Keeney, Roman

Marshall, Maria I.

Remble, Amber A.

English

Research Papers in Economics

 
 
A Competing Values Approach to Small Family Business Succession 
 
 
*Amber A. Remble (aremble@purdue.edu) Graduate Assistant 
Roman Keeney (rkeeney@purdue.edu) Assistant Professor 
Maria I. Marshall (mimarsh@purdue.edu) Associate Professor 
 
Purdue University 
Department of Agricultural Economics 
403 W State Street 
West Lafayette, IN 47907 
 
*Corresponding Author 
 
 
 
 
Poster prepared for presentation at the Agricultural & Applied Economics Association 2010 
AAEA, CAES, & WAEA Joint Annual Meeting, Denver, Colorado, July 25-27, 2010 
 
 
 
  A Competing Values Approach to Small Family Business Succession 
Introduction 
Small family businesses (farm, farm-related, and non-farm): 
Represent a critical component of the U.S. rural economy. 
Involve several parties: 
a)  Family employees 
b)  Non-family employees 
c)  Non-employee family members 
Face issues concerning both the business and the family, which may have competing 
objectives. 
Recent literature focuses on growth, sustainability, and survival (business transfer). 
At any given time, as many as 40 percent of U.S. businesses are dealing with ownership transfer in 
some fashion (Bowman-Upton, 1991). 
Difficulty arises from: 
Different stakes and levels of objectives of the parties involved 
Heterogeneous set of preferences for long-run strategy 
 
Objectives 
The objective of this study is to develop a spatial ‘competing values’ framework to characterize rural 
family businesses. This will improve our understanding of the complexity associated with conflicts in 
managerial succession and help researchers and practitioners understand the processes used to 
navigate ownership transfer in family business settings. 
A secondary objective is to analyze the heterogeneity of family businesses to understand different 
objectives that may be associated with the transition process and how these might give rise to 
differently effective models of transition. In the present analysis, we focus particularly on business 
demographic and performance values based on typological definitions developed from the 
competing objectives framework. 
 
 Methods 
Method 
Adapt Quinn and Rohrbaugh spatial framework for analysis of managerial effectiveness to family 
business succession problem. 
Develop a spatial context for characterizing rural family businesses. Use the spatial orientation to 
adapt standard models of succession to the particular objective orientation of a family 
business. 
Graph: Spatial Model of Competing Values in Succession 
Structure (vertical axis): ranges from most equitable to most advantageous 
Focus (horizontal axis): ranges between singular focus on the business or on the family 
 
 
 
 
 
 
 
 
 
 
 
Using data from a survey of family businesses, we design a measurement concept of business and 
management objectives that relate to the axes in figure 1. 
Equality 
Advantageous 
Family  Business 
TYPE I  TYPE II 
TYPE III  TYPE IV 
Figure 1. Graphical Interpretation of Competing ValuesThe responses to the family business survey questions are organized by scoring responses to Likert 
scale questions in accord with their agreement with one of the poles of the two axes in figure 1. This 
yields a spatial orientation of family business values following the schema in figure 1. With this 
spatial model in hand, we can then use activity and performance information of family businesses in 
the survey to analyze firms which are competing values neighbors.  
The graph allows us to create the numerical types (displayed in the quadrants) of family businesses 
based on their position on the spatial graph. 
 
 
Data 
National Family Business Survey, 2007. 
Asks questions business (orientation and performance), family (number and extent of member 
involvement), and practices and beliefs toward business succession process. 
Surveyed sample is limited to families in which at least one person owned or managed a family 
business, and met the required criteria (see further sample selected in Winter et. al., 1998). 
 
Approach to Analysis 
Compare business demographic and performance indicators between the four types of family 
businesses as created by the spatial model. 
 
