our firm expends substantially large amount in R & D

13 Our firm expends substantially large amount in new product

14 Our firm spends substantially large amount in marketing

15 Our firm sells new products/services in new market

Autonomy 1 2 3 4 5

16 Our employees are free to make decision

17 Our employees are encouraged to implement newness

18 Our firm overrules employment rules to involve worker in new idea

19 Our firm favors new idea beyond rules and regulation

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Proactiveness 1 2 3 4 5

20 Our firm adopts “follow the leader” strategy in the market

21 Our firm always take unrelated opportunities

SECTION: D Organizational Learning External acquisition of knowledge 1 2 3 4 5

01 The company is always in touch with professionals and expert technicians

02 Employees regularly attend fairs and exhibitions

03 The firm encourages its employees to join formal and informal networks from

other organizations

04 Co-operation arrangements with other firms are fomented

Internal acquisition of knowledge 1 2 3 4 5

05 There is always a consolidated and resourceful R&D policy

06 Organizational systems and procedures support innovation

07 New ideas and approaches on work performance are experimented continuous

Knowledge distribution 1 2 3 4 5

08 Employees are always informed about the aims of the firm

09 Meetings are periodically held to inform all the employees about the latest

innovations in the firm

10 The company has formal mechanisms to guarantee the sharing of the best practices

among the different fields of the activity

11 There are individuals responsible for collecting, assembling and distributing

internally employees suggestions

Knowledge interpretation 1 2 3 4 5

12 All employees of the firm always share the same aim to which they committed

13 Employees share knowledge and experience by talking to each other

14 Teamwork is a very common practice in the company

15 The company develops internal rotation programs so as to facilitate the of the

employees from one department to another

16 The company offers others opportunities to learn so as to make individuals aware

of other people's duties

Organizational memory 1 2 3 4 5

17 The company has a data base to stock its experience and knowledge so as to be

able to use them later on

18 The company has up to date data base for its clients

19 The data base is always kept up to date

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20 All employees in the organization have access to the firm's data base

21 Employees always consult the data base

22 The codification and knowledge administration system makes work easier for the

employees

SECTION: E

Survival of Family Business

Rate the survival of the firm by ticking the appropriate box

1. Firm’s growth rate: less than 2% 2-5% 5-8% 8-11% over 11%

2. Firm’s raise in profit level: < 2% 2-5% 5-8% 8-11% over 11%

3. Firm’s raise in market share < 2% 2-5% 5-8% 8-11% over 11%

4. Firm’s sales increment: < 2% 2-5% 5-8% 8-11% over 11%

5. Firm’s operation expansion < 2% 2-5% 5-8% 8-11% over 11%

6. Rise in capital investment: < 2% 2-5% 5-8% 8-11% over 11%

2

2 3 5 4

1

1

3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 5

2

4

5 1 3 4