The challenges of continuity in family businesses in Rwanda

Abstract

Focusing on a developing country, this study investigates how an owning family builds its business’ continuity. While scholars of family businesses tend to depict the continuity of a family firm in terms of family succession, preserving the family legacy, or the firm’s longevity, in the social context of a developing country that is dominated by instability and hostility, family firms are subject to day-by-day survival risks. My approach is viewing family businesses’ continuity as day-by-day survival for the sake of ensuring the long-term orientation of the family businesses in the context of a developing country. The family is situated in a broader social context, and therefore the business is embedded in the family’s social networks that cannot be detached from the country’s social context. The developing country context is important because of its culture, politics, and history that differ from a developed world.

In this thesis, the continuity of family businesses is understood as: (1) sustaining the family’s legacy coming of the founder’s achievements, (2) succession, sustaining the business beyond the founder’s tenure, and ensuring that both the family and business stay together, and (3) longevity, ensuring a long-term orientation which is a crucial characteristic of all family businesses. This last category is relevant to this thesis because long-term orientation is achieved through futurity, persistence, and continuity patterns. This thesis focuses on continuity as daily and short-term survival to ensure the long-term orientation of a family business. Different theoretical lenses including portfolio literature, socialization literature, and commitment literature were tried for in this thesis. Commitment literature was found binding both portfolio and socialization literature. And therefore, commitment literature was considered reliable for understanding the challenges of family businesses’ continuity. Using commitment literature, this study uses data collected from founder-led business families in Rwanda and investigates how the commitments of actors at multiple levels affects the day-by-day survival of family businesses.

The thesis follows a qualitative approach with multiple cases of research design. It uses data from six founder-led business families in Rwanda. It follows the interview approach and uses the INVIVO program to code the transcribed data. The phenomenon of how the family built its business’ continuity is investigated following a multi-level analysis, that is, how each level affected the continuity of the family business or individual, family, and business levels in a business family. The individual level has founders, next generation members, women, in-laws, and non-family employees (Sharma, 2004). It uses the grounded theory for elaborating on matters arising when investigating the continuity of family businesses (see Figure 6.1). A family business’ continuity model is built to map ‘how’ a family builds its business continuity as well as ‘what’ is the expected role played by each level (see Figure 7.1), and a day-by-day continuity model of the family business is crafted to understand the mechanisms behind its day-by-day continuity (see Figure 7.2).

The findings of this thesis show clearly that family businesses in Rwanda are focused on preserving their firms for retaining the family legacy, but unfortunately, they are unable to plan for a long-term legacy. I posit that short-term survival, repeatedly, will lead to long-term survival and, subsequently, to longevity. The findings highlight the role of the specific context and associated cultural aspects of continuity in family businesses. The three aggregate dimensions developed present three main challenges to the continuity of family businesses in Rwanda. First, due to Rwandan cultural obligations of inheritance by the next generation, both the founding generation and the next generations are committed to family businesses’ continuity. Unfortunately, there is a detachment among generations in Rwanda, which is contrary to the cooperation expected in family businesses. Second, the uncertainties and inertia resulting from the absence of co-ownership and the inter-generational distance due to cultural aspects lead to separate and parallel planning for businesses’ continuity. Third, when it comes to the involvement in the management of family businesses, inter-generational conflicts and uncertainties result in weak family embeddedness that may push some family members away from the family businesses. This situation is a challenge because the absence of co-management between the incumbents and the next generation is abnormal since both parties, like dancing partners, need to manage the transition.

Ignoring the three challenges that they face, business families in Rwanda strive for continuity through (1) created and protected family legacy, (2) created inner cohesion among the next generation’s members, (3) in-laws and non-family members assimilated into the family business, (4) the family forming norms for succession, governance, and order-conflict processes, and (5) the family business’ resilience maintained for the family and community. Missing this mindset of planning for the long-term explains why many business families in Rwanda fail to continue after the founder’s tenure. There are many reasons for not planning for the long-term. In this thesis, the factors in a family business’ continuity are linked to (a) the family setting and the social capital of both direct and invisible members that ensures on-going activities of the family business; (b) the cultural setting related to inheritance management, heirship/legal ownership succession, family chieftaincy retention, and leadership succession, and (c) the institutional uncertainty and Ubuntu or a communitarianist nature of family firms as a way of living in a developing country making it difficult to plan for the long term.

This study contributes to an understanding of the heterogeneity of contexts in family business research. It will also assist owners and practitioners operating in changing environments to design informed continuity plans that have the potential to ensure the survival of family businesses in Rwanda. Theoretically, the study concludes that a commitment to continuing family businesses is shared by different levels in business families, but each level has one primary form of commitment and many forms of secondary commitment for the continuity of family businesses. There is a fluidity in commitment among multiple levels in business families.