THE EFFECT OF FAMILY CULTURE ON FAMILY BUSINESS: A RESEARCH ON FAMILY BUSINESS IN ISTANBUL CHAMBER OF COMMERCE

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• THE EFFECT OF FAMILY CULTURE ON FAMILY BUSINESS
  A RESEARCH ON FAMILY BUSINESS IN ISTANBUL CHAMBER
  OF COMMERCE
•  
• Canan Çetin
• Ata Özdemirci
• Erkan Taskiran
• Esra Dinç Özcan
• Marmara University, Turkey

2
Research Questions

• What is the effect of family culture on
  organizational culture?
• What is the effect of family culture influence on
  business and founder/ceo centralisation on firm
  performance in family business?

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CORPORATE CULTURE

• In recent years, the term corporate culture has
  been used widely to describe shared attitudes,
  beliefs, values and expectations that interact to
  create behavioral norms within the work
  environment.
• Today, the companies are required to set own
  values which are different from the other
  companies which are not easily imitated by the
  others in order to align with rapidly changing
  environment conditions. This necessity forces
  companies to have distinct beliefs, norms and
  values.

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CORPORATE CULTURE

• The notion of organizational culture has been
  very important in the studies for the last
  decade. In spite of disagreements over some
  elements of definition and measurement,
  researchers seem to agree that culture may be an
  important factor in determining how well an
  individual fits an organizational context.

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CORPORATE CULTURE

• All the organizations have their own cultures
  when they share some specific values and this
  structure helps values align with the behaviors.
  Within this context, the companies who have
  strong organizational culture can observe the
  positive impacts of culture over the companys
  performance.

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CORPORATE CULTURE IN FAMILY BUSINESSES

• In family businesses the role of culture is
  stronger than in non family firms as family
  members tend to maintain and strengthen the
  founders value over the long term. (Casillas,
  Acedo and Moreno, 2007).
• Family businesses are accepted to be the
  milestones of the economy especially in
  developing countries. Although theoretical
  efforts to describe family business have been no
  single definition exists.

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CORPORATE CULTURE IN FAMILY BUSINESSES

• Brun de Pontet, Wrosch and Gagne (2007) defines
  family business as a company whose ownership and
  management are concentrated in one family, with
  at least one member of the family at the helm of
  the business and another being groomed or
  considered for eventual leadership.
• With another definition, family business can be
  described as the business in which the family
  owns a significant part of the business and the
  family members are highly involved in the
  management and control of the business.

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CORPORATE CULTURE IN FAMILY BUSINESSES

• Family businesses contribute a significant
  portion of the gross domestic production and
  employment. In many countries, family businesses
  contribute a substantial amount to their gross
  national production and provide the reduction of
  unemployment. It is evident that family
  businesses play a major role in most countries
  economic development.

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CORPORATE CULTURE IN FAMILY BUSINESSES

• Organizational culture in the area of family
  business is especially complex, and thus the
  culture emerges not only from the relationships
  that exist at the heart of the firm itself, but
  also with regard to family members.

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FAMILY CULTURE

• The family as a social unit achieves cohesion
  through the sharing of values, beliefs,
  perceptions, and expectations among its members.
• Each family has own culture unwritten operating
  rules that govern relationships, communication
  and decision-making.
• Family culture plays an important role in the
  operation in the business and the way owners make
  their decisions.

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FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES

• It is expected from the family businesses to
  share the values and beliefs among the members of
  family and the executives so as to be rapidly
  institutionalized and developed. In family
  businesses, sustainability is the main process
  that aims at sharing the values, beliefs and
  norms and ensuring competent family leadership
  across the generations (Mazzolo, Marchisio and
  Astrachan, 2008).

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FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES

• All families construct their family paradigms
  according to their beliefs on life. This paradigm
  has an effect on ways of solving problems and
  families viewpoints of relationships, and most
  of the time it determines not only the culture of
  the family but also the culture of the family
  business . (Akdogan and Mirap, 2008)
•  

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FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES

• The fact that the family has authorization to
  control and own the firm, familys values and
  vision will be present in the firm. If owners can
  deeply inculcate values in family members that
  are conducive to organizational success, the
  family business may have a competitive edge.

