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Family System versus Economic System: Chinese Family Business Networks in Taiwan

Wenyi Chu Associate Professor National Taiwan University 85, Lane 144, Keelung Road, Sec. 4

Taipei, Taiwan Phone: (+886) 2 2363-0231 Fax: (+886) 2 23-5141 E-mail: wenyichu@mba.ntu.edu.tw

Family System versus Economic System: Chinese Family Business Networks in Taiwan

ABSTRACT

An important organizational feature of Chinese family firms is that they are organized through a network of small and medium-sized firms inter-linked to one another through ties of kinship and personal relationships. Based on the concept of institutional overlaps, this research argues that the management of Chinese family business networks in Taiwan is simultaneously influenced by two different factors: family/interpersonal factors, and economic/strategic factors. By using data collected from 122 affiliated companies of twenty-eight family business networks in Taiwan, this research found that the internal organizations of family business networks are influenced both by family business considerations and economic efficiency considerations, but the influence of economic factors is more significant. This research shows that although Taiwanese family business networks have not completed the transformation from entrepreneurial control to professional management, most family business networks have adopted an internal organization that follows some basic economic rationales proposed in the Western literature.

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Family System versus Economic System: Chinese Family Business Networks in Taiwan

Introduction

In recent decades the most important innovations in business management are emerging in the fast-growing region of the world – the Southeast Asia. In this region, most economies are dominated by overseas Chinese family businesses (Seagrave, 1995; Weidenbaum and Hughes, 1996), especially in the three overseas Chinese economies: Taiwan, , and Singapore. Overseas Chinese family businesses have gained a wide reputation for cost efficiency, responsiveness, flexibility, and global competitiveness (Carney, 1998). Their significant economic performance has also sets off an emerging line of studies on the institutional and economic structure of East Asian capitalism as well as the organizational characteristics of Chinese family firms (e.g. Hamilton & Biggart, 1988; Weidenbaum and Hughes, 1996).

Most existing studies on Chinese family firms follow the institutional perspective to examine organizational isomorphism in Chinese economic communities. Scholars argue that, due to some historical, political, social and culture backgrounds, overseas Chinese family firms tend to be small in size, only engage in few stages of the value-added activities, and rely heavily on personal relations and personal trust to reduce transactional uncertainties and risks (Hamilton and Biggart, 1988; Hamilton and Kao, 1990; Kao, 1993; Orru, Biggart and Hamilton, 1991; Redding, 1996; Whitley, 1990; Wong, 1996). Therefore, an important organizational feature of Chinese family firms is the “weak organizations, strong linkages” (Redding, 1996) pattern of operations: firms are organized through a network of several small and medium-sized firms that are interlinked, connected to one another and so creating cooperative networks of firms through

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kinship circle and ties of common origins. Many scholars have recognized families and networks as the basic social institutions of Taiwan’s businesses (e.g. Greenhalgh, 1988; Hamilton and Kao, 1987; Kao, 1996).

Although these existing studies provide some answers on how institutional/contextual environments make the family business network a dominant form of business organizations among overseas Chinese businesses, few research efforts have been granted to the internal administrative arrangements of Chinese family business networks. For instance, are the control styles of the parental founding entrepreneur and the second generation different? Do professional managers and family managers receive the same level of decision-making autonomy? To what level do the internal organizations fit external strategic and industrial requirements facing firms? As Fukuyama (1995) and Duncan and Flamholtz (1982) pointed out, the greatest difficulty facing Chinese family businesses is the transition from entrepreneurial management to professional management. However, in family businesses, the complex of emotions and business needs make these issue of corporate governance particularly difficult to answer (Magretta, 1998), and the high emphasis of personal ties and personal trust may obstacle the transition of Chinese family business firms (Carney, 1998).

Therefore, the purpose of this study is to empirically examine the internal organizations, specifically, the level of centralization and decentralization, of Chinese family business networks in Taiwan. This study aims to provide answers on how the internal organizations of Taiwanese family business networks are influenced by family/personal factors and by

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economic/strategic factors.

