Leadership and Sustainability: From the First to the Second Generation of SMEs Ownership

Leadership and Sustainability: From the First to the Second Generation of SMEs Ownership

DOI: 10.4018/978-1-5225-3543-0.ch002
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This chapter on leadership and sustainability from the first to the second generations of SME Ownership addresses both the leadership and sustainability from the perspective of different generations in family SMEs. Because, sustainable leadership is seen as a key factor of the competitiveness in a family enterprise. Without effective and efficient human capital, the SMEs cannot gain the goals such as growth, internationalization and increasing performance. Generational differences in SMEs may improve the creativity and innovation, providing that the established appropriate management system and strategy. From this viewpoint, this chapter provides an overview of generations, leadership, sustainability and competitiveness about SMEs
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1. The Generations Of Sme

Small and medium-sized enterprises (SMEs) especially family-owned businesses are the force of the economies across the world. Because they provide employing a major amount of workforce across all business verticals. The share of the family-owned businesses in them are about 60 to 70% contributing employing. According to Shiva (2016) in India, the gross output of these families owned business accounts for 90% of the industrial output, while in the USA the accounts of family run businesses are 90%. It means that 40 to 50% of the Gross National Product is contributed by family owned businesses. Similarly, the rate of France is 59% and so it can be said that 70% to 85% of all businesses are family run businesses in the world industries (Shiva, 2016). But these enterprises face some challenges and have some difficulties in the process of transition.

From the first to the second generations, the need of professionalization emerges more specifically because the family generally grows faster than the enterprise. The profit pressure on the entrepreneur leads the growing, but the decision has a critical importance because of the uncertainty. The first generation wants to sustainable success, but there is no guarantee about the future and about the talents of the new generations. All family members have roles which support the owner and others for success. So, success is a personal matter, while the future of the enterprise is bound to the commitment of the members. There are shared values and a business culture which is felt by all employees when the organizations help to maintain the family ties from one generation to the next. The successful transfer of the enterprise from the first generation to the second depends on the family, the shareholders and the concept of the ownership (Shiva, 2016).

The passing of the enterprise from one generation to the other is a big challenge for the owners because they are worried about the sustainability of the firm. The survival of the enterprise is obvious, so they need to manage this critical process carefully. One of the main goals of the transfer is the growth of the family firm as well as increasing business performance. In this process, some disasters cause the disintegration and division. As a result of this process, family members concede the irreversibility of economic potential and downsizing of the firm. To avoid this ending, family member especially the top managers or entrepreneur should have a professional manner and pay attention the family capital. Institutionalization and financial awareness are the key factors of transfer the enterprise from one generation to the other or sustainability.

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