Internal Growth Barriers Of Small Swedish Family Business

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Internal Growth Barriers of Small

Swedish Family Business

Paper within: Bachelor Thesis in Business Administration

Authors: Rafah Alhasni, Negar Askari Tari

Tutor: Annika Hall

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Bachelor Thesis in Business Administration

Title: Internal Growth Barriers of Small Swedish Family Business Authors: Rafah Alhasni & Negar Askari Tari

Tutor: Annika Hall Date: 2021-05-24

Key terms: Family Business/es (FB/FBs), Non-family business/es (NFB/ NFBs), Growth, Internal Barriers of growth

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Abstract

Background:

The family business is one of Sweden’s most common business forms, making up 90% of all firms and institutions. Also, it accounts for more than a third of GDP. So, it plays a vital role in the economy in Sweden. However, most of the family businesses are relatively small.

Purpose:

This paper aims to explore and understand the internal growth barriers to the small Swedish family business.

Method:

A qualitative method inspired by the inductive approach was conducted through semi-structured interviews with five owners of small family businesses in Sweden. The data were analyzed through three steps of general analytical procedure, which are (1) data reduction, (2) data displays, (3) conclusion and verification.

Conclusion:

This study concludes several internal growth barriers that affect the small Swedish family business: having only revenue goals, long-term growth goals, no written form of goals, family-oriented goals, unawareness of owner to change the firm’s structure during the growth, owner’s tendency to control all activities, owner prefers to keep the business smaller to keep control, the owner has more than one role and task, shortage of competencies and skills, unqualified successors and family members are welcome, lack of robots and Knowledge,

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owners have another job, different tasks, and roles, family business offers services of high quality that need time, selecting the oldest son to take over regardless of his competencies, employees’ attitude towards obeying a female owner, successors have no interest in taking over, no successors, rivalry among siblings and conflict of their interest, high arguments, different goals of family members from different generations, employ the first non-family member employee, employed more people, fear that non-family employees are less interested in FB or that more employees lead to loss of control, not able to employ more people and finally risk-avoiding behaviour.

These barriers resulted in: hindering strategic changes in the needed time, innovation changes in the market obstructed, goals are forgotten, lack of competencies and skills, increases workload and challenges for the male manager, not responding to the market changes quickly, impossible to manage everything effectively, decrease control, not employing needed employees, responsibilities and roles on the owner increase, decrease integrity and harmony in the family, and finally, not developing the products, assisting more customers, and focusing on the growth. Consequently, lead to selling the firm and not keep it for a long time, slow growth, do no maximize potential growth, growth affected negatively, growth hindered, stay in the same size, avoid growth chances, or miss growth opportunities.

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Tables

Table 1: Search parameters in Frame of Reference... 9

Table 2: Summary of the internal growth barriers of family businesses worldwide...16

Table 3: Summary of samples...21

Table 4: Summary of studied cases...25

Table 5: Summary of the internal growth barriers of small Swedish family businesses...47

Table 6: Summary of the study's academic contributions...50

Figures Figure 1: Stages in qualitative data analysis...21

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1- Introduction

___________________________________________________________________________ In this section, the reader is introduced to the background of the topic, the problem

statement, the purpose of this study, and the research questions.

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1.1 Background

The economic policies played an important role in improving family businesses (FBs) in Sweden; since the mids-1980s, a set of regulations and restrictions have been refined or removed to increase the efficiency of the Swedish economy (Henrekson, 2017). Indeed, many obstacles for entrepreneurs and small family-owned firms were removed (Bjuggren et al., 2011). However, during the last decades, the economic policies of Sweden have been criticized for supporting large firms and providing fewer opportunities for the private sector in favor of the large public sector (Bjuggren et al., 2011).

FBs make significant contributions to the global economy as FBs represent the main form of firms worldwide (Randerson et al., 2016). FB in Sweden is a common form and accounts for more than a third of the GDP (Statistics Sweden [SCB], 2017). This significant share reflects the critical role FB plays in Sweden. In addition to the economic role, many FBs are suppliers of large international companies such as IKEA, Volvo, Electrolux. Also, there are good collaborations between FBs and other companies (Ljungkvist & Boers, 2016). Moreover, apart from the vital role of FBs in the country’s economic growth, some studies showed that the FB-dominated regions of the country have more resilience capacity and are more successful in overcoming structural economic crises (Ljungkvist & Boers, 2016).

No doubt that growth is one of the main challenges of any business. Generally, existing studies focused on differences between FB and non-family business (NFB) and analyzing the differences in behavior between FBs (Zellweger et al., 2010). Some studies suggest that FBs grow slower due to their more conservative strategies and behavior, risk aversion, and the emphasis on continuity rather than growth (Belenzon et al., 2016). In contrast, other studies indicate that FBs experience higher growth, especially when family members are involved in managing the business. Further, one more study shows that FBs have higher growth rates in terms of workers but lower sales growth rates (Cirillo et al., 2020). Therefore, identifying the barriers of FBs growth is at the center of attention (Marques et al., 2020) not only because the growth of a business is seen as a reflection of its success and especially as a source of continuity (Stenholm et al., 2016) but also because growth has a significant impact on the economy and society (European Commission, 2009).

Growth barriers of firms are the factors that limit or affect their performance negatively. These factors can be both internal and external (Karlsson, 2020). Internal barriers are linked to personality traits such as lack of experiences, competencies, training, different types of fear, further other plans, next-generation do not want to take over (Więcek-Janka et al., 2016), lack of managerial and entrepreneurial skills, lack of market information (Karlsson, 2020).

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External barriers are linked to market conditions (Gill & Biger, 2012), such as unfavorable institutions and competition (Karlsson, 2020). Both types of barriers are essential but, this paper will focus only on internal barriers to growth.

