Challenges to Growth There are many theories on why family firms do not grow and rarely survive over the long term. The following are those most frequently seen:

• Growth is difficult for all long-established firms, family owned or not, because of maturing markets, intensifying competition, and changing technology. The business life cycle identified by Joseph Schumpeter (1990) is the natural order for all businesses.

• Once-effective personal paradigms eventually constrain successful entrepreneurs. As the business environment and requirements for success change, entrepreneurs can become particularly inflexible by clinging to habits of past success and avoiding decisions that might threaten their image or economic security.

• Inherited security or wealth deprives next-generation family members of the hunger and drive they need to be successful entrepreneurial business leaders. They often prefer the pleasures of leisure, artistic expression, and time with family and friends. • Children growing up in a family dominated by a successful, hard-working, self-reliant, decisive entrepreneur do not learn vital social skills of cooperation, shared decision-making, and unselfish collaboration. They also lack a parental role model for the teamwork and servant leadership skills so necessary for the next generation to work together or even to own a business together as a partnership of siblings.

• Even good business growth cannot satisfy the economic wishes of a family that is growing both in size and lifestyle expectations. Excellent linear revenue growth of 5% to 10% per year rarely keeps up with the linear growth in numbers of family members: Two parents (or more) might have several offspring who likely have even more children among them. An added burden is the frequent hope of most generations to live a lifestyle at least as expensive as that of its forebears.

• As families expand and acquire in-laws, the diversity of personal goals and values makes it unlikely that there can be consensus for business decision-making and common commitment to business ownership. Building a shared vision for the future and reconciling inevitable conflicts become increasingly difficult, if not impossible. Ward 325 All of these theories hold some intuitive appeal, as stories supporting each appear regularly in the media.

Family-business owners themselves acknowledge their validity. In questionnaires to speech audiences, owners rank the six most powerful challenges to their firms’ long-term growth in this order: (1) Maturing business life cycles and increasing competition (2) Limited capital to fund both family needs and business growth needs (3) Weak next-generation business leadership (4) Entrepreneurial leadership’s inflexibility and resistance to change (5) Conflicts among sibling successors (6) Disparate family goals, values, and needs...

Click her to read the full article: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.453.6770&rep=rep1&type=pdf