Business Transfers, Family Firms and Entrepreneurship

Bérangère Deschamps, Audrey Missonier, Catherine Thévenard-Puthod, Paulette Robic, Dominique Barbelivien

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000322965
• Edition: 1
• Topic: Business
• Subtopic: Small Business
• Index: Business

'Business transfer' refers to the transfer of ownership and leadership from one or more outgoing owner-manager(s) to one or more incoming owner-manager(s). Apart from all the company's material assets, it presupposes that information, relationships, know-how and social capital are also transmitted from one to the other.

While much of the research on entrepreneurship has focused on new business ventures, few studies have considered business transfers as an alternative way of embarking on entrepreneurial activities. Business Transfers, Family Firms and Entrepreneurship provides the international community with a more comprehensive state-of-the-art of business transfer studies, which will enrich readers' understanding. The business transfer is examined through different prisms: family businesses, internal business transfers to employees, external business transfers, and woman in business transfers.

This book deals with business transfer as a whole, following a logic of continuity and sustainability for the transferred firm. It offers a refreshing point of view on business transfers, in terms of both the process and the actors, and from both the seller's and the buyer's sides. It presents the research on all types of business transfer including internal and external transfers and will be of interest to researchers, academics, and students in the fields of entrepreneurship, small business management, family business, and strategic management. It can also be instructive for practitioners and stakeholders involved in a business transfer.

Part I

Definitions

The two conceptual chapters that open this book provide us with two models to define and analyse the phenomenon of business transfers. The emphasis is put on transfer as a process. We are hence offered the opportunity to think about business transfers from two new angles.

Chapter 1, Business Transfer: Historical Perspectives, Definitions and the Transfer Process, reviews the history of the concept of business transfer. Bérangère Deschamps proposes a consensus definition to be used in this field, as well as a method for mapping business transfers. A breakdown of the transfer process into three steps of a recurrent cycle—entry, transfer and entrepreneurial exit—is introduced as a framework to analyse the entire process. The business transfer process is thus modelled in such a way as to propose a unified vision that cuts across the French and English-speaking worlds.

Chapter 2, Revisiting the Entrepreneurial Exit Decision Process: A Decision-Making Model, proposes to delve deeper into the question of the exit of the outgoing CEO by revisiting the decision-making process leading to the exit. Marie-Josée Drapeau and Maripier Tremblay build upon the model of strategic decision processes, which has been adapted and refined. They detail the decision-making process of the CEO about to leave the SME, which makes it of primary interest. They end by proposing a reviewed model that integrates the factors that can be used for further studies.

1 Business Transfer

Historical Perspectives, Definitions and the Transfer Process

Bérangère Deschamps

Over the last two decades, the topic of transferring a business has been of increasing interest to researchers. On one side are the francophone researchers. Since 2011, francophone researchers have seemed to agree on the term ‘transmission-takeover process’, which refers to the relationship between two main actors: the outgoing and incoming CEOs (Cadieux and Deschamps, 2011). Through transmission and takeover, ownership and management are transferred from one CEO to another (Cadieux and Brouard, 2009). On the other side, Anglophone academic literature has studied this issue almost exclusively in the context of family business succession (Le Breton-Miller et al., 2004; Sharma, 2004 for instance).

The two research topics—business transmission-takeover and family business succession—appear distinct and specific; indeed, so far, they have not crossed over. However, Haddadj and d’Andria (1998) have questioned whether the differences between internal (i.e., family) and external transfers are significant enough for these topics to be separated to this degree. Barbot and Richomme-Huet (2007) also question the boundaries of these two academic fields. In this chapter, we aim to bring these two research communities together through entry and exit theories. Indeed, Parker and Van Praag (2012) and Block et al. (2010) include takeovers in their entrepreneurial entry mode, and Nordqvist et al. (2013) integrate the exit mode in their definition of the entrepreneurial process. In doing so, these authors cast a new light on the field: through their association of entry and exit, they recognise that the founder will one day be the outgoing CEO.

