Attributes for successors’ performance in family-owned small and medium enterprises in Arusha city, Tanzania
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Date
2021
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Publisher
Sokoine University of Agriculture
Abstract
High failure rate has been documented to affect family-owned small and medium
enterprises all over the world. In response to this situation, initiatives such as formulation
of SME Policy, developing financial and non-financial services, establishing SMEs
supportive organizations and infrastructures have been implemented in Tanzania.
Despite several government and private sector interventions, high failure rate is still a
challenge to family-owned businesses. Although various scholars have carried out studies
on different facets of family-owned businesses, attributes for successors performance in
family-owned SMEs has not been exhaustively discussed. This led to a knowledge gap in
the area of the attributes for successors performance in family-owned SMEs. Therefore,
the study on which this thesis is based is meant to address the existing knowledge gap.
Specifically, the study assessed the following aspects: (i) succession planning and
performance of family-owned SMEs, (ii) influence of successors’ socio-demographic
characteristics on the performance in family-owned SMEs, and (iii) the influence of
successors’ entrepreneurial competencies on the performance in family-owned SMEs. The
data was collected through a survey whereby a structured questionnaire was administered
to a randomly selected sample of 219 successors of family-owned SMEs. The
questionnaire data were analysed through SPSS Version 21. This software was used in
order to compute descriptive and inferential statistics which included frequency
distribution, percentages, independent samples t-tests, and hierarchical multiple regression.
The results showed that most of family-owned SMEs in the study area had mechanisms of
succession plan in their businesses. Moreover, there was a difference in performance in
terms of the business net profit between the successors selected and prepared by business
founders and those selected and prepared by other family members. Those selected and
prepared by family business founders generated higher net profit. Furthermore, it was
found that education and business experience influenced performance in terms of profit in family-owned SMEs. Additionally, the results have shown that there was no significant
difference in performance in terms of profit between male and female successors of family-
owned SMEs. These results suggest that when male and female successors are equally
prepared to manage family businesses, there will be no difference in their performance in
terms of profit. Successors’ risk-taking propensity and ability to exploit business
opportunity showed significant results in predicting performance of family-owned SMEs.
It is considered that risk taking behaviour gives successors the courage to invest more in
the family business, and competence in exploiting business opportunities gives successors
the ability to expand the boundaries of the family business. Therefore, this study concludes
that, business founders are highly aware of the importance of succession planning in
family-owned SMEs in the study area. There is high performance of family-owned SMEs
if business founder selects and prepare the business successor, and sex should not be a
factor for consideration in selecting successors of family-owned SMEs. For good
performance of family-owned SMEs, successors’ education and business experience
should be given the highest priority in succession plan. Family-owned SMEs managed by
successors who are able to take calculated risks and able to exploit business opportunities
are in a good position to realize better performance in terms of net profit. This study
recommends that, founders of family-owned SMEs should select and prepare their
successors before they depart from their businesses, both male and female family members
should be equally considered in the selection of family-owned SMEs successors.
Moreover, founders should invest in the education of their successors and build their
successors’ business experiences, risk taking behaviour and competence in exploiting
business opportunities to improve the performance of their family-owned SMEs.
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Thesis
Keywords
Family- owned, Arusha city, Tanzania, Medium enterprises