negotia - babeș-bolyai university · 2007; wattanapruttipaisan, 2003; ayyagari et al., 2012; beck...

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EDITORIALBOARDOFSTUDIAUNIVERSITATISBABEŞ‐BOLYAINEGOTIA

EDITOR‐IN‐CHIEF:Assoc.Prof.IOANALINNISTOR,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaEXECUTIVEEDITOR:Prof.dr.CORNELIAPOP,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaCO‐EXECUTIVEEDITOR:Assoc.Prof.dr.SVENM.LAUDIEN,UniversityofBayreuth,Bayreuth,GermanyEDITORIALBOARD:Prof.dr.PARTENIEDUMBRAVA,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaProf.dr.MASAHIKOYOSHII,KobeUniversity,JapanProf.dr.JÁNOSSZÁZ,CorvinusUniversity,Budapest,HungaryProf.dr.PHILIPPEBURNY,UniversitédeLiège,Liège,BelgiumProf.dr.MARILENPIRTEA,WestUniversity,Timişoara,RomaniaProf.dr.SEDEFAKGÜNGÖR,DokuzEylülUniversity,Izmir,TurkeyProf.dr.STANISLAVAACINSIGULINSKI,SuboticaUniversityofNoviSad,SerbiaProf.dr.DJULABOROZAN,J.J.StrossmayerUniversityofOsijek,Osijek,CroatiaProf.dr.CORNELIAPOP,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaProf.dr.IOANCRISTIANCHIFU,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaProf.dr.SMARANDACOSMA,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaProf.Ing.MIROSLAVSVATOŠ,CSc.,CzechUniversityofLifeScience,Prague,CzechRepublicProf.dr.SIMEONKARAFOLAS,TechnologicalEducationalInstitute(TEI)ofWestern

Macedonia,GreeceProf.UEKDr.hab.MAREKĆWIKLICKI,CracowUniversityofEconomics,PolandProf.UEKDr.hab.KRZYSZTOFWACH,CracowUniversityofEconomics,PolandAssoc.Prof.dr.IVANAKRAFTOVA,UniversityofPardubice,CzechRepublicAssoc.Prof.dr.MEDETYOLAL,AnadoluUniversity,Eskisehir,TurkeyAssoc.Prof.dr.KARELTOMŠÍK,CzechUniversityofLifeSciences,Prague,CzechRepublicAssoc.Prof.dr.BERNAKIRKULAK‐ULUDAG,DokuzEylülUniversity,Izmir,TurkeyAssoc.Prof.dr.PHAPRUKEUSSAHAWANITCHAKIT,MahasarakhamUniversity,Maha

Sarakham,ThailandAssoc.Prof.dr.OVIDIUIOANMOISESCU,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaAssoc.Prof.dr.ELENADANABAKO,Babeş‐BolyaiUnivesity,Cluj‐Napoca,RomaniaAssoc.Prof.dr.MARIA‐ANDRADAGEORGESCU,NationalUniversityofPoliticalStudies

andPublicAdministration,RomaniaAssist.Prof.dr.GURHANAKTAS,DokuzEylülUniversity,Izmir,TurkeySeniorLect.PETERJOHNRAS,TshwaneUniversityofTechnology,SouthAfricaSeniorLect.dr.SUSANNALEVINAMIDDELBERG,North‐WestUniversity,Potchefstroom,

SouthAfricaLect.dr.GAMONSAVATSOMBOON,MahasarakhamUniversity,MahaSarakham,ThailandAssoc.Prof.dr.OANAGICĂ,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaIndependentfinancialanalystELISARINASTITIMURESAN,Seattle,USASECRETARIESOFTHEEDITORIALBOARD:Assoc.Prof.dr.OANAGICĂ,Babeş‐BolyaiUniversity,Cluj‐Napoca,RomaniaLect.dr.MARIAMONICACOROŞ,Babeş‐BolyaiUniversity,Cluj‐Napoca,Romania

YEAR Volume62(LXII)2017MONTH JUNEISSUE 2

PUBLISHEDONLINE:2017‐06‐30PUBLISHEDPRINT:2017‐06‐30

ISSUEDOI:10.24193/subbnegotia.2017.2

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CONTENT – SOMMAIRE – INHALT – CUPRINS

FRANÇOIS COETZEE, PIETER BUYS, Independent Review or Audit? The SMEImplicationsworthPondering...........................................................................................5

