Keywords

1 Introduction

Family businesses are important drivers of economic development as they encourage the connectivity between individual involvement and business development (Kuratko & Hodgetts, 2004). Family businesses encourage workforce engagement by focusing on the importance of future planning to enable its survival in difficult economic times (Liang, Wang, & Cui, 2014). They do this by being dynamic organizational structures that develop and change depending on changing environmental conditions. Family businesses often link multiple family groups and can be a factor in international expansion and entering into different economic activities, which can include sport-related activities (Moss, Payne, & Moore, 2014). Family businesses are better than non-family businesses at enjoying the private benefits of control including extracting value and using company assets for personal gain (Westhead & Cowling, 1997). Some of these discretionary benefits have seen family’s investing in professional sport franchises due to the link sport has with the community (Agyemang, 2014).

Family businesses vary in the amount of equity held in the business, which influences the level of family involvement in development activities (Steward & Hitt, 2012). The definition of ‘family’ in the workplace has changed with society and technological advances. This has lead to changes in society meaning that the traditional concept of family is altering but the concept of sport has remained important to most families regardless of their size or wealth. Family now more commonly refers to social and economic communities of individuals coming together for a similar purpose. Family businesses incorporate multiple definitions of family including intermarriage, kinship and apprenticeship exchanges (Kuper, 2009).

There are a variety of different definitions of family business with most focusing on the ownership, structure and governance roles that distinguish them from other types of business (Chua, Chrisman, & Sharma, 1999). The term ‘family’ has different definitions but most commonly it refers to blood relations between individuals (Pukall & Calabrò, 2014). However, the concept of ‘family’ is changing due to shifting social understandings of the term and it can include people related by marriage, partnership or shared interest. Poza, Hanlon, and Kishida (2004) defines a family business as having ownership control by two or more members of a family that strategically influences business decisions. A broad definition of a family business adopted in this chapter is when an economic entity has the majority of ownership or control from members of a family (Brockhaus, 2004). The majority of businesses around the world are family businesses and much large multinationals start as family businesses. In transition economies, family businesses dominate with a large proportion of overall enterprises being family owned.

This chapter investigates the development of family businesses in the sport sector by examining their evolution and importance in the global economy. The role of family business in sport start-up, growth and community renewal are discussed. The unique role of family business in the sport sector is explored. There is limited research in the sport sector concerning family business despite well known families owning famous sport clubs and organizations. As the topic of family business and sport organizations is limited, the research in this chapter draws on the broader literature of family firms as well as sport management to understand sport based family businesses.

This chapter proceeds as follows. First, the literature on family business is reviewed that suggest the advantages and disadvantages of family businesses contributing to community development. Next, the role of family businesses in sport clubs is discussed. This includes a summary of the arguments for family businesses investing in sport clubs due to geographic, historical and economic reasons. As a result of this discussion the chapter concludes with reasons why the sport industry, private foundations and government authorities might encourage further involvement of family businesses in the local community. The chapter concludes with suggestions and directions for future research. The next section will provide an analysis of how family businesses in the sport context can operate more efficiently.

2 Literature Review

2.1 Role of Family Business

Family businesses have the overall motive of using the business for the advancement of the family (Chua et al., 1999). The goals of a family business involve more than the usual profit maximization objective of other firms that often stem from their connection to the community. Family business can be distinguished between those that develop as a means of livelihood compared to the more interested orientated family businesses that are centered around family activities (Singer & Donahu, 1992). As family businesses adapt to changing conditions different types of organizations are derived from the new market dynamics including those balancing both family and business needs compared to businesses focusing primarily on family concerns.

Family businesses have many different goals including both financial and non-financial depending on the owners willingness to accept lower returns on investments. The financial goals can include job security, income return and tax benefits whilst non-financial goals incorporate quality of work, personal growth and autonomy (Andersson, Carlsen, & Getz, 2002). Some family businesses are established to provide employment for family members that ensure financial and economic independence (Andersson et al., 2002). However, non-financial reasons including working in a happy atmosphere with other family members can encourage family businesses to accept longer paybacks on financial investments. In addition, being the owner manager of a family business can give individuals a sense of social advancement that enables innovation to develop. Often family businesses are continued for lifestyle reasons rather than solely financial reasons thereby in the process accepting lower profit revenues that could otherwise be obtained (Westhead, 1997).