 
 
 
 
 Figure 2. Competing Values in Family
  Family businesses respond to s
competing values of managem
o  This likely reflects the 
prioritize family orient
questions.  
o  Also reflects the inhere
between centrally locat
origin) will yield insigh
balanced versus non-b
values. 
  Family businesses are spatially 
favoring equality or fairness in
-12 -10 -8 -6
Business
Results 
y Business 
survey questions in a manner that tries to balance th
ment. 
design of the survey which allows a respondent to b
ted choices as well as business oriented choices in se
ent conflict in balancing these approaches. Further 
ted businesses and outliers (those most removed fro
ht into performance advantages and disadvantages fr
alanced approaches to objectives associated with co
dispersed quite evenly (see figure 3 below) with the
n business practices and choices. 
-8
-6
-4
-2
0
2
4
6
-4 -2 0 2 4 6 8 10 12
Equality
Advantageous
 
he 
both 
eparate 
testing 
om the 
from 
ompeting 
e majority 
FamilyFigure 3. Type Classification 
 
Table 1. Business Demographics Clas
Variable  T
Number of Employees 
No.of family members work 07 
Household Size 
Spouse Work in Business 
Home Based Business 
Work Hours/Week 
Work Weeks/Year 
Work Hours/Week (Spouse) 
Work Weeks/Year (Spouse) 
Pay Yourself 
Work in Another Job 
How Successful 
Gross Income 
Profit 175
Share Value Change 
Total Assets 
Total Liabilities 
 
Advantageous v. Equality 
  Smaller percentage of those ty
  ‘Advantageous’ businesses own
  ‘Advantageous’ businesses pos
T
T
TYPE I
 
sified by Type 
Mean 
Type I  Type II  Type III  Typ
2.13 3.17 4.19 
1.35 1.43 1.32 
3.00 3.09 2.74 
0.58 0.63 0.57 
0.60 0.57 0.71 
40.13 39.31 43.87 
49.33 46.26 46.84 
16.88 16.94 16.61 
31.03 29.00 26.77 
0.38 0.40 0.19 
0.25 0.20 0.26 
4.20 3.91 3.84 
254269.70 293362.50 323519.23 234
033177.00 228634500.00 193616435.00 214311
2.38 2.11 2.37 
316747.83 384518.52 688000.00 642
73322.58 72633.33 132370.37 99
yped as ‘advantageous’ pay themselves a salary. 
n higher value of assets. 
sses lower value of liabilities. 
TYPE I
40
28%
TYPE II
34
23%
TYPE III
30
21%
TYPE IV
41
28%
TYPE II TYPE III TYPE IV
e IV 
3.10
1.36
2.67
0.64
0.64
47.14
47.02
25.81
33.00
0.24
0.19
3.55
4787.88
1495.00
2.21
2516.13
9705.88Family v. Business 
  ‘Business’-typed businesses employ more employees on average. 
  ‘Business’-typed businesses reported slightly more gross income. 
 
 
Conclusion 
Family businesses face a permanent duality in their choice structure, what benefits the family and its 
optimal operation may not coincide with choices made for the business. Ward’s central thesis is that 
successful family businesses must first self identify their values before they can begin a consideration 
of optimal choices in business planning and structure. A particular area in need of further research 
related to family business planning is the transition function, which governs the interaction of family 
generations involved in the business. The role of individual well-being and varied interests across 
and within generations expands considerably on the complexity involved in decision-making. Our 
continued work on the competing values framework will explicitly consider models of business 
succession, outlining the principles which are common and divergent for different values based 
spatial orientations.  
 
 
 
 
 
 
 
 
 
 
 
 References 
Bowman-Upton, N. 1991. Transferring Management in the Family-Owned Business.” U.S. Small 
Business Administration, available at http:www.sba.gov. 
Carlock, R.S. and J.L. Ward. 2001. Strategic Planning for the Family Business. Palgrave Macmillan, 270 pp. 
Quinn, R.E., and J. Rohrbaugh. 1983. “A Spatial Model of Effectiveness Criteria: Towards a 
Competing Values Approach to Organizational Analysis.” Management Science 29(3): 363-377. 
Ward, J.L. 2004. Perpetuating the Family Business. Palgrave Macmillan, 256pp.  
Winter, M., M.A. Fitzgerald, R.K.Z. Heck, G.W. Haynes and S.M. Danes, Revisiting the study of 
family businesses: methodological challenges, dilemmas, and alternative approaches. Family 
Business Review 11 (1998), pp. 239–252. 
This paper reports results from the Cooperative Regional Research Project Survey. The National 
Family Business Survey (NE 167) was partially supported by the Cooperative States Research, 
Education, and Extension Service (CSREES); U.S.D.A., Baruch College, the experiment stations 
at the University of Arkansas, University of Hawaii at Manoa, University of Illinois, Purdue 
University (Indiana), Iowa State University, Oklahoma State University. University of Minnesota, 
Montana State University, Cornell University (New York), North Dakota State University, The 
Ohio State University, Utah State University, and the University of Wisconsin-Madison. 
 