1.2 Problem

FB study field is relatively small, recent, and has just passed its first stage (Poza & Daugherty, 2014, as cited in Von-Lüttichau & Villmann, 2016), with the first study came back to only 1953 (Sharma et al., 2007, as cited in Randerson et al., 2016). Everything that followed until 1990 being essentially anecdotal. Therefore, it is natural that many gaps and areas need to be understood about FBs (Poza & Daugherty, 2014, as cited in Von-Lüttichau & Villmann, 2016). Chrisman et al. (2005) show that literature and previous studies gave only a tiny insight into how FB utilizes its unique resources and capabilities. So, it is not unusual that Astrachan commented that if there is a field that required more research and theory recognition, then it is the FB field (Astrachan, 2010). Although FB studies have grown over the last decade, there are increasing demands for deeper insights into the nature and workings of FB (Nordqvist et al., 2009). Previous studies have examined the practices that affect FB growth (Benavides Velasco et al., 2011). Financial returns and profit growth have been studied in several articles and meta-analyses as they are essential aspects of business success. However, the literature on FB growth is far less developed (Miroshnychenko et al., 2020), and the research stream is still underdeveloped (Benavides Velasco et al., 2011). Further, the efforts to achieve growth tend to be hampered because of the inability of managers to understand which factors affect their firms (Arrondo-García et al., 2016). Therefore, scholars in recent years seek better to understand FB specificities (Bjuggren, 2015).

In addition to this, previous studies focused a lot on large FBs even though in Sweden, small firms with less than 50 employees constitute approximately 96% of all firms (Gunnarsson, 2010). So, there is criticism that FB studies focus mainly on big and mid-sized firms, while few known about small FBs. Therefore, more studies are needed to examine the role of social, organizational, human, physical, and financial play in small FBs (Muskat & Zehrer, 2017). FBs face internal and external barriers that hinder their growth. Therefore, analyzing FBs’ growth barriers is critical to overcoming these barriers (Marques et al., 2020). According to a survey of empirical FB studies for over 300 variables examined (Yu et al., 2012), growth was very much neglected, and the relationship of growth with family influence was indeterminate (Evert et al., 2015). The family effect is a significant factor of FBs growth, as it changes the strategic behavior of the FBs, (Chua et al., 1999, as cited in Miroshnychenko et al., 2020), thereby influencing the business growth. Nevertheless, regrettably, that effect has been largely neglected (Evert et al., 2016, as cited in Miroshnychenko et al., 2020). Further, a recent global survey on FBs showed that 87% of the businesses in the sample have not yet adopted any conflict resolution system to resolving the family members’ conflicts, and 12% have used an external third-party resolution service (PwC, 2021). More research showed that only 16% of FBs worldwide have documented, discussed, and planned for succession in place (Von Lüttichau & Villmann, 2016). Also, only 56% of FBs have their family values, and the firm’s

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mission is explained in written form (PwC, 2021). As goals, conflicts, and succession are internal barriers to growth, the results of these studies indicate that more study about internal barriers to growth is needed.

It is essential to increase the research and theory in the FB field as FBs growth is vital for the long-term sustainability of FBs and real economic growth (European Commission, 2009). Because FBs make significant contributions to the economy in terms of gross national product and wealth generation (Feltham et al., 2005). Also, FBs offer stable jobs and continuous growth, which means that FBs provide economic stability (European Commission, 2009). Moreover, looking at the impact of FBs on society, the impact itself is influenced by the multiplicity, specificity, evolutions in the family as an institution, and the natural evolving of business (Randerson et al., 2016). That means FBs’ future will impact the futures of economies and societies.

This study provides an opportunity to increase the studies about the small FBs. Further, exploring the internal barriers of the growth would help Swedish FBs and the economic growth. Based on that, the knowledge produced will be exciting and helpful for FBs, and possible results will help small FBs in Sweden manage the internal barriers and improve the growth.

1.3 Purpose and Research Question

Most FBs in Sweden are small businesses compared to NFBs (Bjuggren et al., 2011). This fact piqued researchers’ interest. Therefore, this paper aims to explore and understand the internal growth barriers of small Swedish FBs.

Based on that, the questions of this study are:

RQ1: What are the internal growth barriers of small Swedish family businesses?

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2- Frame of Reference

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The purpose of this section is to provide the theoretical background, along with a review of existing literature on (1) family business, its definition, and its economic role in Sweden, (2) growth and the internal growth barriers of the family business, (3) gaps in literature. Further, presenting the method of the frame of reference.

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2.1 Method for the Frame of Reference

Researchers looked for relevant articles and studies that provide descriptions of FB, related quantitative statistics, and internal growth barriers to FB. There were few studies regarding the barriers to the growth of FB in Sweden. Therefore, researchers decided to look for the internal growth barriers to FB worldwide. As a result, researchers reached 50 articles; 30 were very helpful because they focused on the internal barriers and how they affected growth. Whereas the rest 20 of them were not very helpful because they focused on the external barriers, studied a single case study, studied barriers related to the geographical region it is located, or focused mainly on founding, governing, and success factors FB. The keywords, language, time period, and resources used are included in the following table.

Source: Authors’ data

Table 1: Search parameters in Frame of Reference

The literature review aimed to recognize, evaluate, and summarize the related literature on FB, growth of FB, and its internal barriers. Finally, the following frame of reference is the outcome of the search on the current literature.

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2.2 The Family Business (FB)

2.2.1 Definition of Family Business

The FB is a type of business established and managed by family members to pursue the vision or grow across the family generations of the family (Chua et al., 1999, as cited in Randerson et al., 2016). The size or type of the business, “public or privately held,” are not what distinguishes between family and NFB. FB could establish for different reasons, such as creating personal and family wealth, creating work opportunities for its members, creating emotional bonds, and so on (Hernández-Linares et al., 2017). What is meant by family members in FB are: parents and their children, another form is the married couples who had been previously married to other spouses with their children, also the cohabitating partners with and without children, the extended families including grandparents, same-sex partnerships, single-parent families, foster families including other legal guardianships, and finally adults linked by biological children (Randerson et al., 2016).

More than 90 definitions of FB (Bjuggren et al., 2011) make the distinction between FB and NFB difficult. However, most of the studies used the definition of the European Commission for FBs. Two reasons behind choosing this definition, not another definition (1) because the EU, multinational FB networks, and different organizations have adopted this definition which guarantees that it could be used continually in the future, (2) because it is comprehensive of European definitions of FBs (SCB, 2017).

