Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Activities involved in succession process 7


Published on

Published in: Business, Technology
  • Be the first to comment

  • Be the first to like this

Activities involved in succession process 7

  1. 1. Journal of Contemporary African Studies, 21, 1, 2003Entrepreneurial Succession andPost-Founder Durability: A Study ofIndigenous Private Manufacturing Firmsin Igbo States of NigeriaChikwendu Christian UkaegbuThe years following the fall of Soviet Communism have witnessed a heightened domestic andinternational enthusiasm for democracy and the free market. This new world order, backed byneo-liberal ideology, currently wields influence throughout Africa, where deliberate efforts havecontinued in the direction of private sector development. Private sector development, in turn, hasplaced indigenous entrepreneurs at the centre stage of productive activity.In response to these developments, federal and state governments in Nigeria s nascentdemocracy have articulated their intentions for industrial development premised on the freemarket model. These governmental intentions include the attraction of more foreign investments,attempts to restore the confidence of foreign investors, the improvement of conditions to enhanceindustry, and the rejuvenation of physical infrastructure to support and facilitate industrialactivities. Other governmental objectives include greater efforts to make the best of the exportprocessing zones still under construction, and the continuation of the privatization process startedand stalled by previous administrations. Political intent, however, is one thing. Aggressive andcommitted governmental effort is quite another. After all, previous administrations had stalled onsimilar intentions towards industrial development.In the same vein, representatives of the organised private sector, led by the ManufacturersAssociation of Nigeria, lament the continued decline of industrial capacity utilisation, lowconsumer demand due to the high level of poverty in the country, and the financial difficultiesexperienced by small- and medium-scale enterprises. They also point to the countrys excessivedependence on imported raw materials and machinery .They advise the government to strengthenlegal institutions to guarantee law and order for business to flourish. Implicit in the demands ofthe organised private sector is the neo-liberal paradigm. This paradigm excludes governmentfrom direct economic activity, but assigns it the role of creating an enabling environment forprivate entrepreneurial initiatives to flourish.Both the government and the organised private sector have legitimate concerns. But anotherconcern is that of enterprise durability. In this study enterprise durability means the prospects fora firm to exist for long after the death of its founder without a significant decline in human andmaterial input as well as organisational output. For lack of a better term, I have called thisscenario post-founder durability. This problem receives only occasional attention from theindigenous business community, scant attention from academic observers, and almost noattention from policy-makers. The fact is that medium- and large-scale enterprises owned byindigenous Nigerian entrepreneurs have continued to spring up and some of these firms have
  2. 2. Journal of Contemporary African Studies, 21, 1, 2003production facilities and organisational structures comparable to their multinational or state-owned counterparts. But little is known about their organisation and management, and theirpotential to endure is difficult to predict, especially after the death of their founders.Prospects for economic development become limited where the wealth accumulated by eachgeneration of indigenous entrepreneurs is lost when the owners die. Development, therefore, isanchored in the principle of cumulative legacy. A legacy of generational extinction ofaccumulation makes for underdevelopment or undevelopment. Put differently, manyindigenously-owned private investments in Nigeria usually blossom under the leadership of theirfounders. What are their prospects for survival after the founders have either died or areincapacitated by age or illness?Entrepreneurs innovate, open new markets, and bear risks. They find new combinations ofmaterials, processes, and products. They create employment, commercialise new inventions andinvest in new opportunities (Marsden 1990; Kilby 1971; Schumpeter 1961). However, it is onething to commit entrepreneurial will and energy to establishing a large commercial enterprise. Itis quite another to create an organisational structure that can enable the enterprise to survive andendure. Investments may grow and flourish with the committed leadership or excellentmanagerial acumen of the founder, but may not survive his exit.Medium- and1arge-scale indigenous private manufacturing enterprises in Nigeria have expandedsince the end of the Nigerian civil war in 1970. These enterprises, which arguably hold the key tothe countrys economic development, deserve more research attention than they currently get. Itis important to understand their internal structure, management, and entrepreneurial successionplans as well as their potential to be durable springboards for societal accumulation. Aspects ofthe internal structure and growth of the firms under consideration have been variously analysedby some observers (Forrest 1993; Brautigam 1997).Most other studies of enterprises in Africa have concentrated on medium- and small-scaleenterprises (MSEs), firms employing fewer than 100 workers (Biggs and Srivastava 1996).These studies have focused on a variety of subjects including the contribution of MSEs toemployment generation (Mead 1994); their role in economic development (Liedholm and Mead1999); and their chances of survival or closure (McPherson 1995). Using the proportionalhazards model McPherson identified several factors which affect the survival or closure of firmsin four countries of Southern Africa. These include firm size, location, speed of growth,investment sector, and the gender of owner. McPhersons study focused on MSEs, used firms inmultiple sectors, operational enterprises, and included firms in which owners were alive, but didnot emphasise post-founder durability. In fact there is in Nigeria a tendency for business venturesto fail upon the death of their founders, and the public awareness of the phenomenon as anational problem about which something should be done.The present paper focuses on post-founder durability in the Igbo states of Nigeria, using casestudies derived from medium and large firms (employing 55 to more than 100 workers) whoseowners had died. The case study method is used to point to a phenomenon that could pose asevere obstacle to capital accumulation and thereby limit economic development in the Igbostates, Nigeria, or Africa for that matter. The author summarises observations on severalenterprises that failed or were shut down for a considerable number of years after the death of