Theoretical Foundations

This research employs the concept of “institutional overlap” of family firms proposed by Lansberg (1983). According to Lansberg, different from typical modern firms that are characterized by the separation of ownership and control (Fama, 1980; Fama and Jensen, 1983), family ownership and family control co-exist and influence the choice of corporate governance in family business organizations. Therefore, family business organizations exist on the boundaries of two qualitatively different social institutions – the family and the business. Each institution defines social relations in terms of unique set of values, norms, and principles, and has its own rules of conduct. As a family institution, organization design should reflect personal trust and social ties to assure the care and nurturance of family members. As a business institution, organization design should follow economic rationales to pursue efficiency and effectiveness. The co-existence of these two institutions makes the management of family firms particularly complicated because what is expected from individuals in terms of family principles often violates what is expected from them according to business principles (Carney, 1998; Chen, 1995; Duncan and Flamholtz, 1982; Kepner, 1983; Lansberg, 1983). Therefore, this section reviews two lines of literature on the determinants of internal organizations of family firms, to identify possible important factors. Hypotheses are then developed. Family Business as a Family System

As a family institution, the family firm represents a social system endorsed by law and

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custom to take care of and to manage its members’ needs, such as the need for belonging, affection, intimacy, and sense of identity (Kepner, 1983). Therefore, in addition to providing for the economic security for its members, the family business firm must satisfy deep social and emotional needs. To achieve this, the top management of a family business firm must be able to clearly distinguish family members from non-family members, and to design the control and delegation systems accordingly.

If we view the family business organization as a social network, from the social network and embeddedness perspective, economic actions are embedded in structures of social relations, which form social norms, rules and obligations, further direct the decisions of economic exchanges (Granovetter, 1985). Informal social relations, such as ethnic, regional, religious, educational and family ties, can generate social capital and trustworthiness between actors and among actors, further develop a closed community, i.e. a network (Coleman, 1988). For actors belonged to the network system, economic exchanges are safeguarded not by contract (price mechanism) or equity (authority mechanism), but by the mutual obligations, expectation, and trustworthiness of members granted by the network (Coleman, 1988; Powell, 1990). Therefore, within a family organization, the design of governance structure, specifically the distribution of power and decision-making autonomy, is to facilitate existing personal trust and social capital within the business network.

Similar arguments have been proposed in studies on Chinese businesses (e.g., Farh, Tsui, Xin and Cheng, 1998; Kao, 1996; Tong & Yong, 1998). It is particularly important in Chinese

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business community to separate the inner circle (i.e., family members, close relatives, and honorary family members such as a long-serving, loyal managers) and the outer circle (i.e., professional managers). A differentiated level of trustworthiness will be granted to managers belonging to the inner circle versus managers belonging to the outer circle. Therefore, family membership, trustworthiness of managers, and the founder/entrepreneur’s managerial ideology are expected to influence the choice of centralization and decentralization within Chinese family business networks.

First, as have been pointed out by scholars such as Hamilton and Kao (1987) and Wong (1996), Chinese businesses are dependent on what Max Weber called “particularistic trust” that rooted in the “community of blood” and rested upon purely personal, familial, or semi-familial relationships. Kinship and family ties thus play a critical role in facilitating trust and relations within the organizations of Chinese family firms. Therefore, whether the general manager of an affiliated company is a family member or a professional (non-family) manager may influence how this affiliated company is controlled by the corporate center. Similarly, from the agency theory perspective, because the moral hazard and opportunistic behaviors that agents are pertained to are expected to happen in non-family employees rather than in family members (Daily and Dollinger, 1993), the management styles and motivations of family versus non-family managers are thus different. Professional managers are more likely to seek to maximize their own benefits rather than the value of the firm, and they seldom maintain loyalty to any one organization (Alcorn, 1982; Barach, 1984). Therefore, the family firm may grant less

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autonomy to those affiliated companies with professional managers; while for family managers who have ownership interests, a less formal system, i.e., the family system, is expected. It is thus hypothesized that,

Hypothesis 1: In a family business network, family general managers will receive a higher level of autonomy than professional general managers do.

