TRANSGENERATIONAL WEALTH ACCELERATION: FAMILY-INFLUENCED OWNERSHIP GROUPS AS AN ENTREPRENEURIAL UNIT OF ANALYSIS
Joseph Pistrui, Instituto de Empresa
Principal Topic
For the family form of enterprise entrepreneurial activities have become increasingly relevant as family based ownership groups recognize that the long-term viability of the “business” and the “family wealth” are being challenged as never before. The strategies and structures that might have been effective in stable and moderate velocity markets may constrain the long-run wealth creation of families in high velocity conditions. In response to the need for a new model of family-influenced wealth creation that accounts for the conditions in a dynamic marketplace, this paper presents the “enterprising families domain.” The paper examines the mindset and methods of enterprising families and differentiates them from normative family business behavior, thereby presenting a true nexus between entrepreneurial strategy and family wealth creation by positioning the family as a distinct unit of analysis for entrepreneurial behavior.
Method
The exploratory analysis was based on qualitative research investigating three Enterprising Families explicitly chosen to reflect the full spectrum of the form and function continuum. In-depth interviews and survey tools were used to examine the six theoretical dimensions of family-influenced entrepreneurship by gaining the perspective of multiple layers of ownership, directorship, and management from each group.
Results and Implications
This study confirms that families are developing strategies that have led to the creation of new business forms and functions under family control. Diversified holding companies, family offices, and other structures created to manage liquid family assets serve as tangible examples of these strategies. As a result, there is mounting pressure to extend the traditional notions of “family business” beyond that of the on-going management of a single production unit, and to fully recognize that family ownership groups represent a wealth creating economic unit well beyond the scope of any given asset class. Through this paper we are interested in setting the stage for a better theory of family-influenced wealth creation for those families who desire to seek superior rents from the market over long periods of time, what we refer to as transgenerational wealth acceleration.
CONTACT: Joseph Pistrui, Instituto de Empresa, Madrid, Spain 28006; (T) 34 91 745-3253; (F) 34 91 745-2147; joseph.pistrui@ie.edu
2002 Babson College. All Rights Reserved. Last Updated March 2003.