Next Generation External Venturing Practices in Family Owned Businesses

• Date: 01 January 2021
• Author: Mattias Nordqvist,Marcela Ramírez‐Pasillas,Hans Lundberg
• DOI: http://doi.org/10.1111/joms.12566
• Published date: 01 January 2021

© 2020 The Authors. Journal of Management Studies published by Society for the Advancement of Management Studies

and John Wiley & Sons Ltd.

Next Generation External Venturing Practices in

Family Owned Businesses

Marcela Ramírez-Pasillasa, Hans Lundbergb and

Mattias Nordqvista,c

aCeFEO, Centre for Family Entrepreneurship and Ownership, Jönköping International Business School,

Jönköping University; bUniversidad Iberoamericana and School of Business and Economics, Linnaeus

University; cHouse of Innovation, Stockholm School of Economics

ABSTRACT Drawing on an Entrepreneurship as Practice (EaP) approach, this article examines how

next generation members in family owned businesses (FOBs) engage in external venturing. Our

study builds on longitudinal qualitative research in two Mexican FOBs where the next generation

launched ten ventures. It reveals five different practices of external venturing used by next genera-

tion family members: ‘obtaining family approval’, ‘bypassing family’, ‘family venture mimicking’,

‘jockeying in family’, and ‘jockeying around family’. The five practices are combined into three

routes for external venturing: ‘imitating the family business’, ‘splitting the family business’, and ‘sur-

passing the family business’. Building on notions from Michel de Certeau’s practice theory, this study

contributes to theorizing the five practices as ways of operating and the routes as modes of sensing

to better understand how next generation family members deal with settings featured by dominant

orders within the family and the FOB in their attempts to originate and launch their new ventures.

Keywords: corporate entrepreneurship, emerging economy, entrepreneurship as practice,

external venturing, family business, next generation, ownership, practice, Mexico

INTRODUCTION

Research on corporate entrepreneurship in family owned businesses (FOBs) shows that

many businesses engage in new venturing activities to support family entrepreneur-

ial teams (Discua Cruz et al., 2013), maintain an entrepreneurial orientation among

the business family’s members from different generations (Kammerlander et al., 2015;

Journal of Man agement Studi es 58:1 January 2021

doi:10. 1111/j om s.1 25 66

Address for reprints: Marcela Ramírez-Pasillas, CeFEO, Centre for Family Entrepreneurship and Ownership,

Jönköping International Business School, Jönköping University, Jönköping, Sweden (marcela.ramirez-pasil-

las@ju.se).

This is an open access article under the terms of the Creat ive Commo ns Attri bution License, which per-

mits use, distribution and reproduction in any medium, provided the original work is properly cited.

64 M. Ramírez-Pasillas et al.

© 2020 The Authors. Journal of Management Studies published by Society for the Advancement of Management Studies

and John Wiley & Sons Ltd.

Minola et al., 2016; Zellweger et al., 2012), develop portfolio entrepreneurship (Sieger

et al., 2011), and nurture transgenerational entrepreneurship (Habbershon et al., 2010;

Jaskiewicz et al., 2015). However, detailed knowledge about venturing as a form of cor-

porate entrepreneurship in FOBs is still lacking (e.g., Bettinelli et al., 2017; Kellermanns

and Eddleston, 2006; Marchisio et al., 2010; Randerson et al., 2015), in particular, if we

direct our attention to how next generation family members with a point of departure

from the family’s original business relate and interact with other family members to ad-

vance their new ventures.

Research has shown that next generation family members engage in entrepreneurial

activities (Cruz and Nordqvist, 2012) and have motivations and ambitions of becoming

more autonomous (Akther, 2016). However, literature on venturing concentrates mostly

on internal venturing as a way of deliberately growing established FOBs and building

their entrepreneurial legacy (e.g., Barbera et al., 2018; Jaskiewicz et al., 2015). Scholars

have paid much less attention to how members of the next generation in younger FOBs

with a less deliberate approach to establishing legacies and growing an existing FOB,

draw on practices to create their own external ventures (Aldrich and Cliff, 2003; Nordqvist

and Melin, 2010). Investigating this gap in literature is important since we lack knowl-

edge about how family relations and interactions influence external venturing (Chua

et al., 2004; Steier, 2007) and, in particular, in what ways next generation family mem-

bers draw on practices as they relate to family members and the original FOB to support

their external venturing (e.g., Discua Cruz et al., 2012; Kellermanns et al., 2008). At the

same time, we also know that external venturing among next generation members in

business families is common and contributes to entrepreneurial outcomes and activities

(Chua et al., 2011; Steier, 2007).