According to this definition (European commission, 2009, as cited in SCB, 2017), a business of all sizes defined as a FB if:

1. At least one member of the family participates in the management of the company. 2. Control directly or indirectly the voting rights.

3. The majority voting rights of the company controlled by the natural persons who established the business, who acquired the business, or the parents, spouse, children, or children’s heirs.

4. Listed companies meet the standards for FB if the natural persons who established or acquired the company, including families and heirs, control at least 25 percent of the voting rights.

2.2.2 The Economics Role of Family Business in Sweden

FBs are the most common form of companies in Sweden, making up 90% of all firms and institutions (Andersson et al., 2017). In 2017, almost 410,000 FBs in Sweden were identified by Statistic Sweden (SCB, 2017).

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FBs are the most significant employer in Sweden and the economy’s largest source of income (SCB, 2017), and economic policy tends towards FBs to increase employment and growth due to their sizeable economic contribution (Bjuggren et al., 2013). FBs in Sweden make up everything from the smallest local producers to the biggest multinational businesses (Andersson et al., 2017). FBs are considered the rule of economic activity in Sweden as FBs generate around one-third of Swedish employment, 94% of all employment in micro-companies (SCB, 2017), and 1/12 of big firms (Andersson et al., 2017).

Lastly, FBs play an essential role during the economic crisis. Literature showed that the FB-dominated regions of the country have more resilience capacity and are more successful in overcoming structural economic crises (Ljungkvist & Boers, 2016). During the 2009 crisis, FBs reduced employment but not as much as NFBs. The financial crisis had the most significant effects among large NFBs (SCB, 2017). That highlights that FBs employ many people and are more resilient and prosperous in overcoming economic crises than NFBs.

2.3 Growth of Family Business

2.3.1 Definition of Growth

Stenholm et al. (2016) see that the firms’ growth can be evaluated. Whereas the theory of firm growth sees that defining and measuring the growth of businesses is a complex and multidimensional issue because different aspects need to be considered (Pittino et al., 2020). According to Seibold (2020), an increase in the size of a business is generally understood as growth. This can be indicated by increasing different aspects such as profit (Gancarczyk & Zabala-Iturriagagoitia, 2015), assets, sales, production, export, employees, and development quality and size of an object (Pittino et al., 2020).

Studies indicate that firms consider growth as financial if growth is shareholder wealth, sales growth, market share, accounting profitability, etc. Moreover, as non-financial if growth is reputation, society contributes, develops the employee, etc. (Greidanus & Märk, 2012). However, FBs’ perspectives on growth are multiple (Cano‑Rubio et al., 2021). For instance, growth could be wealth creation, enhancing reputation, etc. (Stenholm et al., 2016). However, the admitted concept among practitioners and scholars is that growth in size, asset, and revenue is an important performance measure of business success (Pittino et al., 2020).

2.3.2 Internal Barriers of Growth

The internal growth barriers of FBs in the reviewed literature are presented in the following categories:

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Family Dynamics

Family dynamics refer to behavioral interactions and relationships between family members (Cater & Young, 2016). Besides, in this context, it refers to the family’s tradition, values, and culture.

One study found that human capital “education, experience” is not enough for business growth in the founding stage (Cirillo et al., 2020). There should be social capital, “family support,” or financial capital beside it. Another study shows that emotional capital is a crucial source that drives growth. Therefore, communication and relationships between family members are essential for growth (Cirillo et al., 2020). Interpersonal trust between family members and their mutual understanding helps share their social networks in a trustworthy environment and continuously explore, gain and examine new information to keep their competitiveness in the market (Wang, 2016). However, types of relationships among family members can affect growth. Businesses run by spousal teams grow more than ones run by siblings. When spousal teams run the business, the level of conflicts will be lower, and the level of goal alignment will be greater because wife and husband are involved in an emotional relationship, they choose each other as a life partner before forming a work team that generates harmony and avoids rivalry within the business (Cirillo et al., 2020). Also, when interpersonal conflicts or intentions are very low, family firm managers can access trustable information at a lower cost and make more efficient decisions. However, frequent interactions of family members can lead to blind trust. Consequently, technical information provided by family members and non-inspected markets could mislead managers’ strategic decisions (Wang, 2016). As a result, communication and type of relationship affect growth. Therefore, interpersonal trust between family members is an essential factor that managers should encourage along with a stewardship culture to be successful in a dynamic environment (Wang, 2016).

On the other hand, in some FBs, tradition, values, culture has a role in influencing the growth of the business; for example, the oldest brother should be the manager and the younger should be the assistant regardless of the competence of both (Cater & Young, 2016). Another example is that the manager should be a male successor. Some studies indicate no equality between male and female successors in selecting, training, and transferring the power to them, and many FBs prefer to hand over their management to a male non-family member than their daughter (Kubíček & Machek, 2019). Moreover, if management were transferred to a female family member, others may resist her management style, making a succession unsuccessful and negatively affecting the firm growth (Kubíček & Machek, 2019).

Succession

Succession is the transfer of power, authority, capital, assets, contacts, and skills from one generation to the next (Eddleston et al., 2013). Studies indicate that only about one-third of FBs can transfer management to the second generation, and 10-15% of the second generation has survived to transfer management to the third generation (Fuad et al., 2019). One of the main elements of the growth in FBs is passing from procedures to successors. Therefore, succession has become an important problem to growth (Eddleston et al., 2013).

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Indeed, there are many reasons for ineffective succession in FBs. These can be because of the unwillingness of the founders and successors to change, lack of proper human capital, both specific and general, uneducated heirs, inappropriate transfer of tacit and implicit knowledge, etc. (Sardeshmukh & Corbett, 2011). Therefore, Succession planning is especially crucial for the continuity and success of firms at first-generation. Moreover, communication between generations, selecting and training the proper successor, and using management accounting to codify and classify knowledge are factors that help managers hand over the firm and knowledge to the next generation successfully (Hiebl, 2013). Research showed that only 16% of FBs worldwide have documented, discussed, and planned for succession in place (Von Lüttichau & Villmann, 2016).