 
 
 
 
 
 Appendix 
Table 2. Questions Used to Design Spatial Modeling 
Questions 
 
X-AXIS: Family v. Business 
Please tell me if you respond this way always, often, sometimes, seldom, or never.
When things are hectic at home family members, other relatives, or friends help 
in the business without pay so you can spend more time with family. 
ALT_RES_F 
When things are hectic at home you put off or skip routine business demands 
(such as record keeping or file management) to spend more time with family. 
DEL_POST_F 
When things are hectic at home you do more business tasks at home.  PHY_REL_F 
When things are hectic at home you temporarily shift some business work to 
others so you can spend more time with your family. 
REA_PERS_F 
When things are particularly busy or demanding in the business family 
members, other relatives, or friends who usually do not work in the business 
help out in the business without pay. 
ALT_RES_B 
When things are particularly busy or demanding in the business family members 
putt off or skip routine household tasks to do business work. 
DEL_POST_B 
When things are particularly busy or demanding in the business family work 
usually completed home is done at the business (pay bills, make appointments, 
etc.) 
PHY_REL_B 
When things are particularly busy or demanding in the business some 
household responsibilities are temporarily shifted among family members so 
more time can be spent in the business. 
REA_PERS_B 
  
Y-AXIS Equality v. Advantageous   
Do you strongly disagree, disagree, agree or strongly agree with that statement? 
When times are tough…. 
It is best to have one strong person in charge making decisions.  UNI-CON_A 
It is best to reach compromises that everyone can agree with.  UNI_CON_E 
It is best to keep focused on whatever needs to be done to make it through.  INT_EXT_A 
It is best to keep mind that other may be less fortunate.  INT_EXT_E 
  
On a scale of 1 to 5, how much tension exists in your home life?   
Confusion over who has authority to make decisions.  OWN_AUTH_A
Unequal ownership of the business be family members.  OWN_AUTH_B 
Failure to resolve business conflicts.  NO_NAME_A 
Unfair workloads among family members, due to the business.  NO_NAME_B 
 Table 3. Variable Names and Coding 
Variable Name  Recode Name  Recode Formula  Axis  Dimension 
D3ACB07  ALT_RES_F  X-3, Del if X>5  BF  F 
D6ACH07  ALT_RES_B  (-1)(X)+3, Del if X>5  BF  B 
D3BCB07  DEL_POST_F  X-3, Del if X>5  BF  F 
D6BCH07 DEL_POST_B  (-1)(X)+3, Del if X>5  BF  B 
D3DCB07  PHY_REL_F  X-3, Del if X>5  BF  F 
D6DCH07 PHY_REL_B  (-1)(X)+3, Del if X>5  BF  B 
D3FCB07  REA_PERS_F  X-3, Del if X>5  BF  F 
D6FCH07 REA_PERS_B  (-1)(X)+3, Del if X>5  BF  B 
        
C3ACB07  UNI_CON_A  X-3, Del if X>5  EA  A 
C3CCB07  UNI_CON_E  (-1)(X)+3, Del if X>5  EA  E 
C3HCB07  INT_EXT_A  X-3, Del if X>5  EA  A 
C3GCB07  INT_EXT_E  (-1)(X)+3, Del if X>5  EA  E 
D2BCB07  OWN_AUTH_A  X-3, Del if X>5  EA  A 
D2CCB07  OWN_AUTH_E  (-1)(X)+3, Del if X>5  EA  E 
D2ECB07  NO_NAME_A  X-3, Del if X>5  EA  A 
D2FCB07  NO_NAME_E  (-1)(X)+3, Del if X>5  EA  E 
 
 

A Spatial Model of Effectiveness Criteria: Towards a Competing Values Approach to Organizational Analysis.”

Perpetuating the Family Business.

Revisiting the study of family businesses: methodological challenges, dilemmas, and alternative approaches.

Strategic Planning for the Family Business.

Transferring Management in the Family-Owned Business.” U.S. Small Business Administration, available at http:www.sba.gov.

A Competing Values Approach to Small Family Business Succession

A Competing Values Approach to Small Family Business Succession

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