This is a study of the family business from the standpoint of enterprises. The study of family business has not been made sufficiently before. So, the definition of the family business is rather important in this study. The definitions generally recog...
This is a study of the family business from the standpoint of enterprises. The study of family business has not been made sufficiently before. So, the definition of the family business is rather important in this study. The definitions generally recognized are as follows:
A company is considered a family business when it has been closely identified with at least two generations of a family and when this link has had a mutual influence on company policy and on the interests and the objectives of the family. Such a relationship is indicated when one of more of the following conditions exists:
1) Family relationship is a factor, among others, in determining management succession.
2) Wives or sons of present or former chief executives are on the board of directors.
3) The important institutional values of the firm are identified with a family, either in formal traditions of the organization.
4) The actions of a family member reflect on or are thought to reflect on the reputation of the enterprise, regardless of this formal connection to management.
5) The relatives involved feel obligated to hold the company stock for more than financial reasons, especially when losses are involved.
6) The postion of the family member in the firm influences his standing in the family.
7) A family member must come to terms with his relationship to the enterprise in determining his own career.
8) Nepotism, which is defined as favoritism granted on the basis of family relationship.
The family businesses which belong to the above category of the definition are so many in Korea. It has a large share of 85.4% in the field of manufacturing. So, the importance of the family business is so great that this study is aimed at exploring the methods for the development and growth of the family business.
The approach to the exploration of the methods is performed as follows:
First, to examine the bearing of family business of the growth of a firm, degree of family relationship is given as dependent variable, Y and growth factor of a firm, as X. For the growth factors of firm, net soles, capital, gross selling profit and number of employees are given X_(1), X_(2), X_(3), and X_(4) as independent variables respectively, and
Y=a+bx_(1)+cx_(2)+dx_(3)+ex_(4)+E is made.
By the above formula equations are obtained as follows:
∑Y=n.a+b∑x_(1)+c∑x_(2)+d∑x_(3)+e∑x_(4)
∑x_(1)Y=a∑x_(1)+b∑x^(2)_(1)+c∑x_(1)x_(2)+d∑x_(1)x_(3)+e∑x_(1)x_(4)
∑x_(2)Y=a∑x_(2)+b∑x_(1)x_(2)+c∑x^(2)_(2)+d∑x_(2)x_(3)+e∑x_(2)x_(4)
∑x_(3)Y=a∑x_(3)+b∑x_(1)x_(3)+c∑x_(2)x_(3)+d∑x(^2)x_(3)+e∑x_(3)x_(4)
∑x_(4)Y=a∑x_(4)+b∑x_(2)x_(4)+c∑x_(2)x_(4)+d∑x_(3)x^(2)_(4)+e∑x^(2)_(4)
When the above equation is again computerized according to Gauss □hidle's formula, the following simple regression can be obtained.
1) Simple regression.
Y=-.0044746+(.0920702)*X
2) Multiple regression and correlation.
Y=27.9030903+(.0000321)*X_(1)+(.0009929)*X_(2)+(.0000646)*X_(3)+(.0000938)*X_(4)
(1) Determine coefficient .26
(2) Multiple correlation coefficient .51
From the above equation, It is revealed that the correlation coefficient between family relationship and growth of a firm is 0.52.
This evidently shows that there is a correlation between the two factors.
Second, to find out the proper time of transformation of a family business, the stages of growth of a firm is analyzed according to Alfred D. Chandle's "five stages of growth" on the basis of multiple correlation analysis. The formula and the result obtained are as follows:
*Group (step 1)
Multiple regression and correlation.
Y=19.1766611+(-.0122437)*X_(1)+(.0071608)*X_(2)+(.0427960)*X_(3)+(.0223121)*X_(4)
(1) Determine coefficient .09
(2) Multiple correlation coefficient .30
*Group (step 2)
Multiple regression and correlation.
Y=27.3052689+(.0000175)*X_(1)+(.0008483)*X_(2)+(.0014486)*X_(3)+(-.0023880)*X_(4)
(1) Determine coefficient .18
(2) Multiple correlation coefficient .42
*Group (step 3)
Multiple regression and correlation.
Y=37.2122122+(-.0000058)*X_(1)+(.0003513)*X_(2)+(-.0003599)*X_(3)+(-.0013668)*X_(4)
(1) Determine coefficient -.14
(2) Multiple correlation coefficient -.37
*Group (step 4)
Multiple regression and correlation.
Y=41.3394460+(-.0000157)*X_(1)+(.0003864)*X_(2)+(.0002511)*X_(3)+(-.0024598)*X_(4)
(1) Determine coefficient .24
(2) Multiple correlation coefficient -.49
*Group (step 5)
Multiple regression and correlation.
Y=36.6845827+(.000038)*X_(1)+(.0005801)*X_(2)+(.0000167)*X_(3)+(-.0000978)*X_(4)
(1) Determine coefficient .19
(2) Multiple correlation coefficient -.43
From the above analysis, it is concluded that in case of small business the greater the family relationship is, the greater the growth degree is and in case of big business the opposite is true.
Third, the proper scale of a business at the time of transformation of a family business is as follows:
Net soles: 20,135,123,000 Won.
Capital: 2,406,00,000 Won.
Gross sailing profit: 2,343,075,000 Won.
Number of employees: 428 persons.
In the context it is recognized from this study that a family business is not necessarily unsuccessful of insolvent, but the above methods taken into full consideration, family business can be improvement measures.