Definition Of Family Business

Examples of well known international family-controlled companies include Lego in Denmark; Michelin in France; Kikkoman in Japan; Tetra Pak and IKEA in Sweden; and Estee Lauder in the US.

There is still no widely accepted definition of family business.

Recently, Klein, Astrachan, and Smyrnios (2002, 2005) proposed a radical shift in the way in which family firms should be regarded.  Rather than dichotomising enterprises, these academics ask: What makes a business a family business? Their answer is the ascendancy of the owning and/or managing family.

For Goehler (1993), family influence constitutes the family business. At the most basic level, what differentiates a family business from other profit seeking organisations is the family's influence on the decision making and operations of their firm (Chrisman, Chua & Zahra, 2003).

The work of Klein, Astrachan, and Smyrnios (2005) demonstrates that there are discrete and particular qualities or characteristics of a business that are more appropriately measured on a continuum with family and non-family firms at either end of a spectrum. The extent and manner of family involvement in, and influence on, an enterprise are regarded as key elements. 

According to Klein, Astrachan, and Smyrnios (2005), there are three important dimensions of family influence:

1. Power - which refers to dominance exercised through financing the business (e.g., shares held by the family) and through leading and/or controlling the business through management and/or governance participation by the family.
   
   
2. Experience - which refers to the knowledge families bring into their business and is defined by the generation in charge in management and ownership (more generations, more opportunity for relevant family memory).
   
   
3. Culture - which refers to values and commitment. Family commitment is seen in the overlap of business and family values.

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