Collaborative creativity, disclosure of information and professionalization within the family business

Written on 03 November 2017.


Interview with Dr. Yan Du

 

 Dr. Yan Du is an Associate Professor of Accounting and Family Business. She is actively involved in the EDHEC Family Business Centre, mainly doing research on corporate governance in family businesses. She has also developed specialized courses which incorporate family business topics in accounting and management control. 

 

 

Dr. Yan, how do family businesses create a significant level of social, human and financial capital?

"No doubt, family businesses play an important role in our economic and social life. Because of the kinship and shared history, family members trust each other and identify themselves within the business. What I really appreciate is their entrepreneurial spirit. Indeed, they are innovative, and not afraid of taking risks. Regarding financial capital, family businesses are profitable in a long run. They contribute to 70% to 90% of global GDP annually. However, sometimes it could be difficult for them (especially those start-ups) to raise external funds. So they have to rely on other family members or friends for financing."

 

Could you tell us about the collaborative creativity within the family business?

"Families in business are creative in nature given their entrepreneurial orientation. However, the success of a family firm depends on the collaborative creativity within the business, especially with nonfamily members in the business. Families are often secretive and tend to trust less nonfamily members in business. Without sufficient information about the firm, it is difficult for nonfamily members to be creative and collaborate with families. Thus, open and frequent communications are important for stimulating collaborative creativity."

 

The mutual trust and exchange among family members, and the value commitment to the business could encourage creativity and provide competitive advantage over nonfamily businesses.

 

How does the family dimension affect creativity in family business?

"The mutual trust and exchange among family members, and the value commitment to the business could encourage creativity and provide competitive advantage over nonfamily businesses.  However, tensions and conflicts among family members, which happen quite common in later generation family businesses, could harm the implementation of creative ideas. Moreover, to sustain the creativity in family business, the entrepreneurial spirit should be alive across generations."

 

Creativity requires professional management and control to become innovation.

 

 

What are the advantages and disadvantages of family businesses for fostering creativity?

"Families’ individual human capital, as well as mutual trust, and commitment among family members are all valuable assets for creativity. However, only a creative idea is not enough in business. It must be accompanied by a feasible plan with the objective of influencing the business, for example, by opening up a new service, or by improving a current product. So creativity requires professional management and control to become innovation. Family firms need to professionalize the business, and install processes and systems that leverage their unique resources. On the other hand, creativity needs autonomy and freedom, but inappropriate use of management control could inhibit creativity. Thus, balancing creativity and control is the key. Sometimes, informal relational controls in family business (e.g., collective sense-making; creating a business community; exchanging ideas at social events) could be more effective than formal controls."

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