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FAMILY CULTURE INFLUENCE ON FAMILY BUSINESSES

• Considering the companies in our country, Turkey,
  especially the companies whose family orientation
  has been maintained, it can be easily observed
  that they have their own cultural structures and
  these structures have been a major topics of
  various researches in the last decade.
• The main purpose of this research is to
  investigate comprehensively the effect of family
  culture upon the organization culture and
  performance.

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Hypothesis

• H1 Family culture effects organizational culture
• H2 Family culture effects firm performance
• H3 Family culture influence on business effects
  firm performance
• H4 Founder/ceo centralisation effects firm
  performance

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METHODOLOGY

• The type of the research is hypothetic research.
  Data collection method is survey. Sample
  selection method is coincidental.
• The universe of the study is the family firms in
  Istanbul Chamber of Commerce which are at least
  10 years old and which have minimum capital of
  250000 TL?150,000 .
• Its estimated that the population of the
  universe is approximately between 15000 and
  20000.

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METHODOLOGY

• We made face-to-face survey with the executives
  who are family members on charge and we also used
  mail and telephone survey for reaching maximum
  participation.
• We used factor analysis to determine the
  dimensions of the measures. We also made K-S test
  for normal distribution and Cronbach Alpha test
  for reliability.

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Measures
MEASURE DEVELOPERS ITEM NUMBER
FAMILY CULTURE INFLUENCE ON BUSINESS (FCI) Koiranen, 2002 12
FOUNDER / CEO CENTRALISATION Borgatti, 1999 12
FAMILY CULTURE / ORGANIZATONAL CULTURE Denison, 2001 12/ 12
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Measures

• Also
• 2 control questions about the family effect on
  business (share amount of family, family members
  in board of directors)
• 1 control question about the participants
  relatedness to the family
• 8 questions about the firms perceived
  performance
• 8 questions about the demographics are asked to
  the participants.
• Likert Scale-5 is used in all questions

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Factor Analysis and Reliabilities

• We made expletory factor analysis for
  establishing the sub dimensions of measures.
• All factors have passed the KMO Measure of
  Sampling Adequacy and Bartlett test of Sphericity
  which means that our data set is appropriate for
  factor analyses.
• Principal components and varimax method are used
  in analysis. For all measures, items which have
  factor weight below 0,50 unique items in a
  factor items with close factor weights are
  leaved out of evaluation.
• After these processes, factors which have initial
  eigenvalues over 1,00 and Cronbach Alpha over
  0,65 are

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Factor Analysis and Reliabilities

• FAMILY CULTURE
• 2 factors (Cumulative Extraction Sums 74,32)
• Power of Family Culture (Cronbach Alpha0,936)
• Value Attributed to Individuals (Cronbach
  Alpha0,883)

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Factor Analysis and Reliabilities

• ORGANIZATIONAL CULTURE
• 2 factors (Cumulative Extraction Sums 70,02)
• Power of Organizational Culture (Cronbach
  Alpha0,876)
• Value Attributed to Individuals (Cronbach
  Alpha0,849)

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Factor Analysis and Reliabilities

• FAMILY CULTURE INFLUENCE ON BUSINESS
• 2 factors (Cumulative Extraction Sums 74,32).
• Participation of Family (Cronbach Alpha0,921)
• Support of Family (Cronbach Alpha0,922)

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Factor Analysis and Reliabilities

• FOUNDER / CEO CENTRALISATION
• 1 factor (Cronbach Alpha0,942)

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Factor Analysis and Reliabilities

• FIRM PERFORMANCE
• 2 factors (Cumulative Extraction Sums 72,545)
• Concrete Performance (Cronbach Alpha0,908)
• (sales, financial performance, profitability,
  market share, reaching goals)
• Abstract Performance (Cronbach Alpha0,715)
• (handling difficulties, HR quality and meeting
  expectations)

