SAES-422 Multistate Research Activity Accomplishments Report

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Basic Information
Additional Info

Status: Approved

Basic Information

Project No. and Title: NE167 : Family Business Viability in Economically Vulnerable Communities
Period Covered: 01/01/2002 to 12/01/2002
Date of Report: 10/16/2002
Annual Meeting Dates: 10/06/2002 to 10/08/2002

Sharon Danes, University of Minnesota Sara Douglas, University of Illinois Margaret Fitzgerald, North Dakota State University Grace Fong, University of Hawaii at Manoa Karen Goebel, University of Wisconsin George Haynes, Montana State University Ramona Heck, Baruch College Cynthia Jasper, University of Wisconsin Yoon Lee, Utah State University Diane Masuo, University of Hawaii at Manoa Glenn Muske, Oklahoma State University Kay Obendorf, Cornell University, Administrative Advisor Alma Owen, The Purdue University Holly Schrank, The Purdue University Kathryn Stafford, The Ohio State University Margaret Whan, University of Arkansas Mary Winter, Iowa State University Project web site: <a href="http://www.cornell.edu/NE167/">http:www.human.cornell.edu/NE167</a>

Brief Summary of Minutes of Annual Meeting

Mid-year Meeting - 4/18-20/02

The mid-year meeting was held with 2 specific objectives in mind. The first objective was to work on the economic vulnerability data with Warren Brown of Cornell University. A tentative codebook was presented outlining the variables where Warren could access county level data, the year of the data, and what was known about the data set. The group further refined the data request for Warren.

The second objective was a review of the project goals, objectives, and timeline with a discussion among the members of what each person was currently working on or had plans to work on in the future. The previous work plan grid was discussed with some items dropped that were not priorities under the project goals and new items included. Following that discussion, it was decided that the group should pursue a two-year project extension until Sept. 2006.

Annual Meeting - 10/6-8/02

It was reported at the meeting that the request for an extension had been endorsed by the Multistate Committee of the Northeast Region with the understanding that we would continue to operate with the existing objectives. This request has been submitted to CSREES for final approval.

Ramona Heck reported on two upcoming conferences that Baruch College will sponsor. A "Tool Kit" for entrepreneurs is the product that will be developed from the first conference. While the first conference focuses on home-based business owners, the second will concentrate on women entrepreneurs. The individual/group authors agreed on deadlines and helped Ramona refine the various tools to be produced.

During the meeting, George Haynes reported on the progress of the development of the scale assessing the socioeconomic vulnerability of the communities in which the family businesses in the sample are located.. At present the scale has 21 variables with some variables measuring similar attributes of vulnerability. The committee made suggestions about reducing the number of variables in the scale. George will rerun the vulnerability estimates using the revised scale and effects on the scale‘s reliability. To assist him with validity issues, George asked that each member provide him with an estimate by local experts, of the vulnerability for each county. He will compare the experts‘ rating against the rating obtained using his final model.

Finally, the work grid was reviewed and modified. To improve communication among members, a policy for declaring articles and sharing abstracts from published works was discussed and agree upon.

Accomplishments

Accomplishments can be grouped into three categories: 1) those focused on the processes that need to be completed prior to data analyses, 2) specific data analyses, and 3) the presentation of findings and implications through publications and presentations.

Processes completed include:

A modified version of household manager and business manager interview instruments for a new survey of family business households in Hawaii.
Assistance was provided by Iowa State University researchers to other members of the technical committee in understanding the complex data structure of the 2000 data.
A preliminary version of a socioeconomic vulnerability scale composed of community- and county-level variables was developed.
Two scales using subjective community variables in the data set were constructed
The assessment the effects of panel attrition between 1997 and 2000 on the representativeness of the 2000 sample, a step crucial to using the 2000 data set for further analyses. Analyses indicated that business managers not reinterviewed were younger, and that they managed younger, smaller, lower-income businesses than those who could be reinterviewed. It was suggested that, to correct the sample bias introduced by panel attrition, all analyses of the 2000 data include age of the manager or of the business, number of employees, and gross income from the business.

Specific data analyses include:

A family FIRO theoretical model, one of interpersonal dynamics and change, was empirically tested and was verified.
Succession planning behavior (presence or absence of written plan to transfer ownership) among family business owners was examined
Cash flow problems of 673 family-owned businesses were investigated to predict the occurrence of cash flow problems in the business, household, and in both the business and household simultaneously.
Family business success was compared for female and male business managers.
Selected business, financial, and household characteristics were compared by wives‘ employment choices as well as factors that influenced wives‘ employment choices.
Wives‘ household management scores and their reported quality of life were compared by wives‘ employment types.
Analyses were completed that focused on predicting two different, but related, family business phenomena: the continued involvement by the owner-manager of a family business over time and the continuation of the business over time..
The impact of variables related to the timing and sequencing of family and business development on the types of adjustment strategies used by family and business managers during hectic times was analyzed.
Descriptive statistics about copreneurs in the 2000 data set were completed
Family and business success was empirically tested on single manager family business households with a 1997 business manager still involved in the business in 2000.

Accomplishments focused on the dissemination of findings include:

Rogoff and Heck served as Guest Co-Editors for a special issue of the Journal of Business Venturing Special Issue titled, "The Evolving Family/Entrepreneurial Business Relationship," which will be a major contribution to both family business and entrepreneurship research.
13 conference presentations that: (1) introduced tools that can be used by financial counselors with family businesses to examine the dynamics of families and the co-mingling of finances, and (2) shared findings related to the economic contributions of family businesses, business performance, the effects of education, economic contributions and family business growth, and the contributions of family businesses run by copreneurs.
1 extension workshop for family business leaders was presented on the nature and life span of copreneurs.