  3. 3. Journal of Contemporary African Studies, 21, 1, 2003their founders, and highlights some implications of the findings for the theory and policy ofeconomic development. This paper is an exploratory rather than explanatory endeavour,concluding with suggestions for more focused and in-depth studies on the subject.Methodological SummaryThe case stories presented in this paper were collected from medium- and large-scale indigenousprivate enterprises founded and owned by Nigerians in the former Anambra and Imo states,presently split into five as a result of the creation of new states in 1991 and 1996. The five statesnow are Abia, Anambra, Ebonyi, Enugu and Imo, all of which are predominantly inhabited bythe Igbo. The study started in 1989 after some guided trips to indigenous firms by my IndustrialSociology class at the University of Nigeria, Nsukka, as part of the practical experience for thecourse. In 1991 the author collected observational, survey and interview data during six monthsof intensive fieldwork. The primary objective was to explore the extent to which entrepreneurialroles in indigenous private manufacturing firms facilitated or handicapped their success anddurability. However, the general proposition was that the prosperity of any economic enterprisedepends on the collective efforts of its entrepreneurs, managers and workers. Data were collectedfrom the three groups using separate questionnaires and interview schedules. A total of 20functioning firms participated in the study. Firms were selected from a variety of industries,namely pharmaceuticals, paper, shoe, automobile parts, machine tools, beverages, plastics,paints, chemicals and grains processing, Six non-functioning firms were included as a result ofspontaneous decisions made during the fieldwork. It was felt that understanding why they hadstopped production would help to explain some dimensions of enterprise performance anddurability. In-depth interviews with owners, managers and in some cases offspring of the owner-founders showed that their failure or suspension of activity was not always the result ofmanagerial or entrepreneurial inadequacies. Rather, questions of trust, family and partnershipsquabbles and inheritance problems were paramount. The details of the methodology and the re-suits of the survey on the structure and management of the enterprises have been publishedelsewhere (Ukaegbu 1995, 1998, 2000).The present paper focuses on the status of five firms whose owners had died. It also contains theresponses of some living entrepreneurs on the phenomenon of entrepreneurial succession anddurability .The latter were used to try to interpret the factors that might have contributed to theexperiences of the post-founder failed firms. Another field study of the same firms wasconducted in 2001, 10 years after the maiden study in 1991. The five firms which had been shutdown after the deaths of their founders were revisited. It was also observed that an additionalfour owners of other firms or group of companies had died since the 1991 study. The post-founder status of those firms is incorporated in this paper. Over- all, the 2001 study showed thatthe deplorable situation of the initial five firms had not changed. Three of the four firms whoseowners died after 1991 faced the same problems as their counterparts whose owners had diedbefore 1991. Aspects of family relations and cultural practices appeared to be of paramountsignificance, and examining these factors brought added explanations and insights to the problemat hand.Post-founder failed firms were ones that either suspended production for a prolonged period orwere permanently closed down after the death of their founders. To tackle the issue, observationsand interviews focused on owner-founders and/ or the heirs-apparent of functioning firms as well
  4. 4. Journal of Contemporary African Studies, 21, 1, 2003as on stories of non- functioning enterprises told by surviving associates and distant observers ofdeceased founders. The concept of entrepreneurial succession is particularly central in this case.This study differentiates between on-founder performance and enterprise durability. On-founderperformance refers to what happens to a firm when its founder is alive and in control of theenterprise. Durability issues refer to what happens to a firm or group of firms after the founderrelinquishes control due to old age, illness, or death. But plans for durability can and shouldindeed be built into the objectives, vision and administration of the enterprise when the owner isstill in control.Enterprise Durability in Theoretical PerspectiveSuccession, in organisational theory and practice, refers to the process of transferring managerialcontrol from one leader or one generation of leaders to the next. It includes the dynamicspreceding the actual transition as well as the after- math of the transition (Shepherd andZacharakis 2000). In the context of family business, Sharma et al (2001) define succession as theactions and events that lead to the transition of leadership from one family member to another.By extension, entrepreneurial succession is the process by which ownership and control of theproduction or commercial infrastructure accumulated by one generation of a nuclear or extendedfamily is transferred to the next. In the context of this paper, it entails the transfer of acommercial investment of any type from the owner-founder to his prospective survivors. Thesecould be members of a nuclear family in a monogamous household such as a wife and children,or members of a compound family in a polygynous household, namely wives and children.Survivors could also be members of the extended family such as uncles, aunts, nephews, nieces,cousins, and affines. In most cases in this study, however, entrepreneurial succession hasfollowed or is expected to follow the rules of inheritance in Igbo society. Here, the owner-founder actually bequeaths his enterprise(s) to his offspring. Or, where he is still alive and incontrol, his offspring are assumed to be the heir(s)-apparent to his assets, including hiscommercial enterpnses.The literature on the subject shows that although a viable succession plan often results in asmooth transition, certain factors do constrain the process. For instance, many people avoidthinking about succession because to do so means acknowledging ones mortality (Kets de Vires1993). This may be more prevalent among young owner-founders, who feel that they have manyyears of life, health and strength ahead of them. Further, conflict can arise between the founderand the heirs-apparent upon the realisation by the former that more responsibilities to the lattermean less power and visibility to him, the founder. Conflict can also escalate within the family asmany members campaign, lobby, or engage in intrigues to secure power in the prospectively newentrepreneurial dispensation. Consequently, choosing the appropriate successor even from onesown children poses a problem (Handler 1991). The founders choice may be reversed, or theenterprise may disintegrate upon the death of the founder as a result of posthumous antagonismsamong family members. Therefore, maintaining good family relationships is extremely importantfor a successful and effective succession (Sharma et aI2001).It could be argued, in the context of Igbo society in particular and Africa in general, that thepropensity for intra-family antagonism over entrepreneurial succession upon the death of thefounder or even when he is still alive will be greater in polygynous than in monogamoushouseholds. This is because each sub-family (kitchen as it is translated in some Igbo dialects)