NELLYDASZKIEWICZ,ForeignEntryModesofHigh‐TechFirmsinPoland....23MARIOLADŹWIGOŁ‐BAROSZ,SignificanceofSuccessionCompetenciesinthe

Management of Silesian Family Business in the Sector of Small andMediumEnterprises.....................................................................................................................35

PAULM.LANE,EducationalChangeinthe21stCentury:SmallBusinesstoTackleTemperature,Water,Soil..................................................................................51

CORNELIA POP, MONICA MARIA COROS, CRISTINA BALINT, RomanianRuralTourism:aSurveyofAccommodationFacilities.......................................71

STUDIAUBBNEGOTIA,LXII,2,2017,pp.5‐22(RECOMMENDEDCITATION)DOI:10.24193/subbnegotia.2017.2.01

INDEPENDENTREVIEWORAUDIT?THESMEIMPLICATIONSWORTHPONDERING

FRANÇOISCOETZEE1,PIETERBUYS2

ABSTRACT.SMEaccessibilitytofinanceiswidelyregardedasacrucialcontributing factor tosustainability. It isalsogenerallyaccepted thataccesstofinanceisconsiderablymoredifficultforSMEsthanforlargercorporations.ThestatutoryauditoffinancialstatementsforqualifyingSMEsinSouthAfricahasbeenabolishedandreplacedwiththeoptionto do an independent review of the financial statements. This paperconsidersthisabolishmentfromtwoperspectives.Firstly,theproblembeinginvestigatedinthisstudyiswhetherthelackofauditedfinancialstatementshasnegativelyaffectedSMEaccesstobankfinancing.Thisisdoneby testing the perspectives of SME owners/managers in this regard. AfurtherproblemlooksatmitigatingactionSMEscantaketoimprovetheirriskprofileduringabanksassessmentofaloanapplication.Knowledgeofbasicaccountingprincipleshasbeenidentifiedasapotentialmitigatingfactorbyvariousresearchers.Thisstudygainsinsightintotheviewsandperceptions of SME owners/managers pertaining to their perceivedaccountingknowledgeandorskillsets.Keywords:accountingproficiency,audit,independentreview,SMEfinance,SMEsustainabilityJELClassification:M13,M41,M42,M48

Recommendedcitation:Coetzee,F.,Buys,P.,IndependentRevieworAudit?TheSMEImplicationsworthPondering,StudiaUBBNegotia,vol.62,issue2(June),2017,pp.5‐22,doi:10.24193/subbnegotia.2017.2.01.1PhDCandidate,NWUSchoolofBusinessandGovernance,Potchefstroomcampus,SouthAfrica,[email protected]

2Director:WorkWellResearchUnit/Professor:NWUSchoolofBusinessandGovernance,Potchefstroom,SouthAfrica,[email protected]

FRANÇOISCOETZEE,PIETERBUYS

6

1. Introduction

“It’satroublesomeworld.Allthepeoplewhoareinit,aretroubledwithtroublesalmosteveryminute.”(Geisel,2016)

Althoughtheabovequoteby‘DrSeuss’mayhavebeendirectedat

a younger audience, it does encapsulate the day to day strife of thecontemporarysmallandmediumenterprisetobecomesustainable.TheconceptofaSmallandMediumEnterprise(SME)isgloballyrecognized,denotingbusinessentitiesthatarenotclassifiedasbig(corporate‐type)business organisations. Although there are various opinions as to thedefining characteristics ofwhat constitutes an SME,Mahembe (2011)expresses theview that it ispractical todefine anSMEby its relativesmallnumberofemployees,orbyitsrelativesmallannualturnover,orbyacombinationofthetwo.SurveysdonebyWorldBank(2015)havefound that SMEs play a definitive role inmany global economies, butmoresoindevelopingeconomies‐takingonlyformalSMEsintoaccount,theycontributeupto33%ofGDPinsuchdevelopingeconomies.IfonewastoaddinformalSMEstatisticstothesenumbers,theSMEcontributionstoGDPwouldbesubstantiallyhigher.

Furthermore, according to the World Bank (2015) most jobs(approximately80%)inemergingmarketsarecreatedbySMEs.FromaSouthAfricanperspective, SMEs constitute asmuch as 91%of formalbusinessesandfurthercontributeroughly57%tothelocalGDPand61%tothedomesticworkforce(Abor&Quartey,2010).Withcontributionsassignificantasthese, it is imperativethattheSMEsectorisnurturedandsupportedbyallandsunder inorder tosustainandenhance theireconomicandsocietalimpactglobally.