On the other hand, one of the most common issues that influence the survival and growth of FBs is the lack of family members or successors that can take over. A study showed that the main reason that small FBs do not remain in the long run in Sweden is that they do not want the growth. They were not interested in surviving in the long term as they do not have relatives to take over or think that the next generation should find their way (Gunnarsson, 2010). No one will take care of the FB like the family. Maybe that is why a low rate of transferring the business to non-family members in Sweden compared to other European countries (Cater & Young, 2016). Many researchers have expressed that the responsibility for securing succession holds mainly on the owners and founders of FBs (Więcek-Janka et al., 2016). So, if there were no successor or successor does not want to take over, the long-term survival and growth were unlikely (Gunnarsson, 2010).

Innovation and Competences

Lack of talent and expertise affects growth negatively (Cirillo et al., 2020). Some FBs employ family members regardless of their qualifications (Cater & Young, 2016). A study indicates that 37% of FBs cite that their biggest challenge to growth and success is the war for talent (KPGM, 2016). The business’s success within the succession process is linked to the following generations’ characteristics, competencies, and skills (Więcek-Janka et al., 2016). Some of the FBs’ owners said that today’s youth lack motivation, passion, tenacity, used to a certain comfort, and less attached to the business, which affects growth (KPGM, 2016). Therefore, education and external experiences of successors are some of the factors that create the ability to take and utilizing management concepts in running the business. That also helps develop new skills, ideas, and trends in management and discover new opportunities and, consequently, better performance and firm growth (Sardeshmukh & Corbett, 2011).

Besides competencies, the results of a study showed that FBs could achieve growth when geared to innovate. An innovative orientation is one way to improve the performance and growth of the business, notably the actions that lead to new product innovation (Stenholm et al., 2016). Also, a study found that there is a positive connection between innovation orientation and business growth in the FBs but not in the NFBs. However, NFBs are more innovative than FBs. Therefore, FBs have been criticized for being unwilling to innovate (Stenholm et al., 2016). That could be due to the threat that FBs sense over their social, economic, and emotional wealth by involving innovative activities (Basco & Bartkevicˇiute, 2016). However, FBs have to develop their innovative, dynamic, and adaptive capabilities to survive in the rapidly changing environment (Wang, 2016). Also, because the results of recent

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studies of FBs performing well suggested that FBs innovate, that affects FBs performance positively (Stenholm et al., 2016).

Goals and Strategies

The common goals of a business are survival, profit, and growth. Although FBs, like other businesses, have been formed to be long-lasting and continue business successfully (Tobak et al., 2018). Some FBs avoid growth because by growing the size of FBs, they split up, collapse, are taken over, or change to NFBs (Hiebl, 2013). Besides, growth goals may threaten the family’s need for liquidity control over the business; therefore, some FBs choose not to grow (Cirillo et al., 2020). Further, some FBs goals might not be performance-oriented and may be oriented for more family goals such as enhancing family welfare (Cater & Young, 2016). That could affect growth, as some studies show that growth hinders when family goals replace business goals (Cirillo et al., 2020).

FBs have a long-run perspective, adopt conservative behavior and prefer long-run survival and growth rather than short-term success (Bjuggren et al., 2013). However, their conservative characteristics and preference for preserving wealth can hinder strategic changes in the needed time (Eddleston et al., 2013) thus do not maximize the potential growth (Cater & Young, 2016) as stability hinders growth (KPGM, 2016). Earlier studies suggested that FBs usually grow slower than the NFBs, although FBs increase the number of employees more than NFBs. That can be explained by the long-term orientation of FBs that affects the growth (Moreno-Menéndez & Casillas, 2021).

Management

In FBs, two critical components should be managed carefully; these two components are the family and business sides. The family sides often tend to be full of emotion that can sometimes be detrimental to the business but could be the opposite; for example, the family could save the business during the financial crisis using personal savings. However, although the business side is vital for firm survival, it is not acceptable to sacrifice the family for the business (Cater & Young, 2016). Therefore, effective management is needed.

Leaders’ vision and planning may enhance small FBs growth; therefore, effective management in FB is needed for growth and expansion (Cater & Young, 2016). Studies indicate that FBs have different expectations for managing the firm at different generational levels. In the first-generation firms, management may act very cautiously to protect the family wealth, strategically planning to decrease individual biases, and increase the flow of different information and critical thinking. Hence, the first-generation firms have two barriers; high dependency on the founder’s abilities and expertise and the founder’s tendency to have control. In the second-generation rivalry among siblings and conflict of interest and values between them increases more than ever (Eddleston et al., 2013).

One of the attitudes that constrain the growth of FBs is that by growing the firm, the control of the family decreases (Basco & Bartkevicˇiute, 2016). Also, one of the weaknesses of small FBs is that the firm’s owner usually manages or controls all activities. This structural drawback, along with less access to small FB resources, leads to the fact that they act less

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strategically and are more operational-oriented (Muskat & Zehrer, 2017). Consequently, some FBs think that external managers and the capacity to bring qualified non-family managers are an important way to grow. According to one report based on the reflections of FBs’ owners in eight European countries, 85% of FBs agree that outside managers are essential for the company’s success, and 74% have already given non-family members managerial roles (KPGM, 2016).

Risk-Taking

Risk-taken is an important subject, and FBs have been characterized for long as conservative regarding risk-taking behavior, the risk of losing family wealth that took a long time to create may hinder family leaders from engaging in ventures considered to be risky (Cater & Young, 2016). Therefore, FBs are more risk-averse and hold lower leverage.

Bjuggren et al. (2013) mentioned that FBs respond slowly to the changes in market demand due to risk-avoiding behavior. Also, the safer thinking and risk-avoiding of FBs lead to sacrificing some short-term earnings to be in the secure zone, but risk-avoiding could hinder growth (KPGM, 2016). However, one study found that chosen growth paths of employment and sales are significantly less volatile, which helps sustain employment stability during recessions (Bjuggren et al., 2013). However, one study argues that risk-avoiding behavior could ultimately adversely influence growth (Bjuggren et al., 2013). Further, Cater & Young (2016) mentioned that over time some FBs become more risk averse. Also, risk-taking becomes negatively associated with performance because risk-taking may not be firmly trained in systematic and formal procedures of the business (Cater & Young, 2016). According to that Bjuggren et al. (2013) suggest that FBs, in general, are smaller and experiencing lower growth. Also, when a family leaves management, the business size increases significantly.