Family businesses evolve in three development stages: early, middle and late that depends on the business environment and motivation of the owner (Ward, 1991). The early stage involves examining the success of the family business, the middle stage involves incorporating children into the family businesses development and the late stage involves family harmony and unity (Andersson et al., 2002). As a family business evolves it incorporates into traditions of greater involvement of more family members thereby ensuring a legacy for future generations.

A number of forces influence the disposition of family businesses including the characteristics, nature and climate of the organization, extent of family dominance and rationale of the owner-manager (Andersson et al., 2002). Often owner managers of new businesses evolve into family enterprises in which the founder sees the business as a family asset rather than solely a business activity (Andersson et al., 2002). The excitement of starting a business impacts the development of future family orientated activities when opportunities are seized upon. Running a family business can put financial and non-financial strain on families depending on the hours and nature of the business. For these financial and non-financial reasons there are strong incentives for the establishment of family businesses in transition economies due to capital restrictions that encourage involvement of community members to a regions development.

Family businesses are often founded in order to pursue a dream that can include meeting a lifelong goal, getting rich or desire to be independent (Andersson et al., 2002). Often individuals are involved with family businesses due to their link with a specific location that they might have strong ties. As example of this is the Rooney family’s association with the Pittsburgh region and their ownership of the Pittsburgh Steelers football franchise, There are also advantages to having a family business associated with a sports team in a particular region that include lifestyle and personal goals but there are also disadvantages including debt and decreased leisure time.

2.2 Family Business and Sport Clubs

Many sport clubs act as family businesses due to the involvement of generational interchange of family members (Ratten, 2014). There are different reasons for starting or continuing a family business in the sport context. Many large sports organizations including the Pittsburgh Steelers owned by the Rooney family have focused on the generational ownership of a professional sports team that is a key part of the community in Western Pennsylvania. The Rooney family has mixed family interest in owning a National Football League team with their interest in integrating community participation in a sports team. Part of the Rooney family’s connection to the Pittsburgh Steelers flows from the sense of collectivism and community engagement associated with owning a sports team. This is due to sports teams by their nature being like a family due to the fan and city’s connection to the football team (Anagnostopoulos, Byers, & Shilbury, 2014).

The participation of the family in a sports club is important in order to strengthen the control of the family in business decisions. Sport clubs that are owned by families often focus on key community stakeholders including the local council and government authorities to make their organizations more efficient (Billings & Hardin, 2014). A sports club who wins a premiership title further positively affects the family’s reputation and position in society. For many families there is the advantage of generational ownership as they learn about the business since childhood thereby increasing their knowledge and experience about the sports club. An example of this is the two families who own the New York Giants football team. The Mara and Tisch family share ownership of the New York Giants and within both families there are a large number of family members involved in the sports business operations.

Some family businesses are founded for corporate social responsibility or public relations reasons to give families a better image in their local and international community. The Kansas City Chiefs a baseball team is owned by the Hunt families who have been prominent in Kansas City businesses over the past decades. Often families have ties to a special location that creates a desire of family members to continue the business and fulfill legacy goals. The family character of a business impacts the employees, stakeholders and members of the family. Stakeholders including suppliers and clients are impacted by the inclusion of a family business in a community.

Family business managers often focus on bonding with the community due to the set of values they have about balancing profit and non-profit activities (Godfrey, 1995). Some family business owners feel a closer bond to the community due to being in close proximity that encourages more philanthropic activities (Castro, 1997). Family businesses act as a member of the local community by promoting the cohesiveness of the region (Robbins, 1998). For many families sports clubs are a key part of community and social life (Janin, 1998). Sports clubs are social stakeholder groups that have a relationship with family business owners (Janin, 1998). Some family businesses donate time or money to sport teams as a way of helping the local community. The spirit of a community can be boosted when sports clubs win trophies and promote the business of family organizations. This is due to family businesses often having special relationships with sport clubs linked to the family aspect of the business. This can be due to direct family connections with the sports club being supported which may be hereditary since previous generations were also active members of the sports club.

