Indian Family Businesses: Their survival beyond three generations

K. Ramachandran


Interest in family businesses is recent, and most often knowledge creation in this field is limited to Western academics. Although stray outputs have started appearing on developing countries or Asia in general, no comprehensive picture is still clear on most aspects of family business. It is in this context that this exploratory research is undertaken.

Family businesses constitute most businesses in India, as anywhere else. Economic liberalisation and rapid expansion in the industrial base in recent years have not only created growth opportunities for many but also have tested their resource capabilities to respond to them; some have chosen to follow the role of a custodian of their existing wealth and followed the preservation route, while some others have followed more of an entrepreneurial route of exploiting opportunities with or without relevant resources, with mixed results. One of the key resources for all of them is their family, and their prime concern is wealth and welfare of their family. A major dilemma many of them have faced particularly in the last decade since economic liberalization began is to choose between combinations of risks and returns of business growth and conservation of wealth of the family. This, of course, is intertwined with the missions of their businesses and families.

Family businesses are fascinating because of the mutual dependence of two ecosystems (family and business) that have inherently conflicting characteristics. Some of the key dimensions that determine the cohesiveness of both the family and business are: succession planning, remuneration and rewards planning, recruitment and rewards for non-family professionals, retirement and estate planning, induction and grooming, ownership structure, preserving wealth, resolving conflicts, business vision, strategy and governance, family vision, strategy and governance. Research evidence suggests that these come under strain especially when their operating environment comes under pressure. Growing interest in corporate governance has its positive effects on family governance too especially in introducing greater level of professionalisation in business.