  5. 5. Journal of Contemporary African Studies, 21, 1, 2003usually views itself as a separate entity within the polygynous complex, instead of perceivingitself as part of an integrated whole usually expected of members of monogynous families. Thatshould not be construed to mean that all polygynous households are conflict-ridden anddetrimental to entrepreneurial succession, nor that all members of monogynous households areepitomes of consensus. Successful transition, Handler (1991) notes, is a function of mutualrespect between generations and accommodation by actors in the succeeding generation. A majorproblem lies in how to create the shared values that can facilitate a smooth and successfulsuccession (Dryer and Handler 1994; Hall 1986). How then can an owner-founder design andconsummate a smooth and successful succession? Although there is no magic answer to thisquestion, the literature on the subject has some proposals using ideas from behaviouraleconomics.According to Isaacharoff (198) the endowment effect, a concept in behavioural economics,refers to the propensity of people to value what they already have more dearly than what theyexpect to have, or what they have the opportunity to acquire in the future. People place a highervalue on an object that they have owned (Shepherd and Zacharakis 2000). Put somewhatdifferently, when a per- son already owns an object its loss has greater value than the ability toacquire the object prior to ownership. For example, a person refuses to exchange a shirt for a pairof shoes not necessarily because the former is more useful to him than the latter but because theshirt is already in his possession and therefore would not be easy to part with.Shepherd and Zacharakis propose that where the endowment effect applies in family businesssuccession, it would be expected that once the successor owns and controls the family businesshe or she would value the business more than he/she did prior to ownership. However, thesuccessors value of the business may not equal that of the founder because, as students of theendowment effect theory (Isaacharoff 1998; Knetsch 1989) have found, value increases with theduration of ownership. Consequently, the founder or the past leader who is handing over controlof the family business is likely to place greater value on the business than will the new leader orsuccessor. The mode by which the successor obtains the business and the amount of financialand non-financial investments (sunk costs) he/she makes into it influences the value he attachesto it. In behavioural economics, the idea of sunk costs suggests that people s aspiration levelsincrease with the amount of investment made. The higher the sunk costs, the more the owner willdo to achieve a higher aspiration level (Zeelenberg and Van Dijk 1997).Sunk costs are financial or behavioural. With respect to the family business successor, financialsunk costs include what Shepherd and Zacharakis (2000) call buy in costs. This is the money thefuture leader has to invest into the family business in order to obtain management control. Here,the son, daughter or any heir-apparent to the enterprise incur& costs if he/she has to purchaseequity in the company before taking it over. In the case of multiple children, each child would bemade to purchase equity, the amount of which determines his/her status in the organisationalhierarchy of the enterprise. Having financial sunk costs presupposes that the founders childrenare grown-up and earn money from independent work either within or outside the familybusiness. The financial sunk cost requirement is of potential utility to the succession process, theowner-founder, and the business. It is a test of prospective successors ability to buy the amountof equity that can transfer management and control of the business to them: heirs-apparent maythus have proven to be good and effective managers of their own personal resources. There is anunintended and possibly a dysfunctional con- sequence of the financial sunk cost proposition.
  6. 6. Journal of Contemporary African Studies, 21, 1, 2003Heirs-apparent or prospective successors could expropriate the resources of the family businessto obtain requisite revenue with which to purchase equity .Where that is the case, such acannibalisation could bleed the family business to an untimely death even before succession isconsummated.By contrast, behavioural sunk costs include the time and effort invested into the family businessby the future leaders in order to obtain management control. According to Shepherd andZacharakis (2000), the offspring or heirs-apparent would have invested significant time andeffort if they worked their way up the organisation as opposed to jumping immediately into amanagement control position without paying their dues. Hence source dependence, that is, howthe object/business was obtained, is a crucial factor to predicting how the heir-apparent willvalue the enterprise.The basic idea in the theory of sunk costs, whether financial or behavioural, is that peoplesattachment to an object depends on whether it was obtained by their efforts or by chance.Because windfall gains are unearned, they tend to be less valued than earned gains and so aremore vulnerable to being easily spent or gambled. Shepherd and Zacharakis (2000) found thatAmerican university students who were potential heirs to family businesses valued thosebusinesses more when they invested both financial and behavioural sunk costs and earned theright to take over the business. Further, the more the financial sunk costs, the less the willingnessof the prospective successor to undertake the type of risky investments or decisions that couldjeopardise the durability of the enterprise, such as selling the business.The above summary of the literature on the endowment effect and sunk cost theories derivesfrom studies conducted mainly in developed countries. This author is not aware of any study thathas used the theories to investigate entrepreneurial succession and enterprise durability inNigeria. Neither is there the intention to conduct formal tests of the theories in the present study.Instead, the theories will be used to infer what might have happened to some of the failedenterprises discussed in this paper, and to suggest that formal studies of entrepreneurialsuccession in Nigeria and elsewhere in Africa will benefit from the assumptions of the theories.The issue of enterprise durability is examined below. The cases consist of enterprises whoseowners were deceased at the time of the study. The cases are best characterised as storiesattempting to chart the intersection of family, culture and the future of economic accumulation ina developing country.Enterprise Succession-Durability Problems: Case Stories of Post-FounderEnterprise Death SyndromeCase 1: The Magnificent but Desolate Paint FactoryA magnificent paint factory, in a town in Anambra state, was abandoned for five years becauseof intra-family squabbles over who, among the founders off- spring, should inherit or occupy thetop position in the enterprise. The death of the founder of this large-scale firm generated muchacrimony and litigation among the children of his four wives. The first and oldest son invokedthe principle of primogeniture characteristic of traditional Igbo culture and laid claim to thedirectorship of the firm. The sons of the other three wives rejected his claims. As a securityguard at the company premises informed this author, a court ordered the suspension of
