Research Leads: Devin DeCiantis and Ivan Lansberg
Many of today’s iconic family enterprises were forged in the fires of catastrophic events like the Napoleonic Wars (e.g. Rothschilds), the Great Panic of 1873 (e.g. Kohler, Follett), WWI (e.g. BMW, Ford) and the Great Depression (e.g. JR Marriott, Brown Forman). Conditions in these volatile environments were similar in many respects to contemporary emerging and frontier markets – where weak institutions, imperfect markets, asymmetric information, and greater volatility are the norm. Both contexts shed light on our principal research questions regarding the resilience of family enterprises that thrive under conditions of chronically elevated risk. Moreover, the bulk of the world’s wealth and economic activity for the foreseeable future will be generated in the developing world (Atsmon et al, 2012), precisely where family enterprises represent the highest share of output (Björnberg et al, 2014). Consequently, studying the response of family enterprise systems to chronic market dysfunction and elevated risk can provide useful insights into organizational resilience and has significant implications for economic development.
With a grant from the Kellogg School of Management at Northwestern University, we are currently conducting research into corporate strategy and family enterprise under extreme adversity, and are hoping to discover fresh insights about how organizational systems respond to environmental risk of all sorts. Our research draws on literature about the role of institutional voids in shaping social and organizational behavior (e.g. Khanna & Palepu, 2010; Atsmon et al, 2012) as well as research on biological and ecological resilience in extreme environments (e.g. Pennisi, 1997, Walker & Salt, 2006). In particular, we borrow the following definition of resilience as “a measure of the persistence of systems and of their ability to absorb change and disturbance and still maintain the same relationships between populations or state variables” (Holling, 1973).
Our conceptual model of organizational resilience is based on decades of clinical experience advising family enterprises in these environments as well as confidential interviews with leaders from 30 successful multi-generational family companies operating in countries that score below the 50th percentile in the World Bank’s Political Stability and Absence of Violence Index. We have also assembled a database of publicly available information from over 200 family companies operating successfully in developing markets and intend to conduct a larger quantitative survey to test the validity of our emerging hypotheses. Our research suggests that family-controlled firms in these environments rely on six key elements of organizational resilience that position them for longevity, though this advantage doesn’t always translate into developed markets where trust is greater, institutions are stronger, and competition is fiercer (Khanna & Palepu, 2010).
To inform our perspective, we ask participants the following types of questions:
- How do family leaders think about the risks and opportunities associated with working in volatile regions around the world?
- How do you account for your historical resiliency?
- Are there any unique strategies or tactics you have developed to survive and thrive in these environments?
- Why did your family choose to endure such volatile conditions while others choose to leave?
- What risks and opportunities do you see in the future and what is the family doing to attend to these?
- How does the family maintain a sense of normalcy in the face of obvious market abnormality?
- In what ways does the family itself support the resilience of your enterprise?
At the end of the research process, we will share our results and any lessons learned from studying these companies that have operated so successfully in emerging markets. For our clients, this could take the form of a presentation during a family meeting, or a copy of our final white paper – whatever they would prefer.
Some of the greatest value of this research will be in exchanging stories of resilience and survival between family systems and across a variety of extreme political, economic and operational environments. Participating families will be encouraged to share their experience openly and transparently so that others can learn from them – and so they can learn from others. That said, we will absolutely respect the right of families to preserve their anonymity – particularly when their business or their personal security may be at risk.
If you are interested in participating in this research project, please let us know and we would be happy to schedule a mutually convenient time and location for the interview.