Minority Family Business in Emerging Markets: Organization Forms and Competitive Advantage

Abstract

The prevalence of minority family businesses in emerging markets has several theoretical and practical implications. First, a practical consequence of institutional weakness suggests that family businesses perform both wealth-creation and wealth-preservation tasks in an emerging market. Legal protection for property rights and financial institutions specializing in wealth reallocation and preservation are often ineffective in emerging markets. Lacking such security, the family business unit necessarily becomes something more than a value-creation device; it may also serve as a wealth-protection and intergenerational and/or geographical transmission device used to preserve and transfer wealth through various informal and often nontransparent means. Consequently, the financial goals of the family firm are subject to frequent trade-offs between entrepreneurial activities that generate new wealth and more defensive activities that preserve, hide, or allow for the geographic or intergenerational transmission of wealth.

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