  7. 7. Journal of Contemporary African Studies, 21, 1, 2003production until a verdict was reached on the future of the firm. The magnificent buildings in thecompany premises were so badly neglected and dilapidated that banana trees and grass grewinside them, even though the floors were paved with concrete.In an unsolicited opinion during an interview in a functioning brewery , a managerspontaneously recalled the case of the shutdown paint factory and used it as an example of theuncertain future of private indigenous enterprises. He said: For example, X [name of firm], the industry was forgotten. The industry was left for over five years and grass growing [in it]. The children concentrated on sharing his plots [their fathers real estate]. If a problem arose they sold a house and shared the money. They are trying to reactivate it now after five years.The manager of the paint factory under dispute evaded my questions on the circumstancessurrounding the shutdown of the enterprise. Instead, he gave nonnative, philosophical responsessuch as, "Indigenous companies should have good management. They should pay their workerswell. Raw materials should be supplied promptly. " In the end he mentioned that the deceasedowner had shared his assets among his children prior to his death, during which time his first soninherited the factory as his own share. The founder died in 1983. Recall that the maiden studywas conducted in 1991. If the factory was shut down for five years pending litigation it meansthat the firm operated for three years after the founders death, after which the intra-familyconflict started. This scenario is consistent with our observation in the theoretical framework.The founders decisions about succession could be challenged or even reversed posthumouslydue to intra-family antagonism. When the author visited the firm again in 2001 the premises hadbecome even more dilapidated. Production had not been reactivated except for a few drums ofpaint, which a tenant or security man at the premises described as skeletal production pendingfu11-scale resuscitation. The scene was a case of multiple wastage of land, buildings andmachinery for a decade and a half, and counting.Case 2: Posthumous Family InterferenceIn a town in Anambra state, the general manager of a chemical plant resigned in less than oneyear after the death, in 1990, of his employer and founder of the company because the latterswives, children and extended family interfered with the functioning of the firm. The founder wasnationally recognised as a pre-eminent pioneer industrialist. The children were more interested inthe finances of the company than in its growth and durability, a respondent said. The wives andthe brothers of the deceased owner insisted on influencing who was or was not employed. Hencethe general manager, with a record of long and effective service in the company, resigned infrustration. The company floundered and its future became uncertain. A respondent in this studytold the author in 1991 that the children of the founder were trying to resuscitate the enterprise.The manufacturing enterprise, huge by Nigerian standards, had not been resuscitated by August2001 when the company premises were visited. The eldest son of the founder, in an interview,indicated a desire and an on-going plan to reactivate the factory . The fact is that the investmentwas dormant for 10 years and may remain so for more years.Case 3: The Neglected Oil Palm EstateIn Imo state a very wealthy and pioneer businessman who died in the 1980s left assets valued atover four hundred and twenty million naira. His assets included an oil palm estate, a largevegetable oil processing plant, and a leading beer brewery. The vegetable oil plant had stopped
  8. 8. Journal of Contemporary African Studies, 21, 1, 2003production; the oil palm estate had become almost a forest due to neglect; and the brewery wasonly just managing to continue production. In an interview with one of the deceasedentrepreneurs sons, it was revealed that the siblings of the polygynous family of four wives werein conflict. In the process the brewery was shut down by court order. A manager in a company inanother state spontaneously recalled the demise of this business empire. He used it as a sadexample of the problem of post-founder uncertainties among Nigerian businesses. He lamented: When owners die, their businesses tend to die. Take for example Chief A. He owns a vegetable oil factory at B [location of company]. When he died, his children went to court over the way he shared his assets, claiming that he was unfair. The court gave orders that the factories be sealed pending the decision of the court. Having sealed the factory, the top management staff that had the experience had to go. The people making soap could not make [soap ] again. When Chief A was alive there was no problem. If that company had been made public, this wouldnt have happened.Each sub-family or sub-household was interested in the amount of the patriarchs assets it couldsecure for itself. Although the overt conflict took place among the siblings, especially the males,mothers covertly pushed their children to fight for what they perceived as the rights of their sub-households. Siblings and co-wives accused one another of embezzlement, negligence, andmisappropriation of company resources. In a frank interview with the author, the oldest son ofthis deceased business mogul regretted that his father shared his assets more as inheritableproperty according to Igbo rules of inheritance than by a rational allocation of positions andfunctions for enterprise continuity. That, according to him, was not conducive to the continuityof the large-scale modem commercial organisations which his father had worked very hard toestablish, nurture and consolidate during his lifetime.Case 4: The Demise of a Celebrated FleetIn a major commercial town in Abia state, a famous pioneer transporter of pre-civil-war famegrew bigger after the war, He had over 100 tankers used for hauling petroleum products acrossthe country .Six years after his death in the mid-1980s all the tankers, and a large parking spacespecifically made for them, had been sold and the revenue shared by members of his polygamousfamily. During a visit to that town the author found that the man s once elegant residentialbuilding in a formerly choice part of the town had become rickety .And none of his children orany of his three surviving wives did business with any potential or optimism to approximate thescale and scope of their father or husbands financial accumulation.As was the case with many of my interviews, an independent artisan near the premises,unsolicited, used this case as an example of the problems of indigenous private enterprises. Hesaid: Look at Y [the deceased business magnate]. He died about six years ago. His sons sold that empty land over there at two and half million naira [N2.5 million]. They sold the tankers, the whole transport all gone. Thats that.This same informant referred to another very wealthy businessman (also very familiar to thisauthor) whose immense wealth was squandered by his numerous children from several wives,even though he had shared his assets amongst his heirs-apparent before he died. The collapse ofthe petroleum transporters business fortunes was so total and pitiable that a famous musiciansang a song of lamentation, alluding to it as a regrettable case of the ruination of long years of