Moreover, earlier research suggests that there is a positive correlation between business growth and risk-taking. This association was found among NFBs, but this might not be the case in FBs, perhaps due to the enormous concentration of ownership, the family governance, or even because FBs are more interested in ensuring continuity and wealth creation in a long way than achieving fast growth through a risky action (Stenholm et al., 2016). However, according to Stenholm et al. (2016), studies have conflicting results: (1) one study found that taking is not affiliated with the growth of FBs, (2) some other studies found that taking does not affect FBs’ growth even if it affects the NFBs, (3) one more found that risk-taking is common but related to the performance of FBs negatively. Further, Cater & Young (2016) found that moderate risk-taking may enhance small FBs’ growth.

Conflict

No doubt that the entwinement of the family and business systems opens up space for various disagreements and conflicts. Because when personal family issues are mixed with business issues, conflicts appear and are often sustained over a long time (Kubíček & Machek, 2020). Conflict in FBs may be either substantive “task-based” or affective “relational and emotion-based.” Conflict may appear when the retiring generation does not want to retire and still

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wants to manage after the following generation has assumed the leadership of the business (Cater & Young, 2016). Tension and conflicts among family and business may hinder growth when family members may not have the same goals. The trade-off between investing profits in growth or increasing family liquidity by dividends leads to the animosity that prevents business goals. Therefore, an external manager is necessary for firm growth in such cases (Cirillo et al., 2020). Also, family stress exposure, such as the death of a spouse, divorce, and marital separation, negatively affects business growth.

FBs are full of conflict in three areas: processes, tasks, and relationships (Cater & Young, 2016). For example, disputes between the members of the family, marital conflicts, or even arguments about the division of family wealth may have a negative consequence on the business (Kubíček & Machek, 2020). One study showed that in some FBs, conflict was sometimes severe enough to interfere with the management of the business and, in some cases, led to the closing of the business (Cater & Young, 2016). So, the absence of conflicts and the presence of harmony positively affect growth (Cirillo et al., 2020).

In summary, the internal growth barriers are:

Source: Made by authors based on the reviewed literature

Table 2: Summary of the internal growth barriers of family businesses worldwide

2.4 Gaps in Literature

The results among reviewed literature about internal growth barriers were conflicting. One study found that risk-taking is not affiliated with the growth of FBs (Stenholm et al., 2016). In

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contrast, another study found that moderate risk-taking may enhance small FBs’ growth (Cater & Young, 2016). Also, one study mentioned that owners see that an external manager and the capacity to bring qualified non-family managers are essential to growing (KPGM, 2016). While in other studies, owners see that no one will take care of the FB like the family (Cater & Young, 2016).

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3-

Methodology & Method

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In this section, the reader will be introduced to three categories: Firstly, the research paradigm & approach. Secondly, the research design provides in-depth knowledge about the data collection, the interview process, sample procedure, and data analysis. Thirdly, ethical considerations & trustworthiness including confirmability, transferability, dependability, and credibility.

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3.1 Research Paradigm and Approach

The paradigm or philosophical framework of the study is interpretivism. Interpretivism assumes that social reality is subjective and can be interpreted according to the context of investigation (Collis & Hussey, 2014). The purpose of the study is to reach an interpretive understanding of the internal growth barriers of the selected FBs within their context; thus, this is an interpretivism paradigm. Indeed, researchers interacted with the firms’ CEOs through interviews to understand what is happening in the firm's context.

In this paradigm, the qualitative method seeks to describe, translate, interpret, and get the meaning of the terms and not the frequency of accruing phenomenon (Van Maanen, 1983). Therefore, by interpreting the qualitative data from interviews, this study investigates the internal growth barriers in small Swedish FBs to answer the research questions in section 1.3. The research approach of this study is inspired by the inductive approach. Indeed, it is not purely inductive research. Since the inductive approach is used when there is no theory, and it is needed to develop theory from empirical reality (Collis & Hussey, 2014). Nevertheless, researchers have started based on some literature and theories to develop the methodology in this study. However, it is not also deductive research since the deductive approach is used when theories are developed and tested by empirical observation (Collis & Hussey, 2014). However, in this study, researchers have explored theories and did not test them.

Indeed, the nature of the research questions is exploratory, and researchers collect data through interviews and explore the existed theories to reach patterns and a broader understanding of internal growth barriers in small Swedish FBs.

3.2 Research Design

The design format of this study is a multiple case study to compare cases and understand the similarities and differences between them. In this way, selecting case studies is a method that helps to explore the phenomenon within a real-life context and to acquire in-depth knowledge about it, especially when the boundary between context and phenomenon is not clear (Yin,

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2009). The case studies in this research are the five small Swedish FBs that were chosen purposefully, and the phenomenon is the internal growth barriers. Multiple case studies give the opportunity to understand the internal growth barriers across the different firms and compare the findings and reach patterns.

The nature of the research design is qualitative and exploratory. In this paper, multiple case studies have been chosen, semi-structured interviews were conducted to collect data, and the general analytical procedure was used to analyze data. In the coming sections, the rationale of methods choice will be explained in-depth.

3.2.1 Method to Collect the Data

In this study, the qualitative method’s technics and approaches are used to collect and analyze data to reach findings and answer the research questions. In this regard, a small sample is selected to gain in-depth data regarding the discussed topic. The qualitative techniques that researchers used in collecting data, selecting samples, and analyzing data are explained elaborately in the following sub-sections.

3.2.2 Semi-Structured Interviews

Researchers used the interview to collect the primary data as it is an effective method to be used under an interpretivist paradigm to collect facts and understand the participants’ opinions, attitudes, behaviors, or experiences (Rowley, 2012). Indeed, this method of collecting data persuade participants to share a rich explanation of the phenomenon under study, whereas it leaves analysis or interpretation to the researcher (DiCicco-Bloom & Crabtree, 2006).