We have so far observed two different ways to study business transfers. Academic literature also demonstrates that there are many ways in which a business may be taken over, for example, internal vs external or the whole firm vs a part of it (Deschamps and Paturel, 2009). Indeed, from a closer look at the published papers, we have noted confusion in the vocabulary in both the francophone and Anglophone literature. For instance, Parker and Van Praag (2012), who compare new ventures and takeovers as entrepreneurial entry modes, do not specify the kinds of takeovers they include in their study. Meanwhile, francophone researchers use ‘transmission’, ‘succession’ and ‘reprise’ interchangeably, whereas we observe nuances between the terms: ‘transmission’ refers to the outgoing CEO’s point of view; ‘succession’ concerns family business transfer and ‘reprise’ refers to the incoming CEO’s point of view. Chapter 10 (Deschamps and Durst, this volume) also displays confusion in vocabulary, as the authors do not always specify which kinds of business transfers they are referring to. How can researchers work on papers in which the vocabulary does not precisely correspond to the business transfer modes they are studying? Words create meaning. Yet, if this meaning is not defined, they can obscure comprehension of the issue.

In this chapter, we pursue two aims: first, we analyse existing literature to demonstrate the evolution of the concept and opinions over time; second, we propose a conceptual framework on business transfers with the ambition of becoming the international reference for future research in entrepreneurship and family business. In doing so, this chapter proposes three contributions: (1) a unified concept of business transfers for the academic community; (2) a mapping of different transfer modes as a frame of reference; and (3) a processual model of the business transfer to unify the previously separated Anglophone and francophone visions.

The chapter is divided into three sections. The first provides a historical perspective of the existing research on business transfers. The second defines the issue. The third section explains the business transfer process in the context of entry and exit entrepreneurial theories.

Historical Issues Around Business Transfers

Until the end of the 1980s, entrepreneurship was associated with a new venture (Vesper, 1980; Shapero, 1984; Gartner, 1988; Davidson, 1989; Bygrave and Hofer, 1991; Bygrave, 1995). In 1988, Carland, Hoy and Carland asked the following questions: “Is buying a firm an entrepreneurial activity? Should people who take over a firm be excluded from entrepreneurship studies?” (p. 36). These questions went unanswered, but they became the basis for a broadening of the definition of entrepreneurship beyond new ventures as the only way to become an entrepreneur. For instance, Donckels (1995) has since studied the takeover as an entrepreneurial career, while Sharma and Chrisman (1999) recognise the person who takes over a business as an entrepreneur (albeit in the context of family business succession).

In France, research has mostly focused on external business transfers. The first PhD thesis on business takeovers, for example, studied strategic choices from the point of view of the incoming CEO (Siegel, 1989). Deschamps (2000) elucidated the takeover process (by an external individual, a previous employee or a previous commercial partner). After this work, francophone researchers agreed to include business takeovers within the academic field of entrepreneurship (Deschamps, 2003). Several studies have contributed to a deeper understanding of both the takeover process (Boussaguet, 2005; De Freyman, 2009; Saoudi, 2010) and actors’ behaviours (Picard and Thévenard-Puthod, 2004; Deschamps and Geindre, 2011), all of which have focused on the perspective of the incoming CEO. Research on the previous owner-manager of the target firm has also increased (Cadieux and Lorrain, 2004; Cadieux, 2007; Bah, 2009).

Excluding Barbot and Richomme-Huet (2007) and Meiar (2015), exit and entry are considered as quite distinct in the literature. However, Cadieux and Deschamps (2011) explain that former and new CEOs cannot be considered as two separate and independent actors, but rather as partners who share a common project: transferring the firm from one to the other. According to Cadieux and Brouard (2009), the issue of transfer always applies to takeovers because the outgoing CEO is, it can be assumed, concerned with the continuity of the firm, while the incoming CEO aims to manage an existing activity. In a special issue of a scientific review, Cadieux and Deschamps (2009) invited researchers to think of takeovers as linked to transfer and to consider the relationships and the interconnected actions between the two CEOs.

