Reinventing the Family Firm - Chapter 1

DEFINING THE FAMILY BUSINESS PORTFOLIO FIRM

entrepreneurs (Akhter, 2016a). In the following we highlight five aspects of the portfolio business–portfolio entrepreneur relationship: ♦ The portfolio entrepreneur is defined as a manager who has simultaneous ownership of multiple businesses. Wealth creation seems to be an essential driver for a portfolio entrepreneur, i.e. to develop profitable new businesses. A second driver might be to try out a new business concept, inspired by the creative impulse or intellectual curiosity. For instance, the author started the Lorange Institute and the Lorange Network primarily to test the viability of an alternative concept of a business school rather than to develop a new source for generating revenue per se. As it turned out, both the Lorange Institute and Lorange Network were commercially successful, but return on investment was not the prime objective. A third driver for a portfolio entrepreneur might be to contribute to “the good of society.” This was also a factor in the Lorange enterprises, as they involved attempts to offer a more affordable but still high-quality business school education as a societal goal. However, the societal impacts of Lorange Institute and Lorange Network are regrettably probably rather limited, which is perhaps not surprising given the inherent conservatism of the higher-education sector. We might also label a portfolio entrepreneur a “serial entrepreneur,” to underscore the fact that enduring entrepreneurship is the key, based on the three drivers discussed above (Carter & Ramm, 2003). As such, there are no differences between the various labels, “portfolio entrepreneur,” “serial entrepreneur,” or simply “entrepreneur.” ♦ A strategic commitment can result in the long-term building of family- owned portfolios over many years, even over generations. SUI, for instance, was founded in 1929 as a shipping company, and is now a portfolio, with the author representing the third generation of ownership. Maintaining the required level of entrepreneurship over the generations requires active commitment. A strong involvement in business activities in the portfolio seems key, including the ability to grow businesses, as well as diversify, wind businesses down, or exit certain sectors. New businesses might be developed using, at least in part, the “recycled” resources that are generated or released from exits or sales of other businesses. Entrepreneurial drive is thus key when it comes to a business portfolio’s evolution, and equally so when it comes to expansion, construction, and repeat actions/learning (Zellweger & Singer, 2012). ♦ The portfolio itself might be diverse. For instance, SUI’s portfolio consists of five different areas of business – stocks/bonds, real estate, shipping, education, and ventures. Geographic locations influence strategic decisions and provide focus to a portfolio. At SUI, for instance, at the time of writing there is a preference to expand the real estate business in Switzerland, and to further develop the stock business in Asia. Size differences between the various businesses might be an alternative way of

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