Impacts

IMPACT ON FAMILIES AND THEIR BUSINESSES, COMMUNITIES, AND SUPPORT NETWORKS:
Intermingling finances between family and business systems occurred more often in businesses with cash flow problems.
Businesses with cash flow problems had higher liabilities, were more likely to be in rural counties and to use business real estate to secure family loans.
When disagreements, tensions, and conflicts arise, addressing them through inclusion dimensions of the FIRO model rather than addressing control is critical.
Only 20 percent have a written succession plan, with male more likely to have a plan than females.
Owners consult with financial planners regarding succession only about 13 percent of the time.
Owners who started their own business are less likely to have a written succession than those who inherited it.
Effect of gender was significant for both perceived business success and success in achieving company goals; female managers had higher levels than male managers.
Goal clarification, adjustment strategies, and overall management were highest for wives employed only in family businesses.
With cash flow problems, wives' overall household management scores were lower than those without cash flow problems.
When wives had more children, were older, and had higher management scores, their satisfaction with family life increased.
Success of business, measured both subjectively and objectively, is important in predicting business continuity.
Analysis of the manager's reasons for leaving the business indicate that ceasing to be involved as manager should not necessarily be viewed as either a business failure or managerial failure.
Copreneurs are more likely to intermingle resources than non-copreneurs.
Coprenuers hired significantly fewer employees, were more often located in rural areas, were more likely to have young children in the household, and were less likely to borrow from a financial institution than non-copreneurs.
Copreneurs were more likely to use the family's finances to assist the business than non-copreneurs.
Copreneurs were not more likely to shift financial resources from the business to the family than non-coprepenurs.
IMPLICATIONS THAT CAN LEAD TO SUCCESS FOR BUSINESS-OWNING FAMILIES:
Target populations for interventions by educators, finance officers, and others working with the business community-are young entrepreneurs needing assistance with human and material resource development.
Reducing family tension by only 4 percent would increase annual revenue $400.
Employing a relative living at home increases revenue $1,960.
If, when times were busy, hiring temporary help would increase firm's revenue $3,300 a year.
Each additional family member employed by the business was associated with over 100 times more annual revenue than an additional unrelated employee.
Family system variables contribute most to explanation of cash flow problems.
Business system variables contributed most to identifying cash flow problems. Where cash flow problems are experienced in both the business and household simultaneously, intermingling of finances contributes most in explaining those problems.
Family businesses have a major impact on gross business revenues, jobs, and household income and asset accumulation.

Publications

Danes, S.M., Rueter, M.A., Kwon, H.K., & Doherty, W. (2002). Family FIRO model: An application to family business. Family Business Review, 15(1), 31-43.

Danes, S. M., Olson, P.D., Zuiker, V.S., VanGuilder-Dik, A.N., & Lee, Y.G. (2001.). Cash flow problems within family businesses. Proceedings of the Association for Financial Counseling and Planning.

Fitzgerald, M. A., & Muske, G. (2002) Copreneurs: An exploration and comparison to other family businesses. Family Business Review, XV, 1-16.

Heck, R. K. Z., Rogoff, E. G., Lee, Myung-Soo, & Stafford, K. (2002). The economic contributions of family business. United States Association of Small Business and Entrepreneurship, Annual Conference 2002.

Heck, R. K. Z., & Stafford, K. (2001). The vital institution of family business: Economic benefits hidden in plain sight. In G. K. McCann & N. Upton (Eds.), Destroying myths and creating value in family business (pp. 9-17). Deland, FL: Stetson University.

Heck, R. K. Z., & McCann, G. K. (2001). The Conclusion: Reshaping our vision and ideas about family business. In G. K. McCann & N. Upton (Eds.), Destroying myths and creating value in family business (pp. 65-71). Deland, FL: Stetson University.

Lee, Y.G., Hong, G. S., Jasper, C. R., & Goebel, K. (2002). Succession Planning Behavior among Family Business Owners. Proceedings of the Association For Financial Counseling and Planning Education.

Lee, Y. G., Gong-Soog Hong, & Rowe, B. R. (2002). Women‘s Work in Business Owning Families. Consumer Interests Annual, 48.

Lee, Y. G. (2002). Gender Differences in Business Success: Evidence from the 1997-2000 National Family Business Survey panel data. Consumer Interests Annual, 48.

Masuo, D., Fong, G., & Yanagida, J. (2002). A Comparison of Single Manager Family Business Households in 1997 and 2000. Consumer Interests Annual, 48.

Olson, P. D., Zuiker, V. S., Danes, S. M., Stafford, K., Heck, R. K. Z., & Duncan, K. A. (In press). The impact of the family and the business on family business sustainability. Journal of Business Venturing,18(3) 2003, forthcoming.

Muske, G., & Fitzgerald, M. A. (2002). Copreneurs--who continues and why? Evidence from the 1997-2000 National Family Business Studies, Consumer Interests Annual, 48.

Muske, G., Fitzgerald, M. A., & Kim, J. (2002). Copreneurs as family businesses: Evaluating the differences by industry type. 16th Annual U. S. Association for Small Business and Entrepreneurship Conference Proceedings (CD-ROM).

Rogoff, E. G., & Heck, R. K. Z. Heck. (In press). Reconceptualizing the interconnections with the evolving family/entrepreneurial business relationship [Introductory Editorial Note for Special Issue]. Journal of Business Venturing, 18 (3) 2003, forthcoming.

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