In semi-structured interviews, some questions are prepared by researchers to persuade the participant to talk about the intended topic of the study. However, if the interviewee’s responses were not covering the topic, the researcher can ask and probe more questions to explore the topic and understand the provided answer thoroughly (Collis & Hussey, 2014). In this method, researchers can follow no order to ask questions and skip the questions their answers were provided in previous questions’ responses (Collis & Hussey, 2014). Therefore, it is a proper way to understand the context interviewees are experiencing.

In this study, the primary data were collected from the semi-structured interviews with open-ended and summary questions regarding interviewees’ perspectives on the internal growth barriers of their firms. In this regard, open-ended questions that need long and developed answers and summary questions make it possible for the interviewers to ask about what they think regards the issue, according to literature review results, and in return find what interviewees think about it. Therefore, it helps link both types of questions’ answers and collect more valid data (Kvale, 2011). So, to keep the integrity in the study, semi-structured

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interviews included seven categories from the literature reviews. However, in the beginning, researchers let participants express their internal barriers first, not to affect their thoughts with the predetermined barriers.

Under the influence of the pandemic, all the interviews were conducted online. However, to make participants more comfortable, researchers made the participant choose the online meeting application they prefer, more familiar with, and can access. In all the samples, the Zoom application was selected; thus, interviews were conducted through this application. After checking the quality of connections at the beginning of the interviews, researchers asked for permission to record the meeting. Then, to provide a comfortable environment, researchers started by introducing themselves and the topic. After that, participants introduced themselves. Later, researchers started with questions regarding the company’s history or background to get the interviewee talking. Then, interviewees were asked about their perspective of the firm’s growth.

Further, probe questions during the interview were asked to keep the interviewees on the intended topic, thus gaining the needed data about the barriers that firms had experienced or struggled. Researchers made sure to cover the defined categories to ensure that the collected data is related to existing studies. Indeed, most of the prepared questions were answered during the interviews. Further, participants were allowed to talk without any interruption. Nevertheless, some questions were asked to have more meaning in the answers.

3.2.3 Sample Procedure

Samples for the study were selected by the method of judgmental or purposive sampling. In this method, researchers select the participants based on their experience of the phenomenon under the study (Collis & Hussey, 2014). In this study, the owners or CEOs of small FBs were the target participants as they are more involved in the firm’s control, the most interested in controlling growth indicators, and are most aware of the internal growth barriers of the firm under their control. Then, to select the small FBs and to make sure the collected data is credible and representative of internal growth barriers of the firms, researchers have chosen samples in the frame of these criteria: (1) the sample should be a family firm that, according to Bjuggren et al. (2011) there should be at least one family member involved in the governance of the firm formally, (2) the sample should be a small family firm that, according to Patel et al. (2012), small FBs in the EU belong to the categories of firms with less than 250 employees, (3) the sample should be a small family firm with more than ten years age of activity because these firms are not at the beginning of their business journey and have faced enough challenges to be familiar with growth barriers.

Qualified samples were found by searching in researchers’ networks, friends’ networks, and LinkedIn website. At this level, researchers collected data from Allabolag.se and the firms’ websites to make sure the contacted FBs meet the defined criteria. FBs were contacted by email, phone call, and text message to participate in the study. As a result, five FBs out of 21 accepted to contribute to the study.

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Although, no specific criteria on the amount of revenue or turnover, generation of the business, type of industry, or cities were defined. The samples cover a wide range of aspects that are enough to explore and understand the internal growth barriers of FBs: different generations, different types of relationships between owners, a good range of employees’ numbers, a wide range of experiences’ years, different industries and locations. The final samples are summarized in the following table. Still, to keep the anonymity of the firms, a sample from A-E is allocated to each firm, and firms’ locations are not mentioned.

Source: Made by authors based on the firms’ information. Table 3: Summary of samples

3.2.4 Data Analyzing and Coding Structure.

The data are analyzed through three steps of general analytical procedure, which are (1) data will be reduced, (2) data will be displayed, (3) conclusions will be drawn, and the validity of the conclusions will be verified. Collecting and analyzing data will be carried out simultaneously to understand the themes or the patterns identified by the phenomenon from the interviewee’s view (Fuad et al., 2019).

Figure 1 - stages in qualitative data analysis (Collis & Hussey, 2014, pp. 158).

Before analyzing, data were transcript from the records to written texts. The transcription will be helpful and valuable as researchers can check and recheck the process and ensure compliance with data conformability criteria (Fuad et al., 2019). Transcription will also help researchers identify the critical answers that have not been obtained, show the conflicting

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answers, and help to find exciting themes that can be developed while doing the following interview.

Then the first analysis stage began with reducing the data. Believing that the vital phase for the accuracy of the data analysis is the reducing data phase as it includes following, directing, organizing, and clarifying the themes that have been obtained. Also, it has a role in verifying the conclusions and developing critical theories (Fuad et al., 2019). The data reduction requires a sensitive thought process as it is based on keeping needed data to get the valid themes.

Then the second stage was coding the data. Transcription texts were reviewed again to identify specific categories and themes that appear according to the research problems. Codes were generated by each researcher separately. Then codes were combined to be reduced; for example, codes with the same meaning were combined in one code considering the repetition. Then codes were organized under several categories that show what the internal barriers of growth are. Categories were predetermined and undetermined. Because some were built on the reviewed literature, and some were new as at the beginning of the interview’s participants had the chance to reflect freely on their internal growth barriers. Then a semantic content analysis followed the coding procedure. Here researchers identified concepts and upcoming themes within the explicit meanings of the data. However, in certain sections of the data, an exception to the semantic approach was given. For example, the interviewee talked unambiguously regarding a specific barrier, “lack of marketing skills,” without explicitly stating that this barrier belongs to competencies. In these instances, the categories, concepts, and themes were generated by implied meaning. The categories of each researcher were combined based on the similarity and relation. After that, themes were combined and organized under the categories. Each firm was analyzed separately, then the firms’ analyses were combined according to similarities or differences in the last step. This helped select, simplify, and reorganize the data and then summarized and displayed it to draw conclusions (Miles & Hubermann, 1994).

Then at the last stage, conclusions were drawn from the final analysis that includes all firms. Lastly, to get valid conclusions, results were verified by comparing empirical findings and analysis. The aim was to draw reliable conclusions about the internal growth barriers to small Swedish FB.