  9. 9. Journal of Contemporary African Studies, 21, 1, 2003entrepreneurial effort and accumulation. This author saw no need for a second visit in 2001because the enterprise had completely disappeared by 1991.Case 5: The Abandoned EmpireThe business empire of the richest man in one of the towns in Enugu state suffered anirredeemable disintegration upon his death. Once a beehive of activities, the business premiseshad been abandoned and became desolate and overgrown beyond recognition. Similar to thebusinesses described earlier, the problem started with acrimony among sub-families of thepolygynous complex. Suspicions and accusations of embezzlement, dishonesty, non-accountability and use of charms were very common. Prior to his death, the founder haddeployed some of his children, a good number of them university graduates, in differentdivisions of his group of companies. Yet acrimony, decline and signs of disintegration crept ineven when he was alive, especially during his old age. His death marked the final chapter in thelife of his business empire. Some of his children established their own businesses. But none ofthose businesses came close to the legacy of scale, scope, diversity and success left behind bytheir father.Of the four groups of companies whose owners died after 1991, only one survived the post-founder shock, as will be shown later. In one case the family members were embroiled in intenseconflict for several years, during which time the major manufacturing company was closed. Theother was producing very much below its 1991 capacity, leaving its general manager pessimisticabout the future. And the third group of companies locked up its factory division because the de-ceased founders only son had shown no interest in carrying on with production.Inheritance, Succession and the Future of AccumulationThe above stories lead us to distinguish what should be a fine line between inheritance andsuccession. Indeed. succession is a form of inheritance. Inheritance refers to the acquisition of apossession, or condition, or the receipt of a right or title discernible by law or certain prescribedrules from the ancestor at his death. Succession goes further than that. It is the act or process ofone person taking the place of another in the enjoyment of, or liability for his rights or duties orboth (Websters 1993). Children and their mothers may want to inherit the wealth of their fathersand husbands, respectively, and use such resources as mere entitlements for their daily living andcomfort. But they may not be interested in, or capable of occupying the role of the entrepreneur,the risk bearer, the wealth multiplier, the organisation mover, or the surrogate founder, all ofwhich enable the foundation enterprise to retain its initial identity. Apart from lack of interest orlack of capability among potential successors, intra-family conflicts pose obstacles to thecontinuity of enterprises. Since the present study did not follow the succession plans of thefounders, it is not clear to what extent the problem was caused by the founders own errors andeccentricities. In his study of the growth of indigenous capital in Nigeria, Forrest (1993) foundthat a culture of secrecy among indigenous entrepreneurs effectively blocks delegation, rules outpartnerships and undermines the chances of succession. The latter, combined with intra-familyconflicts, portends a tenuous future for both individual and family accumulation in particular andeconomic development in general. For, as noted earlier, a culture of intragenerational extinctionof accumulation is not conducive to economic development.
  10. 10. Journal of Contemporary African Studies, 21, 1, 2003From the case studies, business enterprises owned by entrepreneurs in polygynous marriages arevery likely to collapse upon the death of their founders. This also implies that enterprises ownedby monogamous businessmen have a greater chance of surviving their founders or owners.Neither of these hypotheses was formally tested in this study. It was simply a coincidence thatmany of the collapsed businesses whose founders had died were owned by men who were inpolygynous marriages. In fact, two of the failed enterprises in the 1991 study were owned byliving entrepreneurs. The first collapsed because of partnership conflicts. The second failed forseveral reasons: mismanagement and lack of commitment by expatriate technical partners,misappropriation of funds by local managers, and the over-concentration of decision-making inthe founder. It does appear, though, that the wealthier a businessman becomes, the greater hispropensity to marry more than one wife. This differs from the picture of traditional Africa inanthropological literature. It used to be that polygyny was a source of labour and wealth, henceneed underlay the urge for multiple wives and children (Beattie 1964). However, it seems that inmodern Africa, wealth has become the source of polygyny. As a caution against a prematuregeneralisation, some managers and owners in this study mentioned an instance where children ofa deceased polygynous businessman expanded the familys foundation enterprise.As noted above, four founders died after the first study had been completed in 1991. In 2001,three were in monogamous marriages. The only enterprises in this group which survived thepost-founder shock were the ones owned by a polygynous man. The head of this family, in hisseventies, and founder of several enterprises, was hospitalised at the time of the first fieldwork in1991. A good number of his 16 children from several wives were highly educated. There wereengineers, lawyers, and holders of the masters degree in business administration among them.His fifth son, the general manager of his paper mill, was confident that his father had laid thefoundation for a successful entrepreneurial succession and enterprise continuity before his oldage and ailment. His father had placed the export and import division of the group in the handsof his first son. He placed another of his sons (an engineer) in a strategic position in a paperrecycling company, arid allocated other responsibilities within the business complex to otherchildren. The fifth son, a graduate with an American MBA, was in charge of the familys largepaper company. He eventually became the chairman and managing director (CMD) of the group.He expressed some uncertainty and anxiety about what might happen when their father died, butended our interview with optimism that his family was poised for stability and continuity of thebusiness enterprises. Following the subsequent death of the founder, the companies havesurvived, increased their work forces, improved their machinery, and were on the verge ofcomputerisation of their printing processes in 2001. This was a case of a successful transition ina polygynous environment.In contrast, the owner-founder of a group of seven large-scale manufacturing companiesappeared to have laid the foundation for a successful succession and enterprise continuity, but tono avail. This business magnate, in his middle sixties in 1991 and alive at the time of this paper,is a devout Catholic and respected knight of the church. He is monogamous and has severalhighly educated children. Among his children are a lawyer, a political scientist, twomicrobiologists, an economist, an MBA graduate, and a brewing technologist trained abroad. Heplaced some of his children as heads of factories and some in high positions in others. Thegeneral manager of one of the firms, who was not related to the family by blood or marriage,said, "The MD [Managing Director] wants his children to take over when he is alive. He wants
