Family Business Groups in India: A Resource-Based View of the Emerging Trends

Abstract

Following the lead of Habbershon and Williams (1999), this paper uses the resource-based view of firms to understand the strategic responses of nine family groups to the more liberalized environment in India's emerging economy. Using the concepts and empirical findings in the resource-based view (RBV) stream of literature, this manuscript offers six hypotheses related to the restructure of business portfolios, structural changes within organizations, and the induction of professional family and nonfamily members. I also identify five emerging trends in the responses and use them to test the hypotheses. Data from published sources indicates a high degree of support for the hypotheses. The manuscript also shows how the resource-based view of the firm provides an excellent theoretical framework for understanding and interpreting these responses and suggests directions for further research.

Innovation and Family Ownership: Empirical Evidence from India

“…Generally, in India, it has been difficult for traditional family businesses to hire professional managers for top positions in their firms because of the lack of an effective labor market that can mobilize human resources. Further, the Indian business culture has been described as, “autocratic, sycophantic, emphasizing personal loyalties rather than professionals” (Manikutty, :289). This is particularly true in emerging economies.…”

“…For instance, studies document that one-third of the S&P 500 (Anderson & Reeb, 2003) and Fortune 500 (Shleifer & Vishny, 1986) firms are family firms. In emerging markets, the large family-controlled business structure is far more common (Manikutty, 2000), and this has particularly significant effect on innovation because these large family firms possess the advantages in R&D investment and economies of scale that are required for successful innovation. India is a good example of this type of emerging market because approximately 70 percent of Indian firms are family-controlled and large family-controlled business is a driving force of innovation in India because of the absence of any other type of concentrated ownership (e.g., Piramal, 1996).…”

The role of family conglomerates in emerging markets: What Western companies should know

“…The cultural context is an important determinant of types of ownership and the leadership vision of the family owners. FCs can provide real value to Western companies because they incorporate firm-specific advantages, such as market knowledge, government relations, and network strength (Manikutty, 2000). Western companies entering an EM should conduct an extensive investigation in order to assess the capabilities of the local FCs, as well as the national cultural and economic environment.…”

Effective management of information systems function: an exploratory study of Indian organizations

“…While securing top management support for IS has been an issue even in developed countries (Lederer & Mendelow, 1988), it becomes even more challenging in developing countries, as the top management executives tend to come from the owner-families that run the business (Manikutty, 2000) who could lack adequate expertise, knowledge and background in IS and management-related areas. Moreover, due to the highly regulated environments, they could lack exposure to competitive dynamics and strategies that are prevalent in western nations.…”