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Organizational Learning and Knowledge DevelopmentPeculiarities in Small and Medium Family Enterprises

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  • Sami Basly

    ()
    (IRGO - Institut de Recherche en Gestion des Organisations - Université Montesquieu - Bordeaux IV)

Abstract

The aim of this theoretical contribution is to analyze the processes of organizational learning and knowledge development within the small and medium sized family firm. Due to its founding characteristics, family SME seems to be a closed, hermetic and rigid organization. Besides, the specificity of mechanisms of learning and knowledge management, in general, within this entity are justified by:- First, the overlapping of "family" and "company" spheres: the family sphere realizes a unique contribution because it constitutes a supplementary source of knowledge inbound to the company compared to a firm without family involvement, - Then, the frequency of the exchanges within the organization: the processes of exchange of piece of information and knowledge take place not only in the organizational context but also and especially in the family context. The family meetings constitute, for example, supplementary occasions for exchange and sharing of knowledge.Schematically, two major characters inherent to this entity constitute obstacles to organizational learning. Indeed, conservatism and independence orientation strongly influence the processes of learning and knowledge development.The literature suggests that the family system attempts to create and maintain a cohesiveness that supports the family "paradigm" which is described as the core assumptions, beliefs, and convictions that the family holds in relation to its environment. Information that is not consistent with this paradigm is resisted or ignored (Davis, 1983). The search for security, conformism and tradition are characteristic of conservative organizations. Particularly to the family firm, the conservative posture could be studied through three dimensions (Miller and ali., 2003). First, on the governance level, the conservatism is exhibited by the plateauing and the growing rigidity of the owner-manager and by the inefficacy of the board of directors. Second, on the strategy level, conservative family SME favorites its actual markets, customers and products and globally is unwilling to change and adopt new paradigms. Then, on the organizational and cultural levels, this entity tends to be closed and introvert. These three components have an impact on knowledge development as the conservatism tends to limit the variation and the exposition to new environments. In short, within this entity the level of organizational knowledge would be weak.The second variable influencing the processes of development of knowledge within family SME is the independence orientation. This orientation is a consequence of the family long-term commitment to the business. Paradoxically, this commitment has two contradictory effects on growth. First, it implies the pursuit of future development and continuity of the firm to make sure that the family heritage is passed on to the following generations. On the other hand, commitment implies a strategy of conservation of the heritage which passes by a strong seek for the independence. Aiming to guarantee its continuity, the (small and medium-sized) family firm establishes an independence orientation of three different types. First, from the financial point of view, it avoids as much as possible turning to outside partners (Hirigoyen, 1985). Then, on the human plan, it would be favorable to the appointment of family members or individuals belonging to the close relational circle to the posts of direction and would be reluctant to the recruitment of professional directors. Finally, to maintain the decision-making in hands of the family, the family firm tends to avoid the inter-organizational relations, cooperative investments, and tries to limit the sharing of the control of its investments. The contribution of outsiders (financiers, directors or partner organizations) can, however, be precious to the company. And the introversion would be a major obstacle to the perpetuity of the firm because it inhibits growth. As a consequence, independence orientation limits the accumulation of knowledge because, on one hand, the horizons of the company will be limited and little varied, and on the other hand, the potential valuable knowledge contribution of outsiders is excluded.The study of these variables raises questions about the efficacy of the organizational memory within the family firm. This organization runs particular risks because of the peculiarity of its knowledge management mechanisms. Because of its founding natural characteristics, the family firm nurtures mechanisms which reinforce the causal ambiguity (Nelson and Winter, 1982) by strengthening the voluntary effort to avoid either a too fast imitation or the loss of knowledge-based resources if the individual or the group holding it leaves the organization (Arrégle, 1995). In short, family firms show an inclination to concentrate the processes of knowledge management around its tacit dimension by encouraging its formation contrarily to the explicit component. However the weak externalization of knowledge coupled with the avoidance of sharing outside the family causes serious risks. First, an obvious risk of deterioration is present because of the weak importance of the organizational protection mechanisms and the strong reliance on individual memory. Moreover, we suggest a risk of erosion of knowledge due to the fragmentation caused by successions that do not preserve the unity of the firm. There is risk of "fragmentation" of the strategic knowledge if the company is shared between the potential successors. This risk would be less pronounced if a prior sharing of knowledge with outside directors had been engaged.Another particularity of family firms is about the intergenerational transmission and transfer of knowledge (Cabrera-Suarez and ali., 2001). Mechanisms inciting to intergenerational transfer of knowledge must be set up because of the negative impact of conservatism and independence on organizational knowledge and due to the fragility of family firm organizational memory.

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Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00192809.

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Date of creation: May 2007
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Publication status: Published - Presented, EURAM (European Academy of Management), 2007, Paris, France
Handle: RePEc:hal:journl:halshs-00192809

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Related research

Keywords: Organizational knowledge; family business; conservatism; independence orientation;

References

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  1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
  2. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Kuran, Timur, 1988. "The tenacious past: Theories of personal and collective conservatism," Journal of Economic Behavior & Organization, Elsevier, vol. 10(2), pages 143-171, September.
  4. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
  5. Miller, Danny & Steier, Lloyd & Le Breton-Miller, Isabelle, 2003. "Lost in time: intergenerational succession, change, and failure in family business," Journal of Business Venturing, Elsevier, vol. 18(4), pages 513-531, July.
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