Due to many family businesses having the family surname as the business name then there is reputational considerations from partnering with sports clubs. When sport clubs perform well then the family’s business sponsorship is considered a good business decision and this has happened over the past decade with the Buss’s family’s ownership of the LA Lakers and the clubs multiple premiership wins. Some family businesses due to their close links with the community view sports clubs as a source of extended family. This is due to sports clubs feeling directly responsible for the community due to close ties with stakeholders in the business community. Sports clubs act as social stakeholders due to the constant activity of sporting events that are tied to business and family activities. The Chicago Cubs owners the Ricketts family are a good example of this as their ownership of the iconic baseball team is tied to the cities historical development. The community involvement of family businesses with sports clubs helps to explain the nature of relationships within a community. Family businesses usually behave in a social responsibility manner that conforms to societal expectations about community involvement with sports clubs.

2.3 Management of Family Businesses

Family businesses are managed by following the vision of key family members about future direction. Family businesses focus on the potential sustainability of the management structure in order that the business continues to develop and grow for future generations of a family (Alderson, 2011). Sometimes it is difficult to manage a sport-related family business due to the balancing required of family needs and business opportunity. In a study of Argentine family owned food processors, Hatum, Pettigrew, and Michelini (2010) found that more adaptive family firms focus on internal promotion in conjunction with external recruitment of individuals that have a cultural fit with the family’s existing management structure. This means that depending on the desires of family members there may be an imbalance between the control of who makes key decisions for the business and remuneration of family members for work performed. This can lead to criticisms of family businesses by family members who want to reinvest profits for the future development of the sport business and other family members who derive most of their income from the family business. Recently the LA Dodgers baseball team was sold by Frank McCourt and his ex-wife Jamie McCourt who had a long association with the management of the team tried unsuccessfully to stop the sale of the sport team.

Family businesses are considered to have a management style more emotional and intuitive rather than the analytical style of nonfamily enterprises, which may be the reason many family’s are involved in sport-related activities. The stereotypes of family businesses are not universally applied due to differences in education, decision making and management styles (Steward & Hitt, 2012). Some family businesses recognize the role merit based performance plays in the success of the business and tie this to the overall performance of their sponsored sports team. However, increasing numbers of family firms are educating succeeding generations in business schools in order to have a more broader and global perspective of business (Tsui-Auch, 2004).

Institutional factors including stock exchange requirements affect the composition of family businesses due to the legal requirements affecting governance mechanisms (Oxfeld, 1993). These institutional factors can encourage family business participation in the sport context particularly in professional sport leagues in the United States where there is limited corporate ownership of teams. These institutional factors influence the social networks used by family members in management structures (Arregle, Hitt, Simon, & Very, 2007). Cromie, Stephenson, and Monteith (1995) in a study of small family businesses in Britain found that formalized and rational management systems exit. In addition, Chrisman, Chua, and Litz (2004) found that there are advantages for private family firms of using family members as owners, agents and managers due to the decreased cost in finding the appropriate and knowledgeable people.

2.4 Conflict and Family Business Structures

Family businesses are different from other businesses due to the presence of family in the management and ownership of the business. Often there is conflict in family businesses due to the different roles and requirements of family members participating in the day to day management activities. Research by Poza et al. (2004) found that leaders of family businesses had a higher evaluation of their management that may bias the overall performance. However, another study by Tsui-Auch (2004) in a study of Chinese family firms found no significant difference between educational levels of family members and overall performance of the family business. This means that there is difficulty with some family businesses in that the founder’s desires may not be inherited by heirs and lead to investments in sporting clubs either being divested or sold to third parties. This may also result in confusion in the family business about management expectations and the merging of work/life balance. Stress can increase in family businesses when there is a long seasonal work hours that may be made worse by gender roles expected despite society changes.

Some problems exist in defining roles and responsibilities of family members of a family business due to differing opinions. Particularly older members of family businesses may be reluctant to make structural changes to the family business despite technological changes influencing the professionalization of family businesses. However, some family owned sport teams including the Glazer family who owns Manchester United in the English Premier league have adopted the use of technology and worldwide viewing audiences to increase the profits of the sport franchise. The readiness to employ non-family members with specific skills helps in the business development. Family businesses handle risk differently as there are less external restrictions around controls on their business activities. Naldi, Nordqvist, Sjoberg, and Wiklund (2007) found that owner managers of family businesses view risk as less important than overall business performance and may be more willing to take greater chances because of their ownership control and desire for continual family involvement in the business.

