The Role of Market Orientation and Organizational Capabilities of Family Businesses on Competitive Advantage

The Role of Market Orientation and Organizational Capabilities of Family Businesses on Competitive Advantage

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DOI: 10.4018/978-1-7998-1655-3.ch002
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Family businesses are described as organizations owned by one or more members of the same family. Most of the business organizations in the world consists of family firms. However, although they constitute a larger share in almost all of the economies, in their first 5 years of operation, 90% of the family businesses disappear. Of the remaining 10%, 67% die or change ownership after first generation. Only 12% survive under current ownership past the third generation. Therefore, in order to maintain the continuity of the business, family businesses have to achieve competitive advantage. One way to achieve competitive advantage is through becoming market oriented. In this connection, the purpose of this chapter is to identify the role of market orientation and the four basic organizational capabilities (entrepreneurial ability, management ability, global ability, and building partnerships ability) on gaining competitive advantage by systematically reviewing relevant concepts, thereby contributing to the existing literature.
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Methodology Of The Literature Review

What follows is an integrative type of literature review to provide a deeper understanding of the role of market orientation and organisational capabilities of family businesses in their attaining competitive advantage than has previously been presented. Accordingly, 84 documents in electronic databases, including JSTOR, EBSCOhost, ScienceDirect, Scopus, ProQuest, Springer and SAGE, which used any design, quantitative or qualitative, are scrutinised. These provide discussions about market orientation and the organisational capabilities of family firms relating to competitive advantage between 2001 and 2019. In identifying the studies, the following key words were utilised: family business, family business life cycle, market orientation, management abilities, entrepreneurial abilities, partnership abilities, dynamic global abilities and competitive advantage.

Key Terms in this Chapter

Partnership Abilities: The ability to build inter-organizational relationships that arise between the parties in order to achieve common goals.

Market Orientation: Market orientation is the ability to understand and satisfy the needs and wants of the customers in order to achieve maximum level of profitability.

Dynamic Global Abilities: The capabilities of a firm that consists of vision and strategy, relying on core competence, efficient communication, innovation, appropriate organization structure, organizational culture and technology management.

Competitive advantage: A condition that puts a company in a superior business condition compared to its competitors.

Family Business: Businesses where family members have a minimum ownership stake of 20-25% that are distinguished as family firms from non-family firms.

Management Abilities: The capacity of the individuals to implement mental activities.

Entrepreneurial Abilities: A management attitude within the scope of strategy-making process in order to take entrepreneurial decisions in organizations.

Family Business Life Cycle: The process that family businesses go through and includes birth, growth, maturation, and continuity stages.

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