New Venture Creation in Indian Family Firms: Dynamics of Family Versus Non-Family Champions

Abstract

Research on entrepreneurship in family controlled enterprises is fairly young, though the contribution of such businesses to economies across the world has been very significant. It is now proven that creation of new ventures in family business is different from that in non-family business context in different ways. This paper builds on an earlier work done by Bhalla et al. (2010) wherein it was argued that family firms evaluate new venture proposals based on a combination of the family’s economic, expertise, reputation and affiliation criteria (i.e. the EERA logic). This paper reports preliminary findings from an ongoing study that validates the EERA logic and goes on to empirically find out through primary data the processes involved in the evaluation of new venture proposals and their approvals in family controlled firms. We find that the EERA factors are given different levels of importance by families. We also find that new venture creation process in family business context is distinct due to the influence of familial factors. We conclude that family membership, social standing and family embeddedness of the proposer significantly influence the mechanisms adopted for proposal evaluation and resource allocation to new ventures.

Keywords: Family Business, Entrepreneurship, New Venture, Innovation, Diversification, Start-up