Family members can influence the business by financial ownership, being a shareholder or serving in an advisory role. Family businesses blend the social unit of a family with economic objectives and desire to achieve social prestige from owning a sports team. This is due to family business owners tending to have more personal relationships with employees and customers (Donckels, 1998). The most direct contact family businesses have with customers often enables more community cohesiveness and encourages their linkage with sport. Compared to non-family businesses there is a different and more personal commitment to employee’s wellbeing in family businesses. This sometimes leads to more forward thinking planning that considers strategically the impact of decisions for employees (Castro, 1997).

Family firms include informal social ties that enhance knowledge sharing internal to the firm. This coordination of information flows facilitates change based on external market conditions. Johannisson (2002) in a study of family firms over a 15 year time period found that the interplay between the family as a social institution and having passion for change drives the success of family businesses. The secrecy and trust embedded in many family firms is useful in transition economies that place value on low key business relationships. The discretion of family firms is useful for clandestine agreements with governments in transition economies that is mutually beneficial. This means that the interface between family and business offers entrepreneurial opportunities for family businesses. In a study of United States family firms, Haynes, Onochie, and Muske (2007) found that increased financial performance does not influence the family’s success. Instead, family businesses that use both family and business interests to retain a sense of tradition and purpose perform better over the long term (Steier, 2003)

3 Generational and Succession Issues for Sport-Related Family Businesses

The key concern for most family businesses is the continuity of the business across generations based on a common interest. Family businesses can include first generational families that have started or bought a business that has a legally recognized structure. Many family businesses do not survive multiple generational ownership due to the difficulty of incorporating non family members, tensions amongst family members and lack of proper planning. The Family Firm Institute (2013) states that only 10 % of third generation family businesses survive and this decreases to 3 % in the fourth generation. For some family businesses there are difficulties when the key leader and visionary retires or withdraws but still participates in decisions (Bruc & Picardg, 2005). Tax reasons including inheritance and estate taxes are an important issue of succession planning for family businesses (Grassi & Giarmarco, 2008). The nurturing of younger generations is a key aspect of succession planning for members of family businesses. By grooming potential successors this will help family business move into the next generation.

Family businesses can suffer from challenges derived from succession planning and loss of leadership when the business is listed on the stock exchange or enters into a new product or service segment. An example of this is the death in 2014 of Malcolm Grazer the head of the family who owns the Tampa Bay Buccaneers in the American Football League and Manchester United in the English Premier League died and the ownership transferred equally to all his children. Many family businesses lack formal succession plans due to poor communication by the founder of the business about leadership and ownership direction. This is made more difficult when there are family quarrels amongst different children and their families in family firms. In order to achieve sustainable entrepreneurial growth it is important for firms to create a supportive and innovative environment that derives its success from change (Coric, Meter, & Bublic, 2013).

Succession issues of family businesses are a concern particularly if incompetent family members have the desire to take over the leadership of the business. Sometimes the older leader or founder of a family firm can make succession issues harder when there is no heir apparent or if ownerships of the business is held in a family trust. The resistance to succession planning for leaders of family businesses may result from the business being the founder’s key sense of power (Ramadani, Fayolle, Gerguri, & Aliu, 2013). This may lead to successors being unprepared to take over as they have not been trained in family business matters. The convergence of business and private lives for many leaders of family businesses can further confuse the succession issue resulting in a lack of trust from other family members in proper planning. There are also potential gender biases in succession planning with many family businesses assuming the eldest son is the logical successor despite other family members being just as knowledgeable or more capable. Some family businesses take the approach that all descendants regardless of gender or age should be equal in succession talks and the best candidate should be chosen to lead the family firm.