  11. 11. Journal of Contemporary African Studies, 21, 1, 2003his people to take over." But by 2001, six of the seven factories had stopped operation. Theseventh had declined beyond recognition, from a workforce of 200 in 1991 to only 10 in 2001.By having their children work in their enterprises these two older entrepreneurs acted inaccordance with assumptions of the behavioural sunk cost perspective of entrepreneurialsuccession. Contrary to Kets de Vires (1993), they thought about succession and did somethingabout it by putting their heirs-apparent in strategic positions. That one group of companiessucceeded when the founder died and the other failed while the founder was alive deserves an in-depth investigation.But Kets de Vires is also right. Not every owner-founder of family business plans or even thinksabout entrepreneurial succession. It would appear, as postulated earlier, that the younger thefounder the less thought and importance he attaches to the problem of succession. A major threator obstacle to successful entrepreneurial succession and, by implication, post-founder durability,is the lack of awareness of the problem by owner-founders. There were several field cases tosubstantiate this proposition. I will illustrate with two examples here.In 1989, my industrial sociology class at the University of Nigeria, Nsukka, made a field trip to alarge manufacturing firm with a work force of over 1 000. The owner-founder of the factory, ayoung man bubbling with health, prosperity and optimism, personally gave the class a tour of hisfactory. The students asked him many questions ranging from the origins of his enterprise,through managerial structure and processes, to employee motivation, acquisition of productionresources, and the marketing of his products. He answered those questions impressively. Withless than a high-school education, he demonstrated an unusually comprehensive understanding ofthe technical and administrative workings of production organisations in general, and hiscompany in particular. After the bar- rage of questions and a lively interaction between theowner-founder and the students, I casually asked him: Mr B[owner], you are a vibrant and successful young man [about 40 years old or less]. You have many years of life ahead of you. Where do you think this factory will be in the next 40 years?Unlike his quick reactions to the students questions, this time his answer was very slow incoming. The amount of effort he made and the anxiety he felt (pulling the collar of his shirt, witheyes dilated) as he thought of an answer showed that the question took him by surprise. After arelatively long interval, he responded that he had sent one of his relatives for training in Taiwanto improve his technical and managerial skills and to prepare him for a high position in thefactory upon return. Further dialogue between us alerted him to the fact that training a relativefor a special position in the factory is one thing, but designing an organisational structure toenable the enterprise to continue after his lifetime was quite another.1 He was able todifferentiate management from ownership and control in the context of family business.In another instance during the course of the study, the managing director and owner of a group ofeight large companies was asked about his plans for the durability of the companies upon his exitfrom heading them, which could be the result of retirement due to old age, incapacitation byillness, or by death. To try to respond to the question, the owner-founder appeared subdued, benthis neck downward, stared at his table, pondering, indeed almost to the point of meditation, forseveral minutes, and then said:
  12. 12. Journal of Contemporary African Studies, 21, 1, 2003 Your question is quite okay. We have plans to make sure that when I am not here the company continues. Thats why we indigenised the management. If I am lucky personally to have good children, they will take over the mantle. It is more or less a family business.The protracted interview with the MD, a man in his late forties and married to several wives,showed that entrepreneurial succession and enterprise durability were not on the front burner ofhis thoughts and plans. What he saw as his most nagging problem was the conflict betweenhimself and his brothers whom he had helped and made wealthy but who later turned againsthim. He expressed the fear that they could take over his fortunes if he died or became ill. Hehoped, as he put it, that God would help his children to maintain successfully the continuity ofthe business.2Conclusion and Implications of the Study for Further ResearchThis study identified some trends of thought that need further research. Cultural factorsembedded in family structure and traditional norms of inheritance may pose obstacles tosuccessful entrepreneurial succession and enterprise durability. Younger entrepreneurs are lesslikely than their older counterparts to have clear succession plans. Ineffective succession plansby founders pose obstacles to enterprise durability. These conditions can, and do, influence post-founder durability in any geo-cultural environment, be it in the First or Third World.The most conspicuous cultural practice exposed in this narrative is polygyny, a well-known formof marriage in Africa in which a man marries more than one wife at the same time. The majorityof the cases of enterprise closure observed in this paper involved polygynous owner-founders.But there were a few cases where enterprises survived the exit of polygynous founders. It mustbe reiterated, however, that this paper is an exploratory examination of post-founder durability.The sample was small and randomly selected. Recall that this started as a study of functioningenterprises. This author met failed businesses by accident and examined their experiences for thesake of curiosity .It is, therefore, premature to conclude that the culture of polygyny isdetrimental to enterprise succession and durability .After all, conflicts over inheritance andsuccession are also common in the monogamous societies of the West.It is easy for students of culture and development, especially those who see African culture asanti-development, to conclude that polygyny as a cultural practice is anti-accumulation andtherefore hampers economic development, especially when examined in the context ofneoliberal/modernisation theory. Harrison and Huntingtons (2000) influential but ambivalentbook on cultural values is a good example. Contributors to that book gave vivid yet inconclusivex-rays of the link between culture and economic development. Daniel Etounge-Manguelle, forinstance, pointed out numerous traits of African culture which he considered to impede economicdevelopment. His dismay with African culture led him to conclude that "more efficient and justAfrican institutions depend on modifications to our culture". That is an indirect way of sayingthat African culture is the main obstacle to the continents economic development. But someanalysts of the interaction between culture and development are cautious in their articulation ofthe cultural culpability argument.For Weisner (2000), it is wrong to conceptualise culture and values as inflexible and permanenttraits inculcated early in life that permanently become part of a national cultural character. Henceit is equally wrong to argue that culture supersedes resource-based, institutional, and politico-