Second, the longer an individual work for a family organization, the more familiar the

person was likely to be with its people, norms and culture. More specifically, a long serving manager will be more likely to develop strong interpersonal ties with the family as well as with the organization, further generating a high level of social embeddedness (Granovetter, 1985). Recent studies on Chinese family business report that ethnic Chinese family business groups often show a near fanatical reluctance to admit professional managers into the inner circle of the firms (Chen, 1995; Weidenbaum, 1996; Weidenbaum and Hughes, 1996). Most of the top management positions are filled by family members, with other strategic positions reserved for close relatives and for those whom have worked for the family for a long period of time. In other words, professional managers can be in power because they have been serving the family for long time, shown a certain degree of “manager loyalty” (Chen, 1995) and become “honorary family members” (Weidenbaum, 1996). Therefore,

Hypothesis 2: In a family business network, the longer a general manager of an affiliated company has served with the family business network, the more autonomy is owned by this affiliated company.

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Finally, deeply rooted in the legacies of Chinese history, paternalism and paternalistic leadership is a prevalent phenomenon in Chinese organizations (Redding, 1996). The paternalistic leadership style is based on some persistent common values in the Confucian tradition, such as a code of defined conduct between children and adults, and loyalty to a hierarchical structure of authority, and are commonly inherent in the managerial mentality of the founder/entrepreneur of Chinese family businesses (Redding, 1996). The second or third generations of the family usually receive higher education in Western countries and are easier to adopt to modern management knowledge. Therefore, the transition from entrepreneurial control of the first generation to professional management of the second generation becomes a critical issue in Chinese family business firms (Fukuyama, 1995). Scholars also pointed out that founder/entrepreneur-managed firms seldom utilize formal measurement procedures and prefers a centralized appraisal system; while the professionally managed firms is characterized by the use of well-defined internal control procedures and a decentralized system (Daily & Dollinger, 1993; Flamholtz, 1986; Whisler, 1988). Therefore, it is hypothesized that,

Hypothesis 3: Those affiliated companies associated with a family business network that is controlled by the founding entrepreneur will obtain less autonomy than those affiliated companies associated with a family business network that is controlled by the second generation.

Family Business as an Economic System

As a business institution, family business firms are under the pressure to follow

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professionalism and to pursue economic efficiency. The economic rationales thus require family business firms to adopt an international organization that can cope efficiently with task and environmental requirements (Galbraith, 1977; Pfeffer and Salancik, 1978).

With respect to the influence of industrial characteristics, the information processing perspective (Galbraith, 1977; Nadler and Tushman, 1988) argues that the appropriate organization design is to help the sub-unit to deal with its information processing requirement resulting from the uncertainty of external environment. This argument is obviously applicable to family business networks: different affiliated companies compete in different industries and thus face different levels of environmental uncertainty. An affiliated company that competes in an industry with high environmental complexity and dynamics needs a more decentralized organization because it needs to deal effectively with high information processing requirements and to react quickly to environmental changes. Conversely, for an affiliated company competing in industries of low levels of complexity, a more centralized control system could be adopted (Govindarajan, 1986). Therefore, it is hypothesized that,

Hypothesis 4: In a family business network, the higher the environmental complexity faced by an affiliated company, the more autonomy is owned by this affiliated company.

Second, the degree of resource sharing and skill transfers among affiliated companies of a family business network also affect the appropriate level of delegation. Resource sharing refers to the extent to which a focal member company shares functional activities (such as marketing, manufacturing, R&D, and human capital) with other companies within the business network.