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Descriptive Statistics
FACTOR N Mean Std. Deviation
POWER OF ORGANIZATIONAL CULTURE (POC) 106 3,8825 ,64730
VALUE ATTRIBUTED TO INDIVIDUALS IN ORGANIZATIONAL CULTURE (VIOC) 106 3,4830 ,68054
POWER OF FAMILY CULTURE (PFC) 106 3,8311 ,74584
VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE (VIFC) 106 3,4170 ,71985
FAMILY PARTICIPATION IN BUSINESS (PARTICIPATION) 106 3,8097 ,78795
FAMILY SUPPORT IN BUSINESS (SUPPORT) 106 3,8538 ,70784
CENTRALIZATION 106 3,5778 ,83085
CONCRETE FIRM PERFORMANCE 106 3,6759 ,68679
ABSTRACT FIRM PERFORMANCE 106 3,7484 ,61172
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Correlations Between Factors and Demographics
Age Education Professional Seniority Firm Seniority
POC ,198 ,277 ,591 ,453
VIOC ,266 ,423 ,495 ,365
PFC ,029 ,384 ,395 ,304
VIFC ,140 ,659 ,432 ,325
FAMILY PARTICIPATION ,266 ,269 ,518 ,384
FAMILY SUPPORT ,151 ,119 ,438 ,277
CENTRALIZATION ,345 ,150 ,515 ,371
CONCRETE FIRM PERFORMANCE ,033 ,277 ,311 ,264
ABSTRACT FIRM PERFORMANCE -,018 ,393 ,298 ,126
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Correlations Between Factors and Demographics
The perception of power of organizational culture
and family culture, value attribured to
individuals in organizational culture and family
culture, family participation and family support,
centralization and firm performance rises by age,
education and seniority. This means that an
optimistic point of view appears by age,
education and seniority.
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Correlations Between Factors
  1 2 3 4 5 6 7 8 9
1. POC 1
2. VIOC ,609 1
3. PFC ,859 ,459 1
4. VIFC ,718 ,760 ,754 1
5. FAMILY PARTICIPATION ,631 ,586 ,526 ,601 1
6. FAMILY SUPPORT ,701 ,208 ,750 ,411 ,578 1
7. CENTRALIZATION ,719 ,579 ,517 ,604 ,849 ,550 1
8. CONCRETE FIRM PERFORMANCE ,178 ,392 ,057 ,334 ,430 ,141 ,444 1
9. ABSTRACT FIRM PERFORMANCE ,500 ,581 ,401 ,666 ,236 ,065 ,379 ,525 1
30
Correlations Between Factors
We see very high positive correlations between
the factors, it means that we need multi
regression and hierarchycal regression tests for
avoiding collinearity problem
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Analysis of the Hypothesis
Multi Regression Test for Hypotesis 1 Family
culture effects organizational culture

  POWER OF ORGANIZATIONAL CULTURE (POC) POWER OF ORGANIZATIONAL CULTURE (POC) VALUE ATTRIBUTED TO INDIVIDUALS IN ORGANIZATIONAL CULTURE (VIOC) VALUE ATTRIBUTED TO INDIVIDUALS IN ORGANIZATIONAL CULTURE (VIOC)
  ß Sig. ß Sig.
POWER OF FAMILY CULTURE (PFC) ,638 0 -,240 ,006
VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE (VIFC) ,147 ,031 ,906 0
Adjusted R2 ,744 0,600
N 106 106
F 153,545 79,699
Sig. 0 0
S.E. ,327 ,430





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Analysis of the Hypothesis
Multi Regression Test for Hypotesis 2 Family
culture effects firm performance


  CONCRETE FIRM PERFORMANCE CONCRETE FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE
  ß Sig. ß Sig.
POWER OF FAMILY CULTURE (PFC) -,449 ,001 -,235 ,034
VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE (VIFC) ,672 0 ,843 0
Adjusted R2 ,183 ,457
N 106 106
F 12,743 45,142
Sig. 0 0
S.E. ,621 ,451




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Analysis of the Hypothesis
Multi Regression Test for Hypotesis 3 Family
culture influence on business effects firm
performance


  CONCRETE FIRM PERFORMANCE CONCRETE FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE
  ß Sig. ß Sig.
FAMILY PARTICIPATION ,523 0 ,298 ,012
FAMILY SUPPORT -,161 ,138 -,108 ,359
Adjusted R2 ,187 ,045
N 106 106
F 13,07 3,477
Sig. 0 ,035
S.E. ,612 ,598




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Analysis of the Hypothesis
Regression Test for Hypotesis 4 Founder/ceo
centralism effects firm performance


  CONCRETE FIRM PERFORMANCE CONCRETE FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE ABSTRACT FIRM PERFORMANCE
  ß Sig. ß Sig.
CENTRALIZATION ,444 0 ,379 0
Adjusted R2 ,189 ,136
N 106 106
F 25,468 17,477
Sig. 0 0
S.E. ,619 ,569