  13. 13. Journal of Contemporary African Studies, 21, 1, 2003economic factors. Porter (2000) observes that unproductive economic cultures often arise lessfrom deeply embedded societal traits than ignorance and the misfortune of being guided byflawed theories and political leaders that do not understand the workings of the internationaleconomy.Both Porter and Weisner suggest that policy can change or transform culture, as numerous worldexamples show. That policy can transform culture means that a policy argument is superior to acultural argument in the analysis of economic development. This is well captured in TU Wei-Mings (2000) concept of multiple modernities. By this concept Tu Wei-Ming means that thesuccess of the East- Asian Confucian societies in becoming fully modernised without beingthoroughly Westernised clearly indicates that modernisation can assume different cultural forms.Hence there can be alternative modernities to Western modernisation. With this line of thought,Tu Wei-Ming envisions the possibility of Buddhist, Hindu, Central Asian, Islamic, LatinAmerican and African forms of modernisation.Recall that Confucianism was once regarded as a retrogressive value system incapable ofgenerating economic development. It suddenly turned around in the 1970s and 80s to producethe miracle economies of East Asia. In the late 1990s it was blamed for the Asian financial crisesof that period. This is what I call the prevarications of the cultural theory of development. Thisdoes not mean a total denial of the role of culture in national development. Rather, its influenceshould not be overblown to the point of cultural determinism. Some observers and analysts of theintersection of culture and development have captured the prevarications of the cultural theory ofdevelopment. In his study of culture, mental models and national prosperity among governmentand business leaders in Colombia, Lindsay (2000) began with the statement that culture is asignificant determinant of a nation s ability to prosper. This statement was diluted by hisempirical findings, which led him to conclude as follows: The results of our work in the five cities of Colombia led us to conclude that it is not culture per se that affects the quality of choices regions make but rather the way individual leaders think about wealth creation.Because mental models or mindsets that facilitate or inhibit competitiveness for wealth creationare widely distributed across the population, the fundamental task is not to change culture but tocreate conditions for the competitive mindset to flourish (ibid.). Lucian Pye (2000) chronicledthe pendulum and oscillations of opinions about the role of the Asian values in the tigereconomies in the last four decades. He asked how the same set of values could have providedboth the dynamos and dominoes, that is, boom and bust of the tigers. By this call Pye means thatthere is need to fully understand why a cultural system applauded as the engine of anunprecedented speed of economic development became responsible for the downfall of themiracle it supposedly created.The change in women s status in many parts of the world is propelled not by massive culturalchange in those societies but by decisions enacted and enforced by a small segment of thepopulation that has the instruments of power and authority to enact policies that transformlongstanding institutional patterns and practices (Htun 2000). In this regard, countries candevelop and modernise without compromising much of their culture, provided that their leaderstake development seriously and are committed to achieving it. The latter is a very importantparameter in the developmental states of East Asia. Their leaders have seen economic
  14. 14. Journal of Contemporary African Studies, 21, 1, 2003development as an urgent problem, pursued it with a nationalistic fervour and seized everyopportunity to attain national development. If we take the case of Islamic Northern Nigeria, ittook the concern and commitment of Islamic leaders in the region to sensitise their followers toWestern education. Upon the realisation that other parts of the country accelerated in educationalachievements, those leaders made policies and established infrastructures to provide Westerneducation for their population. This was done without compromising Islamic culture. There areas many Christians as there are Moslems among the Yoruba of Nigeria. But both groups canpride themselves on parity in the attainment of Western education. Come to think of it, the Asianvalues of harmony, group orientation, filial piety , respect for hierarchy and authority , valuationof family, and emphasis of social equilibrium are embedded in African traditional culturalvalues. In East Asia, Asian values found expression in miracle economies while Africa reels inunderdevelopment. Answers must be sought in circumstances other than culture. Perhaps theirdifferent histories of modern statehood are a good starting point.Granted, polygyny as a cultural practice does have its problems, especially within the context ofrelations among co-wives, their children, and between the wives and their husband. Inheritanceproblems and conflicts exist in traditional polygynous and monogamous families in Igbo society.When considered within the context of enterprise succession and durability in a moderneconomic setting, polygyny cannot be successfully labelled as singularly problematic and anti-accumulative until its effects are thoroughly studied in conjunction with the effects ofmonogamy. This entails the study of large samples of functioning and non-functioning firms,potential and real cases of succession, the existence or non-existence of succession plans, therelative effects of cultural, managerial, entrepreneurial, micro and macroecononiic, and politicalfactors on enterprise performance, entrepreneurial succession and post-founder durability.Entrepreneurial succession, like most forms of inheritance, is a conflictual process in manyhuman societies. Common sense suggests that the larger the number or enclaves of stakeholdersin a given distributional situation, the greater the chances of distributional conflict. Polygynyincreases the number or enclaves of stakeholders in the entrepreneurial succession environment.It is therefore