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Resource sharing among affiliated companies could be a source of value because high resource-sharing may yield a synergistic cost advantage in that the affiliated company can access the shared resource at a lower cost than they would have if they each had to acquire it separately (Gupta & Govindarajan, 1986; Porter, 1985). In a family business network, since different affiliated companies can have different levels of resource sharing with other companies, the appropriate levels of decentralization should differ accordingly. When an affiliated company’s level of resource sharing is high, the need for family intervention and central coordination is strong and a more centralized control style is suggested. Conversely, when inter-company resource sharing is low, a decentralized control style is proposed. Therefore,

Hypothesis 5: In a family business network, the higher an affiliated company’s resource sharing with other affiliated companies, the less autonomy is owned by this affiliated company.

Finally, the concept of interdependence introduced by Thompson (1967) was employed. Thompson identified three types of interdependence that exist between organizational sub-units: pooled, sequential, and reciprocal. Pooled interdependence refers to the case when organizational members share common resources but are quite autonomous. Sequential interdependence exists when the output of one part of the organization is the input of another part of the organization. Reciprocal interdependence is the most complex situation, when organizational units are reciprocally interdependent by feeding their work back and forth among themselves. As argued by Baliga and Jaeger (1984), the degree of interdependence among sub-units is the most crucial determinant of organizational control systems. They argue that

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under conditions of pooled interdependence, coordination is less important; while in circumstances of sequential interdependence or reciprocal interdependence, more coordination and negotiation between and among sub-units is required so that a more centralized control system is appropriate. Therefore, it is hypothesized that,

Hypothesis 6: In a family business network, the more interdependent an affiliated company is with other affiliated companies, the less autonomy is owned by this affiliated company.

Research Method

Definition of Family business Networks

Various methods have been proposed in the literature to define the family business (e.g., Daily and Dollinger, 1993; Handler, 19; Litz, 1995). Considering definition clarity and business practices in Taiwan, this study defined the family business network as a group of companies that are inter-linked by family ownership and family management. For example, the Formosa Plastics Groups of the Wang family, the Far East Group of the Hsu family, and the Ching Fong Group of the Huang family. Consistent with existing studies, this definition emphasizes both family ownership and family involvement in management (Alcorn, 1982; Dyer, 1986; Handler, 19; Litz, 1995). Sample

To identify the research sample, the author check the top 115 business networks listed in the Business Groups in Taiwan (China Credit Information Service Limited, CCIS, 1996/97 edition). This study’s reliance on directory data for sample identification was due to the following

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reasons: (a) Most of the affiliated companies of Taiwanese business networks are small in size and not publicly listed, making the secondary database probably the only systematic source of company information. (b) Utilization of directory data enables researchers to accumulate and compare research findings. For example, Hamilton and Kao (1990) also utilized the CCIS database to examine the institutional foundation of family business groups in Taiwan.

Since the business groups listed in the CCIS directory are family-owned in nature, the management of the business groups was thus the variable of primary concern for identifying the sample. In other words, the author needed to identify whether the family business networks are family-managed or professionally managed. Consistent with Daily and Dollinger (1993), those family business networks that have two or more affiliated companies with family general managers were designated as family-managed networks; those business networks that do not have two or more affiliated companies with family general managers were designated as professionally managed networks. Although Daily and Dollinger used the last name as the criterion for identifying family members, given the fact that Chinese family names are much less diversified and those persons carrying the same family name are not necessarily from the same family, this research relied mainly on family history and family charts provided in the CCIS directory for sample identification. For those cases involving ambiguity, double check was conducted by using short telephone interviews with the companies, in most cases with the public relations departments, to clarify whether their general managers are family members or not.