Notwithstanding its importance, there is amyriad of problemsfacingSMEsonadailybasis,suchasinaccessibilitytoexternalfinancing,a competitive business environment, a lack of technical, financial andmanagerialskills,alackofresearchanddevelopmentinfrastructure,anunskilledlabourforce,manytaxandstatutoryadministrativeburdens,andvariousotherinternalandexternalfactors(Yoshino&Taghizadeh‐Hesary, 2016; IRMSA, 2015). As daunting as all these challengesmayseem,variousauthorshavefoundthatoneofthegreatestobstaclesto


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SMEsustainability,isitsstruggletoobtainbankfinance(Malhotraetal.,2007;Wattanapruttipaisan,2003;Ayyagarietal.,2012;Becketal.,2005;WorldBank,2013).

Withoutfinanceavailability,SMEscannotbeinnovativeandexpansiveandwillremainstagnantandevenunsustainable.Inthisregard,MillsandMcCarthy (2014) found that bank loans are a crucialmethodof financeutilizedbymanySMEs.Infact,morethan80%ofSMEsconsiderbanksasakeysourceofbusinessfunding(NFIB,2012;Mahembe,2011).Withthisinminditisdisconcerting,fromanSMEperspectiveatleast,tonotethat only approximately 30% of SMEs that apply for bank loans, areeventuallyapproved(Mazanai&Fatoki,2012;Mahembe,2011;Turneretal.,2008).

Tocomplicatematterssomewhatmore,thesuccessofabankloanapplicationhashistoricallybeendependentonthesubmissionofauditedfinancial statements, which banks relied upon during the applicationreviewprocess(GrantThornton,2008;PitcherPartners,2010).AccesstofinancehasbeenmadedifficultbythefactthatbankshavehistoricallyregardedSMEsasagreaterriskthanbigcorporationsasfarasdebtisconcerned (The Conversation, 2012;Haynesetal., 1999). Tomitigatethis risk, banks would put SMEs through a more rigorous screeningprocess,whichincludedtherequirementforauditedfinancialstatements(AccountancyAsia,2011;SAICA,2010;PitcherPartners,2010).However,inSouthAfrica,anewCompaniesAct,No.71of2008(referredtotheActhereafter),broughtabouttheabolishmentofthestatutoryauditrequirementforqualifyingcompanies in favourof theso‐called independentreviewalternativethereto(Act,2008).

AsimilarfatehasbefallenstatutoryauditsincountriessuchastheUSA,theUK,Australia,CanadaandSingaporewheremandatoryauditsarenolongerrequiredforallcompanies(Sallehetal.,2008;AbdulAziz,2002).With the advent of these lesser requirements, SMEs (includingSouthAfricanSMEs)are leftwithadifficultdecision.Dotheykeepondoinganaudit(atahighercost)andimprovetheirchancesatobtainingbankfinance,ordotheyoptforthecheaperindependentreviewandrunthepossibleriskofhavingtheirloanapplicationsrejected?


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2. ResearchProblemandMethodologyAsstatedabove,theimplementationoftheActinSouthAfricaled

toaconundrumforSMEsinthatauditsarenolongerrequiredforqualifyingcompanies,whilebanksinfacthavehistoricallyplacedsubstantialrelianceon audited financial statements to aid in evaluating loan applications.Therefore,thisarticletakesacloserlookattheviewsandperceptionsofSMEspertainingtothechoicethenewActhaslaidbeforetheirdoor,i.e.thatoftheauditversusindependentreview.

Inordertocometoaholisticunderstandingoftheissue,amixedmethodresearchapproachwasfollowed.First,aliteraturereviewconsidersi) the development and importance of accounting and ii) the potentialshortcomings and benefits of an audit versus an independent review.Secondly, the literature study is supplemented with empirical surveysfrom i) a bank perspective on bank finance approval requirements forSMEs,viasurveysofthefourlargestSMEfinanceprovidersinSouthAfrica,andii)anSMEperspectiveonbankfinanceapprovalrequirementsfrombanks,viasurveysof60SMEentitiesthroughoutSouthAfrica.Thearticleisendedwithsomeconcludingremarksandfinalcomments.