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Analysis of the Model
Hierarchycal Regression Test for Concrete
Performance

Model Model Unstandardized Coefficients Unstandardized Coefficients Standardized Coefficients t Sig.
Model Model B Std. Error Beta t Sig.
1 (Constant) 2,364 ,267   8,862 ,000
1 CENTRALIZATION ,367 ,073 ,444 5,047 ,000
2 (Constant) 2,833 ,330   8,598 ,000
2 CENTRALIZATION ,467 ,083 ,565 5,619 ,000
2 POWER OF FAMILY CULTURE -,216 ,093 -,235 -2,336 ,021
3 (Constant) 2,709 ,316   8,575 ,000
3 CENTRALIZATION ,356 ,086 ,431 4,164 ,000
3 POWER OF FAMILY CULTURE -,471 ,116 -,511 -4,071 ,000
3 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,438 ,129 ,459 3,402 ,001
4 (Constant) 2,375 ,343   6,927 ,000
4 CENTRALIZATION ,250 ,096 ,303 2,604 ,011
4 POWER OF FAMILY CULTURE -,770 ,174 -,837 -4,432 ,000
4 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,613 ,148 ,643 4,147 ,000
4 FAMILY SUPPORT ,328 ,144 ,338 2,273 ,025





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Analysis of the Model
Hierarchycal Regression Test for Abstract
Performance


Model Model Unstandardized Coefficients Unstandardized Coefficients Standardized Coefficients t Sig.
Model Model B Std. Error Beta t Sig.
1 (Constant) 1,815 ,217   8,362 ,000
1 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,566 ,062 ,666 9,101 ,000
2 (Constant) 2,353 ,264   8,900 ,000
2 VALUE ATTRIBUTED TO INDIVIDUALS IN FAMILY CULTURE ,654 ,065 ,770 10,029 ,000
2 FAMILY SUPPORT -,218 ,066 -,252 -3,285 ,001




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CONCLUSION

• H1 Family culture effects organizational culture
• This hypothesis is supported at the plt.05 level
  on both dimensions of family and organization
  culture.
• (The significant effect of power of family
  culture on power of org. culture value
  attributed to individuals in family culture on
  value att. to individuals in org. culture.
• Also there is a significant negative effect of
  power of family culture on value att. to
  individuals in org. culture).

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CONCLUSION

• H2 Family culture effects firm performance
• This hypothesis is supported at the plt.05 level
  for both dimensions of family culture on concrete
  and abstract performance. Power of family culture
  negatively effects concrete and abstract firm
  performance and value attributed to individuals
  in family culture positively effects concrete and
  abstract firm performance.

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CONCLUSION

• H3 Family culture influence on business effects
  firm performance
• This hypothesis is supported at the plt.05 level
  for one dimension of family culture influence on
  concrete and abstract performance. While family
  participation positively effects firm
  performance, there is no significant relationship
  between family support and firm performance.

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CONCLUSION

• H4 Founder/ceo centralization effects firm
  performance
• This hypothesis is supported at the plt.05 level.
  There is a strong positive effect of
  centralization on firm performance.

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CONCLUSION

• According to the results of the hierarchycal
  regression test for concrete performance, the
  most important factor is power of family culture
  that has a negative effect on concrete
  performance, and with the positive effects value
  attributed to individuals in family culture,
  family support and centralization follows it.

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CONCLUSION

• According to the results of the hierarchycal
  regression test for abstract performance, the
  most important factor is value attributed to
  individuals in family culture that has a positive
  effect on abstract performance, and family
  support with a negative effect follows it.

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CONCLUSION

• So, the effect of family culture is significant
  on the (perceived) firm performance. The effect
  of value attributed to individuals in family is
  positive and very high, and the effect of power
  of family culture is negative and high. Also
  centralization is still the most powerful
  management style in family business. Good
  performance needs valuable individuals more than
  power or influence of family culture, and Turkish
  style still looks like a one mans show.

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• THE EFFECT OF FAMILY CULTURE ON FAMILY BUSINESS
  A RESEARCH ON FAMILY BUSINESS IN ISTANBUL CHAMBER
  OF COMMERCE
•  
• Canan Çetin
• Ata Özdemirci
• Erkan Taskiran
• Esra Dinç Özcan
• Marmara University, Turkey