Out of the top 115 family business networks in Taiwan, 83 business networks (72%) have

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two or more family general managers and were recognized as family-managed business networks, with the remaining 32 business networks (28%) being under professional management. These 83 business networks are composed of 817 affiliated companies, and out of which 349 (43%) are controlled by family general managers. These affiliated companies are primarily manufacturers and cover a variety of industries. In terms of the size, in average each affiliated company has 396 employees; there are 490 affiliated companies (60%) have less than 200 employees, and only 140 companies (17%) have more than 500 employees. This confirms the arguments of existing studies (Kao, 1993; Hamilton, 1996; Weidenbaum, 1996) that overseas Chinese family business firms are composed of a network of small to medium-sized firms coordinating under the ownership and management of families. Data Collection

Data on internal organizations were collected via a questionnaire survey. The

questionnaire was developed on the basis of a review of previous research to design appropriate measuring instruments, and through discussions with scholars to assess content validity. The draft was reviewed by two general managers and three senior corporate staff of a Taiwanese family business network, before the final one was distributed. Given that most Chinese family business firms view low visibility as an asset rather than a liability (Weidenbaum, 1996), they tend to avoid publicity and make field surveys particularly difficult. To obtain firms’ willingness of participation, an invitation letter was first sent to the core company (which is usually directly managed by the founding entrepreneur or his/her successor) of each business network. Out of

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the 83 business networks that received invitation letters, 28 agreed to participate. These 28 business networks are composed of 258 affiliated companies, and the questionnaires were sent directly to the general managers of all affiliated companies, by mentioning that the families have agreed to participate. Of the 258 general managers who received questionnaires, 138 (53%) responded and 122 (47%) responses were usable. The response bias was tested by comparing the size and profitability of those affiliated companies that responded versus those affiliated companies that did not respond. No response bias was detected. On average, the responding general managers had worked for their family business networks for 19.1 years, and had worked for their present companies for 13.8 years. Measurements

Affiliated Company’s Autonomy. Based on instruments developed by Hill (1988), the degree of autonomy was operationalized by decomposing corporate center’s control toward affiliated companies’ decision-making into STRATEGIC, OPERATE, and FINANCIAL. The scale STRATEGIC measured the extent to which strategic control was centralized, and was constructed from the responses to nine questions. The scale OPERATE measured the extent to which operational decisions were centralized, and was constructed from twelve questions. Similarly, FINANCIAL measured the extent to which financial autonomy is centralized, and was constructed from four questions. The three scales ranged in value from 1 to 7. High scores indicated a high degree of autonomy over strategic, operational and financial decisions. Family Membership. In Chinese businesses it is difficult to identify family managers and

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professional managers from their names. Therefore, this variable was collected by studying the family history and family charts provided in the CCIS directory, supplemented by telephone interviews for confirmation. A dummy variable was used. General managers of affiliated companies were classified as members of the family which owns the business network (=1), or they are professional managers (=0).

Seniority. This variable was operationalized as the number years for which the general managers of an affiliated company had been working in the family business networks. Data were collected via the questionnaire survey.

First/Second Generation. Data on the generation background of family business leaders were collected from information provided in the CCIS directory. A (0, 1) dummy variable was developed to indicate whether the family business network is under the control of the first-generation founding entrepreneur (=1), or under the control of the second generation (=0).

Environmental Complexity. This variable was operationalized as the degree of technical dynamism that each affiliated company faced in its industrial environment. Respondents were asked to indicated the speed of technical innovation in their main industry, ranging from “extremely rapid” (=7) to “extremely slow” (=1). The higher the score, the more dynamic the environment they faced.

Resource Sharing. Following the measure developed by Gupta and Govindarajan (1986), resource sharing was defined as the importance and extent of resource sharing between an

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affiliated company and other companies in terms of eight functions1. Two questions, both with a seven-point response scale, were posed for each of the functions. The first question collected data on a function’s important in implementing the competitive strategy of an affiliated company, ranging from “not important at all” (=1) to “extremely important” (=7). The second question measuring the extent to which an affiliated company shared resources with other companies in each function, ranging from “none” (=1) to “a very great deal” (=7). Data on the importance of the various functions were using as weights. The higher the weighted-average score, the higher the level of resource sharing that existed.

Interdependence. Based on the concept of interdependence proposed by Thompson (1967), two questions were used to estimate the degree of interdependence. The first asked the respondents to provide what percentage of an affiliated company’s total input came from other companies within the family business network; the second question asked for the percentage of a company’s output which was purchased by other affiliated companies. The sum of these two responses was used as the measure, ranging from zero to 200.

