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ERENET Profile Vol. IV, No. 4. www.erenet.org Ms Mridula Gungaphul, MA Senior Lecturer, Department of Management, Faculty of Law and Management, University of Mauritius Reduit, Mauritius E-mail: m.gungaphul@uom.ac.mu and mridula03@yahoo.co.uk and Mehraz Boolaky, PhD Professor, Department of Management and Marketing Room 331, Dostyk Building, 2 Abay Avenue Bang College of Business, KIMEP Almaty, Kazakhstan E-mail: mboolaky@kimep.kz and mehz51@yahoo.co.uk ENTREPRENEURSHIP: IMPLICATIONS AND LESSONS FROM SMALL FAMILY BUSINESSES IN MAURITIUS Part I. Abstract Family firms contribute widely to economic growth and activities in countries worldwide, especially in developing countries and they play a significant role in the process of entrepreneurship. While extensive research has been carried out in the field of entrepreneurship and small and medium enterprises (SMEs), research on family businesses is scarce and almost non existent in Mauritius. Policy makers in Mauritius have for more than a decade been encouraging more and more people to embrace entrepreneurship as a career with a view to reduce unemployment, alleviate poverty and contribute to the economic growth of the island. Public Policy instruments have been put in place to support entrepreneurship in general but family business owners received no special attention although they represent the backbone of entrepreneurial ventures in Mauritius. This study seeks to gain an understanding on various aspects, such as conflicts, strategic and succession planning in small family businesses as these parameters have been acknowledged to be the main areas of failure in family businesses. A semi-structured questionnaire has been personally administered to a convenience sample of thirty family business owners operating in different sector of activities. The main findings of the study are that these businesses make valuable contributions to the family and their businesses such as creating a bond among family members and providing financial safety. Conflicts also exist to varying degrees depending on the areas involved. The study also reveals that the small family businesses do not attach much importance to strategic and succession planning. This study contributes to the scant literature on the role played by family business owners in the entrepreneurial field in Mauritius and also attempts to help policy makers and other stakeholders with valuable information to provide appropriate support to enable family businesses to survive, grow and prosper for the benefit of the entrepreneurs and the country. Keywords: Family businesses, entrepreneurship, conflict, strategic planning, succession, Mauritius Introduction It is acknowledged that entrepreneurs depend to a large extent on their families when considering setting up a business. Further, the importance of both entrepreneurship and the family business to the economy are accepted. (Dunn and Liang, 2001) Families are vital and provide encouraging environments for entrepreneurial behaviour. Entrepreneurship research has revealed that family support and the presence of self-employed parents are important influences in creating a venture and business ownership (Shapero and Sokol, 1982). Entrepreneurship is recognized as a key factor which contributes to a firm’s success and is the start and heart of most family businesses and the phenomenon of an entrepreneurial family fosters, subsidises, and enhances the efforts of its members who engage in entrepreneurship (Bellet et. al, 1994). In most countries around the globe the majority of businesses comprise of small and medium enterprises (SMEs) and many of which are family businesses. Family-owned businesses may well be the oldest form of business organisation and are recognised as contributing significantly to the world economy (Small Business Encyclopaedia, 2002). For instance, in the USA, 90 percent of all businesses are family owned or controlled. (Bowman-Upton, 1991) The same pattern is seen in Great Britain, where it is reported that family owned- 26
ERENET Profile Vol. IV, No. 4. www.erenet.org business, especially in the SME sector comprise the great majority of business enterprises. (Leach, 1994; Cromie et al., 1995) In support of their views, the results of a survey carried out by Barclays Bank (2002) revealed that out of every five businesses in Britain with an annual turnover of less than £5 million are owned and managed by family members. The importance of this sector has also been confirmed for various other countries, such as, Australia (Reed, 1989), South Africa, (Venter et al., 2003), Thailand, (Wannachotphawet et al., 2003), Ireland (Birdthistle, 2006) and in many other parts of the world. As such, there is no official statistics available to confirm the percentage of family firms in Mauritius, a small island; the majority of businesses on the island are family-owned. It can thus be said that irrespective of a country’s degree of development and size, family-owned firms are of great importance to their respective countries. However, family-businesses have many difficulties, some of which are unknown to non-family members (AICPA 2009), obstructing their development. Amongst the problems are: management and planning (Corbetta& Montemerlo, 1998), succession (Burke, 2003) and conflicts among family members in the business. Due to these reasons it has been estimated the life-cycle of family businesses are of less than one generation and that worldwide, only 30% of family businesses survive to the second generation, while fewer than 14% make it beyond the third generation. (Bjuggren & Sund, 2001; Matthews, Moore & Fialko, 1999; Venter et al., 2003) Considering the importance of entrepreneurship and in particular the role of family businesses in an economy it is clear that these managerial difficulties should be understood and addressed to enable these ventures to flourish. This study therefore aims to explore family businesses on issues of conflict, strategic and succession planning are: • to identify the sources of conflicts in small family businesses and how these are managed • to identify the advantages and contributions of small family businesses • to identify the importance that owners of small family businesses attach to strategic planning • to find out how succession is planned in the family business. As there is no international standard definition of firm size, our study will consider family firms in Mauritius employing upto fifty employees. It has to be pointed out that the majority of enterprises in Mauritius are micro or small. Literature review According to Kauffman (2002), “the two most important categories of businesses to consider when discussing entrepreneurship are small businesses and micro-enterprises.” Many of these small enterprises are family businesses. In some countries the economic and political environment may have an impact on the development of family businesses. There are various reasons for the formation of family businesses (Bowman- Upton, 1991). For instance, in India, the origin of family businesses coincided with the evolution of entrepreneurial firm during the industrial revolution. (Dash, 2003) It is also acknowledged that entrepreneurs depend a lot on their families when considering of setting up a business. As Ward (1987) says “A family business owner’s greatest resource is his or her family. Its members provide the company with employees, ideas, new blood; they also give the owner good reason to work hard and achieve success.” At this point it is worthwhile considering some of the definitions of entrepreneurship, SMEs and family businesses as identified in the literature. For more than two centuries, the terms "entrepreneurship" and “entrepreneur” have resisted precise definition (Herbert & Link, 1988). Carton et al., (1998) state that entrepreneurship is the pursuit of a discontinuous opportunity involving the creation of an organization (or sub-organization) with the expectation of value creation to the participants. The entrepreneur is the individual (or team) that identifies the opportunity, gathers the necessary resources, and is ultimately responsible for the performance of the organization. Often, an enterprise starts on the basis of an idea of a person and continues as a small business. Some of them succeed in becoming large enterprises. However, the majority of enterprises remain small; some because they cannot grow and others because they do not want to grow. Those who prefer to remain small often operate in niche markets and the advantage lies in being small. Nonetheless the importance of small businesses is quite evident. Small and medium-sized enterprises (SMEs) are important agents of development throughout the world. Ponthieu and Insley (1996) state “Small businesses constitute 97% of all businesses in the United States and employ more than 58% of the labour force” (p.35). In South Africa, 85% of businesses 27
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