3. 3 Ethical Considerations and Trustworthiness

The ethical term in research refers to the research method performance and how results have been concluded (Collis & Hussey, 2014). The study was done according to Bryman & Bell’s (2007) ethical principles list. First, when inviting firms for an interview, researchers informed the interviewees that the participation is voluntary, so all interviewees participate in the study voluntarily (Saunders et al., 2016). In each interview, permission to record the interview was asked, and interviewees’ anonymity was offered to protect their data. Also, researchers informed them who has the right to access the data. Besides, a consent form was sent to all interviewees to check and sign. The consent forms had information about data processing for

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the interviewees. Moreover, the study’s purpose was explained, and that the aim is looking for patterns of the internal barriers in FBs, not the faults that firms did or doing.

Further, to evaluate the interpretive study’s ethics, Lincoln & Guba (1985) suggested four criteria to estimate; first is confirmability, second is transferability, third is dependability, and finally credibility. These four criteria will be explained in the section below.

3.3.1 Confirmability

To achieve confirmability in this paper, audits and data triangulation was conducted (Krefting, 1991). To assess the neutrality of the collected data and carried out the audits, the researchers met the tutor through five seminars during the study period to explain and discuss reasons for the decisions. Besides, investigator triangulation was used in the coding, themes, and analysis process.

3.3.2 Transferability

The transferability is linked pretty much to the situation, which means if other researchers wanted to do this study again, the context of the study should be highly similar for occurring the transference of findings (Lincoln & Guba, 1985). The transferability of results may be difficult as qualitative studies typically are based on small sample sizes in particular contexts. Therefore, researchers mentioned the details of their samples and the different processes and contexts. However, assessing the transferability is in the future researchers’ hands (Lincoln & Guba, 1985).

3.3.3 Dependability

The dependability is related if the research process is systematic, well accurate, and documented (Collis & Hussey, 2014). The triangulation, recording, transcribing of all interviews, systematically discussing themes, and analyzing the results increased the dependability of this paper. Besides, along with the study, the peer-examination of fellow students and tutors who were familiar with the qualitative studies approach was a reoccurring procedure. This procedure ensures that researchers are honest and continue reflecting on the results (Krefting, 1991).

3.3.4 Credibility

The interpretivism stand of social reality is a subjective manner; therefore, the study’s credibility is related to the amount that readers find the study truthful (Bryman & Bell, 2007).

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To increase the study credibility: the questions were reframing in the interviews to check the consistency of answers, which increased the possibility of getting truthful answers based on personal experience (Krefting, 1991). More questions were asked as “Do you mean.?” and “Is that what you mean?” to ensure that understanding was correct. Besides, the use of data triangulation would strengthen the credibility of the results. Moreover, the comprehensive sample was provided through the multiple case studies approach, so the results were more supported across data collection.

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4- Empirical Findings

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In this chapter, the empirical finding of the study is presented, and the experiences of the five interviewed FBs’ owners are divided into ten identified categories: growth, succession, goals and strategies, innovation and competencies, employment, time, management, risk-taking, conflict, and values. The empirical findings start with presenting related information of each firm. Further, in each sub-chapter, quotations from the interviews are used to exemplify and enforce the findings.

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4.1 Related Information About the Case Studies.

Source: Made by authors based on the firms’ data Table 4: Summery of the studied cases

4.2 Growth

The common meaning of growth for all the FBs was an increase in revenue.

“Growth basically, it is a revenue.”- C

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All the FBs believed that revenue increases lead to an increase in all the other growth aspects. Generally, the growth for the FBs was an increase in revenue, employees, products, projects, sales, quality, size, effectiveness, offer high quality of services, and building strong management.

“Ramp up our revenue and our profits to be able to do those things we wanted to invest in things, we wanted to learn and because we wanted to hire.”- A

“Grow to a size where the revenue makes it possible to have a strong management.”- E

Three FBs felt satisfied with their growth. However, all the FBs wanted to grow in revenue, although they were satisfied with the firm’s growth or not.

“We are striving for growth [...] we had a very good growth.”- C “We want to grow. We had a very good growth.”- D

“I would like for it to grow.”- E

Some FBs’ owners believed that growth affects their control of the firm negatively. Therefore, one of the FBs wanted to stay in size to keep control of the firm.

“The bigger you are, the less you can control.”- A

“We would be happy if we could stay in the size, where we could run it ourselves.”- B

On the other hand, some FBs expressed that growth is significant as it is difficult to run a business with just the same size unless it is tiny. Still, by time business growth becomes complex, and that can be an obstacle to growth. Therefore, one FB has been sold after growing.

“It is difficult to run a company just have the same size [...] that if you grow, things become more complex, and complexity itself can be an obstacle to growth.”- C

“Then the company became too big for her to have the time to take care of herself.”- C

4.3 Succession

Four of the firms had no succession plan, and only one had a conversational-based plan where tasks were planned, and successors gained the needed competencies.

“We working with kind of a succession plan, but it is more conversational based.”- A “There are not, no such plans.”- B

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Indeed, there was no succession plan because there was no purpose to stay for the long-term or no needed to train successors, as they could get the knowledge from the employees or the previous generation or because the firm was still tiny.

“So, the plan was not really to grow.”- C

“Is not necessary; there are a lot of good people you can work with around you.”- D “We have not done nothing about it since we see it as pretty far ahead.”- B

Moreover, successors had no interest in taking over for several reasons (1) not interested in management and being a CEO (2) young successor (3) successors had another plan “study or work in another business field” (4) because the FB was small.

“Neither of them had that interest [...] other plans for her professional life, and our son was not really interested in becoming a manager.”- C

“She has never been interested [...] she wanted to go her own way.”- D

“Since the size of the company is small, at present, it is the second generation would not be that eager to take over.”- B

Succession succussed in two FBs because some of the second generations were interested in taking over and the good communication between generations.

“I was always interested.”- D

“Now our parents, they are still very well informed on how we think and how we want to run the company.”- A

Even with no interested successors, FBs wanted to grow and had solutions for the future of FB, for example, selling FB or have external CEO.

“I think it is better to sell it, to be honest, than not having anyone on the family working.”- D “It depends on if any of the children are interested in the future or if we are going to have a CEO outside the family.”- E

However, succession was a barrier to keep one of the FBs.

