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“Standing still is going backwards”: strategic changes in family firms

Nowadays, organizations are confronted with an environment that is constantly changing. In order to be successful in the long term and to continue to distinguish themselves from the competition, organizations must therefore be flexible and willing to implement strategic changes. Although at least 70% of the Belgian economic landscape consists of family firms, little is known about how these firms deal with strategic changes. Moreover, we see that family firms often fail to successfully transfer the business to the next generations. Does this mean that family firms too often opt for the status quo? And what does it take to implement successful strategic changes as a family firm? To unravel this, Hasselt University and the University of Antwerp have jointly set up a large-scale research project on strategic changes in family firms. This research explores the determinants and impact of strategic changes in this unique context.

In the first place, we look at the specific changes that family firms are making. Initial results show that they will mainly invest in more tangible fixed assets, such as buildings or machines. About 51% of the family firms indicate that they have focused on this in the past three years. Adding new product lines is also a common strategic change. Of the participating family firms, 36% have implemented this specific change. These two strategic changes are more common in family firms than in non-family firms. Strategic changes in the form of mergers or acquisitions, on the other hand, are less common in family firms, namely only in 11% of the cases. This is less than for non-family firms, of which 19% made this change. This might be explained by the fact that family firms often strive to retain control of the business within the family, which can be complicated by mergers or acquisitions.

We then also look at the actions family firms are taking to support strategic change. Here, we see that family firms mainly opt for increasing employment. More than 40% of family firms have increased their employment in the past three years. This expansion of the workforce is often required to successfully implement and operate the expansions outlined above. However, the extent to which family firms are expanding their workforce has slightly decreased due to the COVID-19 crisis. Changing internal organizational processes and structures is also an action commonly taken by about a quarter of family firms to promote strategic change. When we compare family firms to non-family firms, they appear to take the same actions to implement strategic change. There is, however, a difference in the extent to which they take these actions. For instance, non-family firms tend to increase their employment to a greater extent. They also implement changes in organizational structures on a larger scale than family firms. Although family firms clearly consciously focus on actions to support strategic change, the order of magnitude with which non-family firms take these actions is higher.


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