Family business usually has concentrated kinship based ownership that can be governed by secrecy due to the linkage between cash flow and ownership rights (Steward & Hitt, 2012). Family businesses compared to nonfamily businesses have more private benefits for family that can include a nepotism based reward system (Steward & Hitt, 2012). The embedded kinship networks in family businesses include entrenched long tenured leadership roles for family members (Oswald, Muse, & Rutherford, 2009). As leadership succession is usually drawn from the kinship pool there can be an autocratic instead of rational management style of family business.

Family businesses join groups of associated kinship connected firms to gain access to nonmarket inputs to create jointly operated entities (Steward & Hitt, 2012). These family business groups are common in transition economies when information about commercial activities is less freely available (Gilson, 2007). Hsieh, Yeh, and Chen (2010) in a study of Taiwanese electronics firms found those associated with a business group outperform others. Family business groups are common in medium to large scale enterprises due to the informal social ties that encourage collaboration (Steward & Hitt, 2012). These family business groups enable knowledge sharing and interfirm trust to develop amongst firms. Kinship networks enable businesses to provide linkages and pool resources to pursue a single goal. Small family businesses utilize kinship to integrate diverse interests and provide multiple sources of income (Creed, 2000). This is useful when uncertain economic conditions exist that help small family business has fallback positions in case one business is not going too well. Kinship enables internal incentives rather than financial reasons to dominant business decisions of family firms. This can be made difficult when cross-generational unity is harmed by individuals entering a family business (Steward & Hitt, 2012). Some noble or well recognized families enter into marriage exchanges with wealthy families for financial opportunities (McDonogh, 1986). In a similar vein, some newly wealthy families trade capital for sporting prestige. Some family businesses seek relationships with sports clubs as a way of reuniting scattered kin for a common interest.

4 Family Business and Sport Culture

Culture is an important part of family business due to the expectation of redistributing money amongst kin (Watson, 1985). The failure to recognize kinship and family relationships can lead to interpersonal conflicts in family businesses. Sometimes it is hard in family businesses to recognize merit based performance rather than viewing an individual’s own children instead of the extended family as more capable (Tsui-Auch, 2004). The problem of favoring certain family members is seen as endemic in family businesses due to the competing interests of different members (Steward & Hitt, 2012). This happened recently in the English Premier League with the Oyston family who owns Blackpool suffering considerable negative press in the media because of their payments to themselves and related family companies that were considered inappropriate by fans.

Family businesses have idiosyncratic cultures existing in the workplace that might impede regular social skills and communication mechanisms that are apparent of non-family businesses (Helin, 2011). Socioeconomic wealth rather than pure financial wealth is important to family business wanting to maintain the prestigiousness of owning a family operated and established business (Berghoff, 2006). Socioeconomic wealth can include providing sponsorship of sports clubs or providing employment for athletes. Van Essen, Carney, Gedajlovic, Heugens, and Van Oosterhout (2010) found that successive generations of family firms are more risk averse due to their focus on preserving wealth rather than creating wealth. This risk aversion is due to founders already establishing the business with an ongoing profit stream.

Greenhalgh (1994) in a study of Taiwanese family firms found that kinship traditions enabled the development of family talents and loyalties. The unique access to family resources allows family businesses access to privileged control such as strategic decisions. Intrafamily conflicts are common in family businesses that can potentially lead to decreased financial resources available for future development (Watson, 1985). Family members who are younger or from lesser known branches of a family often find it hard to obtain opportunities to collaborate with lesser known sports clubs. The lack of openness and disclosure of financial capabilities of family businesses makes it hard for some owners of sports clubs to further develop their teams.

5 Conclusion

The future will bring interesting developments about the role family businesses have in both professional and amateur sports organizations. Whilst there may be a decline in the traditional sense of what a family business is this will lead to new opportunities for sports entities to enter into and maintain relationships with family businesses. This chapter provides practical assistance to policy makers and foundations interested in encouraging greater support by family businesses in the sport context. More philanthropic support by family businesses is needed to support various stakeholders of sports clubs beyond the basic level required to maintain the sports club operations. As family businesses represent the majority of companies in most transition economies, the findings of this chapter can be drawn upon to help sports clubs. Family businesses support the general economic conditions of a community by contributing jobs and commerce. Family businesses usually support sports clubs close to their geographic location. In this chapter it is argued that a better understanding of the role of family businesses to sport clubs is needed.