The Cronbach alpha reliability test was used to assess the internal consistency of the

constructs. Table 1 summarizes the descriptive statistics as well as the results of reliability tests of all variables in this study. Correlation analysis of all independent variables is presented in Table 2.

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These eight functions include: manufacturing, marketing/sales, R&D, purchasing, human capital, financing,

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--------------------------------- Insert Tables 1 and 2 Here ----------------------------------

Data Analysis Method

Regression analysis was employed as the main analytical tool to test the hypotheses, with decision-making autonomy of affiliated companies as the dependent variable. In the regression model, two control variables were used: (a) size of the affiliated company. measured by the natural logarithms of the assets owned by the affiliated company, to avoid the problems of extreme values; and (b) size of the business network, measured by the natural logarithms of the assets owned by the family business network. Data on these two variables were obtained from the CCIS directory.

Empirical Results

Table 3 summarizes the results of the multiple regression analysis undertaken to test the hypotheses. Equations A, B, and C show the regression results with dependent variables as STRATEGIC, OPERATE, and FINANCIAL autonomy, respectively. All the three equations are statistically significant at the 99% level and explain more than one third of the variation in the dependent variables.

Hypothesis 1 predicts that in Taiwanese family business networks the family general

governance liaison, and other administrative activities.

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managers will own more decision-making autonomy than professional general managers do. Statistical results show that in Equation B the regression coefficient of family membership is positive and statistically significant at the p<0.05 level, while in Equations A and C the coefficients are not significant. This indicates that the “inner circle of blood” exists within Taiwanese family business networks, but it exists only when family firms are making operational decisions. When family business firms are making strategic or financial decisions, which are expected to influence the long-term development of the whole family business, the delegation policy toward the inner circle and the outer circle are not significantly different. Later analysis will show that the economic/strategic considerations play a more important role than family considerations when delegating strategic and financial autonomy. Hypothesis 1 is partially supported.

Hypothesis 2 predicts that the seniority of general managers will be associated with a high level of interpersonal trust and relational embeddedness within the family business network, further resulting in a high level of autonomy. However, for all the three equations, the regression coefficients of seniority of general managers are not significant. This implies that a long-serving manager will not automatically become trustworthy and receive high autonomy. This echoes with the observation of Chen (1995) that it is difficult to make objective assessments of “manager loyalty” in Chinese family business because it is judged by subjective perception of the family leader. Hypothesis 2 is not supported.

In Hypothesis 3 I argued that compared with the second generation the first-generation founding entrepreneur tends to show more paternalistic leadership and control the whole family

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business network more tightly. Table 3 shows that those affiliated companies belonging to a business network that is under the control of its first generation entrepreneur indeed receive less autonomy than those affiliated companies belonging to a family business network that is under the control of its second generation. The differences are significant in strategic and financial autonomy, but not significant in operational autonomy. The findings suggest that the founding entrepreneurs of Taiwanese family business networks still maintain paternalism and paternalistic leadership styles: they keep financial resources and strategic decisions tightly in hand, while delegating operating responsibility mainly to family members and, to some degree, to professional managers. Hypothesis 3 is supported.

With regard to Hypotheses 4-6, almost all findings regarding to the economic and strategic considerations are statistically significant across the three equations, with signs consistent with the predictions. It shows that when an affiliated company is facing an industrial environment characterized by a high level of complexity and dynamism, its general manager will receive a high level of autonomy from the center of the family business. When an affiliated company is sharing a high level of resources or internal transactions exist between affiliated companies, due to the need to central coordination and integration, a centralized managerial type will be employed. All these findings are consistent with the arguments in the organizational theory and strategic management literature.

Another finding is that the size of family business network is positively significant in all the three equations. This means that when a family business network becomes large in size, due

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to the increased difficulties in central coordination and communication (i.e., bureaucratic costs) it will become more decentralized and delegate more autonomy to its affiliated companies.

