Title

Corporate Venturing in Family Business: The Effects on the Family and Its Members

Document Type

Article

Publication Date

2010

Abstract

Previous literature on corporate entrepreneurship (CE) in family business (FB) focusses on the determinants of CE and presents conflicting results on its effects on firm-level performance. We argue that previous studies have overlooked the idea of FBs being complex social systems comprising three components, controlling families, business entities and individual family members; and any business activity in a FB should also be studied with respect to its effects on the family and individual family members, which ultimately impacts the performance. Moreover, previous FB literature addresses CE as a monolithic concept and does not separate its two primary types: corporate venturing (CV) and strategic renewal (SR). This article focusses solely on CV, investigating the impact of CV on FB. The research is based upon a set of longitudinal in-depth case studies of three FBs engaged in CV initiatives. The findings suggest that CV can have positive, negative or possibly both effects at the family and individual levels depending on four moderating factors. At the individual level, if a succession process is present, CV may increase the incumbent leader's capability to effectively direct the selection and development process of next generation family members (NGFMs) as well as the NGFMs' human capital. However, CV could also reduce the affective commitment of NGFMs to the core business and such a risk appears to be higher when CV participation in the FB strategy is low. At the family level, development of CV initiatives may both enhance and reduce the family cohesion. The risk of its decrease grows with greater relevance of non-active family members' ownership and the greater financial impact of the CV initiative itself.