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4.4 Goals and Strategies

Two FBs had growth goals, and strategies and three did not have any except revenue goals.

“We have a revenue goal [...] and some other financial goals.”- A “We did not set any specific growth plan.”- B

“We did not really talk about goals.”- C

Growth goals were different among the studied FBs. For example, the goals were to increase the revenue, size, employees, products, or projects. However, three FBs did not want to increase the size or number of employees not to lose control over the firm.

“We have to have a revenue goal [...] also, some other financial goals.”- A “We just wanted to increase our size of the business.”- C

“Breaking even and developing the quality of the service we provide.”- E

The strategies to reach these goals were (1) improve performance, (2) develop the quality of services, and (3) be more effective.

“If we can keep a good quality - growth is a side effect of that.”- E

“Our main goal is not to increase the number of workers here; we want to be more effective all the time.”- D

Some goals were short-term for one year, and others were long-term for three to ten years.

“We have for each year up to 2025 [...] we have strategies for that. And also, long term goals.”- A

“We have to say a long goal.”- D

Some of the FBs did not have the goals in the written form. Besides, one of the FBs believed that goals should be written to be remembered.

“They are kind of regularly discussed but not in the written format.”- B “We have it in our ESL system.”- D

“We want to be remembered for doing things in a certain way.”- A

Two firms had business-oriented goals, and three firms had more family-oriented goals, for example, work from home, get enough salary, assist one of the family members. However, owners had the same goals, and that was positive for growth.

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“We started the company because we wanted to have my wife to have an opportunity to work from home.”- C

“We started the company to make sure our son got good assistance.”- E

“We just wanted to increase the size of the business so that my wife could actually take out a salary.”- C

4.5 Innovation and Competences

Competences and skills were essential in different work positions and had a role in the growth. However, it was different from a FB to another. Some had a lack of skills to organize employees, key competent employees, marketing specialist, very knowledgeable person, persons with managerial skills, and intelligent person for the customer’s service. So, those shortages affected the growth of firms negatively.

“We lack marketing skills. As such skills are more and more needed.”- B “We needed good managerial skills for those types of jobs.”- C

“I did not have the capability to answer all the questions from the customers.”- C

“With the limited business margin in our business, it can be difficult to recruit some key competencies that are needed for growth.”- E

Indeed, the priority of FBs when employing was to employ competent persons.

“I will say as it is as present, we will look at the skills. First and foremost, instead of family relationships.”- B

“We would not employ a family member just because it is a family member; we need to employ who is competent at their job family or not.”- A

Moreover, some of the FBs’ owners started to gain skills by learning, education, training courses, seminars, the internet, and books.

“Started reading and go into seminars and so we learned.”- C

As a result, successors needed to have marketing skills, technical skills, and understand the core of the business. However, most of the FBs’ owners believed that successors need to be interested in the businesses before having these skills.

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“They need to understand the core business. They have the competence, but it is their choice.”- E

In one of the FBs, the successor gained the needed competence before having the CEO position.

“I tried almost every position in the company before we took the final decision of doing the succession.”- A

However, other FBs expressed that unqualified successors and family members are welcome to work with no skills as the FB could train them for the positions. One firm sees that family members should have the interest and intention to learn.

“It was more trial and error.”- A

“We would have of course like to have them and train them.”- C

“That would definitely be interesting to get them on board and train them into the position.”- B

“[...] and learned from my father and by working, learning by doing.”- D

“[...] are always welcome to come here and work of course. She does not need so to speak any qualifications for that. And especially sort of the other than I need to know that she is interested, she wants to learn.”- D

Moreover, all the FBs believed that innovation is an essential driver of firms’ growth. Although two firms were innovative with good employees who had very good innovation skills, all the firms believed they need to be more innovative to grow.

“Need to be good on innovation, because otherwise, you do not have any business.”- D “We always need to innovate; we always need to try to make better.”- A

“We are very good with innovation [...] have very good employees here who are also very good in innovation [...] we need to be better, and we need to be more efficient. We do not have any robots.”- D

As a result, the firms did not refer to a specific product or process innovation that affected the firm’s growth. However, in one of the firms, product innovation had a massive role in the firm’s growth. Nevertheless, most of the FBs believed that to be better, grow, and keep pace with market changes, innovation is necessary. Indeed, they did it by developing products regularly, innovating more, making things better, increasing the quality and range of products, offering more innovative and better products to customers, and removing barriers of lack of knowledge and equipment.

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“[...] you have to innovate all the time, so every time there is a new [...] we need to innovate the new adapter.”- D

“That would probably be good. Because then, for instance, we could spend more time on focusing on making the firm grow.”- B

“We have been always striving to increase to have a very good quality offering for our customers. I think that has been part of the growth.”- C

“It is machine capacity; it is more production equipment, it is always kind of barrier to the knowledge point, you can always do things better faster.”- A

4.6 Employment

One of the FBs’ growth barriers was the difficulty related to employing the first non-family member employee.

“You start employing people. And that is a barrier in itself, I mean, going from zero to one employee outside the family. That is one big step. And many do not really manage to take that step.”- C

Then when FBs overcame this barrier and employed people, another barrier came due to the increase of responsibilities and roles on the owners. So, employing more employees decrease the control.

“But then, if you take that step, you come over that barrier [...] but then if you want to keep growing [...] that could become a bottleneck [...] it takes a lot of administrative work, and also people work.”- C

“I could not really manage everything, both the customers, the suppliers, the business, and also all these growing number of employees.”- C

On the other hand, in the FBs with employees, the number of non-family employees was more than the number of family member employees. One of the FBs’ owners believed that it is hard for non-family employees to involve in the business if there are many family members. Therefore, having non-family employees is good for the growth of the firm as they strengthen the workgroups.

“We see it as beneficial to employ to have more non-family employees to strengthen the whole group.”- A

“As we grow, we see the benefits of not having too many family members at company at the same time, because it is very hard for non-family members employees to be totally involved in the company, when you are too many family members, it is how much you try it will always be a difference.”- A

Internal Growth Barriers Of Small Swedish Family Business