The purpose of this article is to deepen our understanding of corporate entrepreneur-

ship in FOBs by examining how next generation members in FOBs engage in external

venturing. Our guiding research question is: how and through what practices do next genera-

tion family members in FOBs engage in external venturing? Because our focus is on the role of

micro-level practices in use in external venturing, we draw on the Entrepreneurship as

Practice (EaP) approach. EaP literature focuses on the relational and processual nature of

entrepreneurial activities as they are performed by individuals in interactions and through

practices (e.g., Gartner et al., 2016; Johannisson, 2011; Steyaert, 2007). Specifically, we

rely on notions of de Certeau’s practice theory (1988/1984). He proposes that in a social

context, such as an organization or a family, individuals employ practices to find ways

of manipulating the circumstances to create opportunities for change. Empirically, our

study is based on longitudinal qualitative research of next generation external venturing

in two Mexican FOBs that together started ten ventures.

We contribute to corporate entrepreneurship literature with new insights regarding

how FOBs’ next generation members draw on practices at the micro-level to originate

and launch their own new external ventures while also associating them with the orig-

inal FOBs and their family members. When it comes to research on venturing (e.g.,

Barbera et al., 2018; Discua Cruz et al., 2013; Jaskiewicz et al., 2015; Marchisio et al.,

2010), our contribution is at the subtler relational interplay between different family

members and their external venturing vis-à-vis the existing business within the family’s

domain. In our study, this includes a better understanding of how next generation family

Next Generation External Venturing Practices in Family Owned Businesses 65

© 2020 The Authors. Journal of Management Studies published by Society for the Advancement of Management Studies

and John Wiley & Sons Ltd.

members interact with other family members and the original FOB to advance their

external ventures. Drawing on notions from de Certeau’s practice theory (1988/1984),

we also contribute to the EaP approach in entrepreneurship literature by introducing five

practices in use by individuals to accomplish their external ventures (i.e., obtaining family

approval, bypassing family, family venture mimicking, jockeying in family, and jockeying

around family). Our study further shows that the five practices are combined in three

external venturing routes (i.e., imitating, surpassing, and splitting the FOB). We outline

how these routes are general courses of action that next generation family members

employ to interact with other family members and to relate to the original FOB as they

launch their external ventures.

Next, we present our Guiding Theory and then elaborate on our Research Methods,

where we introduce our study’s empirical setting and the two FOB cases. Next, we pro-

vide the Findings of our study and a Discussion of the findings. The paper ends by

presenting its Limitations, Future Research Opportunities, and its main Contributions.

GUIDING THEORY

External Venturing in Family Owned Businesses

As a form of corporate entrepreneurship, venturing can either be internal or external

depending on where the idea and resources come from and if the venture is created and

positioned inside or outside an established business (Basu et al., 2016; Corbett et al.,

2013; Miles and Covin, 2002; Reimsbach and Hauschild, 2012; Titus Jr et al., 2017).

Our study focuses on external venturing. External venturing is important since a new

external venture can act as a boundary spanner between the new venture, its partners,

and the established firm (Keil et al., 2008) and it can create learning opportunities both

for the new venture and the established firm from which it originates (Keil, 2004).

Focusing on external venturing in FOBs, we define a FOB as a business where a family

owns a majority of the shares, family members serve in managerial positions, members

of more than one generation are involved in the business, and the family perceives the

business as a FOB (Westhead and Cowling, 1998). Even though corporate entrepreneur-

ship in FOBs encompasses both internal and external venturing (Bettinelli et al., 2017;

Sharma and Chrisman, 1999), research has so far mainly prioritized internal venturing.

One focus in literature is on the FOB’s growth motivations or life cycle stages (Minola

et al., 2016) where strategies and resources are considered cardinal (Greidanus, 2011).

The internal venturing literature investigates the degree of relatedness between the es-

tablished firm and the new internal venture, and the level of the venture’s autonomy

(Brumana et al., 2017). Another focus in literature is on the role of family entrepreneurial

teams (Discua Cruz et al., 2012) and entrepreneurial stewardship (Discua Cruz et al.,

2013) in launching new ventures. Some studies also focus on aligning individual and fam-

ily motivations and goals with succession processes via venturing (Greidanus and Märk,

2012; Marchisio et al., 2010).

A focus on external venturing is important as it can show the contributions that the

FOBs and their owner-families make to entrepreneurial activities, processes, and outcomes