methodologically plausible to hypothesise that polygynous marriage will be moredetrimental to successful entrepreneurial succession and post-founder durability than would itsmonogamous alternative. In the meantime, it is only a hypothesis. Admittedly, informal pointersto the possible deleterious effect of polygyny on inheritance are scattered here and there in Igbosociety, and indeed across the country. Only when the phenomenon is systematically andthoroughly studied, in conjunction with the non-cultural factors mentioned above, canconclusions on its effect on modern entrepreneurship and accumulation be confidently reached.AcknowledgementsThis study was conducted with grants from the University of Nigeria, Nsukka, a FulbrightFellowship at the University of California, Berkeley, and additional resources from theUniversity of Wyoming faculty-grant-in-aid UWGIA 9390, 2001. Acknowledgements ofindividuals who in one way or another influenced this study have been made in earlier papers. Ithank my Industrial Sociology class of 1989 at the University of Nigeria, Nsukka, for theirconscientious reports of the field trips that helped to shape this study. This paper also benefitedimmensely from lively discussions by my students in the Advanced International Developmentseminar I offered at the University of Wyoming in the Spring of 2001. I thank the anonymous
  15. 15. Journal of Contemporary African Studies, 21, 1, 2003reviewers of JCAS whose insightful comments provided better focus for this paper. Thanks alsoto Gale Bandsma for her secretarial help.Notes 1. After our conversation and analysis of the question of succession he, with a handshake, said to me: "Thank you very much. You are the best man that has ever visited this company", meaning that he had learned something he had not thought about before. That interaction made me think that other entrepreneurs may not be aware of this problem. Hence I formally designed and conducted the present study 2. After the interview, the entrepreneur asked me to wait while he entered a small room next to his spacious office. He came back and handed me an envelope filled with money. He said: "Use this for your petrol and thank you for your questions and conversation." I should be the one to thank him for giving me a long interview. I refused his gift but he insisted that I accept it and asked me to return at my convenience for more discussions on the subject of post-founder durability. Those spontaneous gestures corning from someone I had never met before meant that the owner-founder felt he had been exposed to something important, but to which he had not previously given a thought. In other words, he had learned something central to his business life.ReferencesBeattie, J. 1964. Other Cultures. New York: Free Press.Bendix, R. 1974. Work and Authority in Industry. Berkeley: University of California Press.Biggs, T. and Srivastava, P. 1996. Structural Aspects of Manufacturing in Sub-Saharan Africa:Finding from a Seven Country Enterprise Survey. World Bank Discussion Paper, No.346.Brautigam, D. 1997. "Substituting for the State: Institutional and Industrial Development inNigeria", World Development, 25,3:1063:80.Dryer, W. and Handler, W. 1994. "Entrepeneurship and Family Business: Exploring theConnections", Entrepeneurship Theory and Practice, 19, 1:71-83.Forrest, T. 1994. The Advance of African Capital: The Growth of Nigerian Private Enterprise.Charlottesville: University of Virginia Press.Hall, D. 1986. "Dilemmas in Linking Succession Planning to Individual Executive Learning",Human Resource Management, 25,2:235-65.Handler, W. 1991. "Key Interpersonal Relationships of Next-Generation Family Members inFamily Firms", Journal of Small Business Management, 29,3:21-32.Harrison, L. and Huntington, S. 2000. Culture Matters: How Values Shape Human Progress.New York: Basic Books.Htun, M. 2000. "Culture, Institutions, and Gender Inequality in Latin America". In Harrison andHuntington: 189-199.Isaacharoff, S. 1998. "Can There Be a Behavioral Law and Economics?", Vanderbilt LawReview, 51:1729-45.
  16. 16. Journal of Contemporary African Studies, 21, 1, 2003Kets de Vires, M. 1993. "The Dynamics of Family Controlled Firms: The Good and the BadNews", Organizational Dynamics, 21,3:59-71.Kilby, P. 1971. Entrepreneurship and Economic Development. New York: Free Press.Knetsch, I. 1989. "The Endowment Effect and Evidence of Nonreversible Indifference Curves",American Economic Review, 79: 1279-84.Liedholm, C. and Mead, D. 1999. Small Enterprises and Economic Development: The Dynamicsof Micro and Small Enterprises. London and New York: Routledge.Linsday, S. 2000. "Culture, Mental Models, and National Prosperity". In Harrison, L. andHuntington, S. (eds.): 284-95.Manguelle, D. 2000. "Does Africa Need a Cultural Adjustment Program". In Harrison. L. andHuntington, S.:65-77.Marsden, K. 1990. African Entrepreneurs: Pioneers of Development. Discussion paper No.9.Washington, DC: The World Bank.MacPherscn, M.. 1995. "Hazards of Small Firms in Southern Africa", Journal of DevelopmentStudies, 32,1: 31-54.Mead, D. 1994. "The Contribution of Small Enterprises to Emp1oyrnent Growth in Southern andEastern Africa", World Development, 22,12:1881-94.Porter, M. 2000. "Attitudes, Values, Beliefs, and the Microeconomics of Prosperity". InHarrison, L. and Huntington, S.: 14-28.Pye, L. 2000. "Asian Values: From Dynamos to Dominoes". In Harrison, L. and Hunting- ton,S.: 244-55.Sharma, P., Chrisman, I., Pablo, L. and Chua, 1.2001. "Determinants of Initial Satisfaction withthe Succession Process in Family Firms: A Conceptual Model", Entrepreneurship Theory andPractice, Spring: 17-25.Schumpeter, I. 1961. The Theory of Economic Development, Cambridge, MA: HarvardUniversity Press.Shepherd, D. and Zacharakis, A. 2000. "Structuring Family Business Succession: An Analysis ofthe Future Leaders Decision Making", Entrepreneurship Theory and Practice, Summer:25-39.Stee1e, W. and Takagi, Y. 1978. The Intermediate Sector Unemployment and Employment-Output Conflict: A Multi-sectoral Model. Washington, DC: The World Bank.Tu Wei-Ming. 2000. "Multiple Modernities: A Preliminary Inquiry Into the Implications of EastAsian Modernity". In Harrison, L. and Huntington, S.: 256-66.Ukaegbu, C. 1995. "Managerial Practice in Indigenously-Owned Private ManufacturingIndustries in Nigeria: Implications for Human Resource Utilization and Enterprise Durability".In Adjibolosoo, S. (ed.) The Significance of the Human Factor in African EconomicDevelopment. Westport, CT: Praeger: 209-32.________ 1998. "Managers and their Entrepreneurs: Power and Authority in Indigenous PrivateManufacturing Firms in Nigeria". In Spring, A. and McDade, B. African Entrepreneurship:Theory and Reality. Gainesville: The University Press of Florida: 181-98.
  17. 17. Journal of Contemporary African Studies, 21, 1, 2003________ 2000. "Working Conditions and Employee Commitment in Indigenous PrivateManufacturing Firms in Nigeria", Journal of Modern African Studies, 38,2:295-324.Weisner, T. 2000. "Culture, Childhood, and Progress in Sub-Saharan Africa". In Harrisson, L.and Huntington, S.: 141-57.Zeelenberg, M. and Van Dijk, E. 1997. "A Reverse Sunk Cost Effect in Risky Decision-Making:Sometimes We Have Too Much Invested to Gamble", Journal of Economic Psychology, 18,6:677:91.