----------------- Insert Table 3 Here ------------------------ Summary and Discussion

This research aims to empirically examine the internal organizations of family business networks in Taiwan. Based on the concept of institutional overlaps, this research argues that the management of Taiwanese family business networks is simultaneously influenced by two very different sources of factors: family business factors, and economic efficiency factors.

Based on the data collected from 122 affiliated companies of twenty-eight family business networks in Taiwan, this research found that family business considerations and economic efficiency considerations both play a role in determining the internal organizations of family business networks in Taiwan. Although the influence of economic and strategic factors is more significant than the influence of family and interpersonal factors, about 55 percent of Taiwanese family business networks are still controlled by the first generation founders, and they tend to follow the centralized leadership style by keeping strategic and financial decisions out of the hands of affiliated companies. Furthermore, family managers are more reliable than professional managers only in operational control; when delegating strategic and financial autonomy, the

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family business networks rely more on strategic and economic factors rather than on kinship and social ties.

It is clear from the empirical evidence that although Taiwanese family business networks have not completed the transformation from entrepreneurial control to professional management, most family business networks have started to adopt an internal organization that follow some basic economic rationales proposed in the Western literature. The transformation is on going. A direction for future research is to examine this internal adjustment process from familism to professionalism of Chinese family business firms.

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Table 1: Summary Statistics and Cronbach Alpha Reliability Tests of All Variables

(N = 122)

Variables MaximumMinimumAutonomy - Strategic - Operate - Financial Family membership

7.00 7.00 7.00 1

1.00 1.00 1.00 0

Mean s.d. Items Alpha 4.97 5.88 4.88 0.39

1.26 1.25 1.62 0.45

9 12 4 1

.5 .938 .848 --

Seniority 44 1 19.07 9.85 1 -- First/Second generation Environmental complexity Resource sharing

1 7 5.63

0 1 .86

0.55 4.57 3.

.050 1.24 1.09

1 1 16

-- -- .7

Interdependence 200 0 26.30 33.14 1 -- Size of affiliated company Size of business network

10.90 12.17

1.79 6.50

6.97 9.72

1.91 1.30

1 1

-- --

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Table 2: Pearson Correlation Coefficients among Independent Variables (N = 122)

1. Family membership 2. Seniority 3. First/Second generation a4. Environmental complexity 5. Resource sharing 6. Interdependence 7. Size of affiliated company 8. Size of business network

a

1 2 3 4 5 6 7 -- .102 -- -.044-.041.071 .077 .125 -.192

-.093-.006-.026.204 .255

-- .081 .0 -.012-.008

-- .130 -.022.099

-- .098 .159

-- -.060

--

.079 .020 .053 .125 .249 .385

: Correlation coefficients greater than 0.17 are significant at p < 0.05, those greater than 0.23 are

significant at p < 0.01.

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Table 3: Results of Multiple Regression Analysis (N = 122)

Variables

A STRATEGIC (.937)

Family membership Seniority of general manager First/Second generation Environmental complexity Resource sharing

-.162 (.238) -.003 (.011) -.573 *** (.204) .200 ** (.084) -.207 ** (.095) (.003)

Size of affiliated company Size of business network R2 F

Significant F

*: P < 0.1; ** : P < 0.05; ***: P < 0.01.

B OPERATE (.944) .482 ** (.240) -.005 (.011) -.196 (.205) .193 ** (.085) -.112 (.096) (.003) -.024 (.069) .358 *** (.102) .33 3.528 .001

C FINANCIAL (1.277) -.299 (.325) .001 (.015) -.699 ** (.278) .210 * (.115) -.316 ** (.129) -.008 * (.005) -.0 (.093) .267 * (.138) .31 2.971 .005

Constant 2.129 2.419 3.482

Interdependence -.009 *** -.010***

-.018 (.068) .352 *** (.101) .37 5.058 .000

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