Since then, the literature has been enriched by new scientific knowledge on the relationship between the two main stakeholders, for instance on transferring: networks (Geindre, 2009), social capital (Coeurderoy and Lwango, 2014), social representation (Bornard and Thévenard-Puthod, 2009), strategic orientation (Grazzini et al., 2009) and corporate social responsibility (Mazari, 2018). Meiar (2015) compared previous and following outgoing and incoming CEOs’ perceptions of the business model of the target firm. This duality has also inspired research in different business areas, such as the specifics of industry (Audet and St-Jean, 2009; Picard, 2009), the wealth of the firm (Geraudel Jaouen et al., 2009) or advisors (Deschamps et al., 2010; Thévenard-Puthod et al., 2014). In parallel, some authors have studied the stakeholders in the business transfer: employees (Estève, 1997), characteristics of the outgoing CEO (Bah, 2009), incoming CEOs in the context of a team (Thévenard-Puthod, 2014), sibling successors (Cisneros and Deschamps, 2014), advisors (Deschamps et al., 2014) and succession by a spouse following the CEO’s death (Robic and Antheaume, 2014).

Chronologically speaking, the two actors’ business transfer processes are separated, but francophone academic literature has tended to unify these points of view, placing them on a continuum from exit to entry. Researchers have thus understood takeovers within a global perspective that does not bring the outgoing and incoming CEOs into opposition. In this context, De Freyman and Richomme-Huet (2010) have suggested a unified vision for takeovers based on two criteria: the transmission mode (internal/external to the family or to the firm) and the recipient of what they call the ‘succession’ (inheritor, employee, physical person or legal person).

In parallel, entrepreneurial entry and exit theories in the Anglophone world also began to integrate the two actors in a business transfer. Business transfers are a good illustration of the entrepreneurial process because they are at once an exit mode (for the outgoing CEO) and an entry mode (for the incoming CEO) (Parker and Van Praag, 2012; Block et al., 2010; Nordqvist et al., 2013). Nordqvist et al. (2013) explain that “the entrepreneurial process does not end with new venture creation and that entrepreneurial exit should be acknowledged as a core part of the entrepreneurial process” (p. 1087). Indeed, with the entrepreneurial process the authors offer an integrated vision of entrepreneurship. This vision was ground-breaking: until then, Anglophone literature had never considered business transfer as a part of entrepreneurship; on the contrary, business transfer was reserved for family business (see Part IV, Chapter 10, this volume, for some explanations).

Finally, scientific communities do not cross over. We wonder why, because the characteristics of the process, the needs of the main actors or the emotions each one feels are not self-evident. Even if the family element is characteristic, it appears that such issues are relevant to all types of business transfers.

In summary, francophone researchers have consolidated knowledge on the subject of business transfers, specifically on external takeovers and from a dual perspective of the outgoing and incoming CEOs. The evolution of the literature from considering takeover to transmission-takeover shows the progress of the research. Academic research on this topic is now considered to be a legitimate part of the entrepreneurship field. However, as explained in the introduction, several terms are used to refer to the same phenomenon, which causes confusion. To increase academic spreading, we feel it is necessary to clarify the vocabulary. That is our aim in the next section.

What Is a Business Transfer?

As explained in the previous section, until now, research has been structured around three trends: (1) the term ‘transmission’, referring to the outgoing CEO (either a predecessor in the family firm or a seller) (Cadieux and Brouard, 2009); (2) the term ‘takeover’, which considers the perspective of the incoming CEO (Deschamps and Paturel, 2009); and (3) the term ‘transmission-takeover’, which brings together the two points of view and denotes the two boundaries (entry and exit) of the practice (Cadieux and Deschamps, 2011). Today, we think that research needs to go further to integrate and define these terms while, at the same time, simplifying them. The lack of consistency in the vocabulary puts into question the scientific va...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• Foreword
• Introduction
• Part I Definitions
• Part II Family Business Transfers
• Part III Internal Business Transfers to Employees
• Part IV External Business Transfers
• Part V Women in Business Transfers
• Biographies
• Index