3. DevelopmentandImportanceofAccounting3.1. AHistoricOverviewAglanceatthehistoricdevelopmentofaccountingwhentryingto

gauge theeffectofanauditversusan independentreview engagementmayseemrathercounterintuitive,butitdoesprovideagoodfoundationintotherealitiesofSMEs.Fromanaccountingperspective,thedecisionanSMEhastomakebetweenanauditoranindependentreviewismorefarreachingthanjusttheaccesstofinancequandary.ItcutsintotheveryfabricofthevalueaccountingofferstoSMEsustainabilityandgrowth.Inthisregard,Buys(2011)viewsaccountingasmorethanjustabookkeepingactivityortheapplicationofaccountingstandards,butratherasavalueaddingnecessity.Emphasizingthisveryviewpoint,WarrenBuffetholdsaccounting,andtheknowledgethereof,insuchhighesteemthatherefersto accounting as the language of business and a discipline that everyshrewdbusinesspersonshouldunderstand(Buffet&Clark,2008).


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Accountingdevelopedbecausetherewasaspecificneedthatwaspresentattherighttimeintherightplace(Edwards,1960).Effectivelywecansaythataccountingdevelopedandevolvedbecausecommercedevelopeda specificneed thatkeptonevolving.Edwards (1960)alsotheorizesthataccountingdidn’tdeveloprandomly,butratherinlogicalandconsecutivephases.Thesephaseswere:

1. record keeping, i.e. preserving of documents to substantiatetransactionlegality;

2. bookkeeping, i.e. progression of record keeping in the sensethattransactionsarerecordedandreported;

3. accounting, i.e. progression of bookkeeping in the sense thattransactionsaresubstantiated,recorded,reported,summarizedandsubjectedtocontrolmechanisms.

The theory that the accounting developmental process can byequatedtoaspecificneedthatdevelopedandevolved,correlatesnicelywiththeopinionraisedbySangster(2010)whenhesaysthatthedoubleentryaccountingsystemwasnecessitated(need)bythefactthatItaly’scommerce(specificity)haddeveloped(development)intoasystemwherebusiness people started using agents and partnerships to trade with(evolution).Theevolutionofaccountingtheoremdidn’tstopwithLucaPacioli,oftenconsideredas the father ofdoubleentryaccounting (tenHave,1976),whenhepublishedhisbookSummadeArithmetica,Geometria,Proportioni et Proportionalita (roughly translated as Everything AboutArithmetic,GeometryandProportion)in1494(Alexander,2002).Thispublicationhasbeenregardedasthebasisformoderndayaccountingtheoryformanydecades(Fogo,1905;McCarthyetal.,2008).Asspecificneedsdeveloped,accountingadaptedandimprovised.Warsono‐bin‐Hardono(2013)arguesthataccounting’sinitialpurposewastoprovideandreproducereliableinformation,originally,tobeofvaluetoallrelevantstakeholders.

Thispurposemayunfortunatelyhave left the initialpremiseofreliableinformationforallinthepast.Currently,thereliabilityextractedfromaccountingisverymuchdependentontheuser’sunderstandingofcomplex accounting standards and principles. For SME ownerstherefore,thechoicebetweenauditorindependentreviewshouldstartwiththequestion:“WheredoIgetthemostuseful,reliableandhelpfulinformation?”


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3.2. AuditversusIndependentReviewThe implementation of the Act in South Africa had very good

intentionsinthatitsobjectivesincludedthecreationofflexibilityintheorganisationofcompanies,alessburdensomeregulatoryenvironment,thepromotionofefficiencyandtransparencyincorporategovernance,and bringing the local company legislation in line with internationaldevelopments.

Significant to auditors, accountants and SMEs alike was theintroductionoftheindependentreviewasanalternativetoastatutoryaudit,which can bring about a potential cost saving in auditor fees, i.e. inpreparingandmaintainingauditfiles,andinadministrativefeesi.e.companyregulatoryrequirements(Othmanetal.,2013).Nevertheless,therehavebeenreservationsastothetrade‐offbetweenhelpingSMEssavecostsandburdensomeadministrativecompliancesandthevalueanauditmayhold(Othmanetal.,2013),includingthefollowing:

Thirdpartiessuchasbanks,taxationauthoritiesandshareholdersmaystillrequireauditedfinancialstatementsasameansofacquiringthenecessaryassuranceastothereliabilityofassertionsmadeinthefinancialstatements.

Furthermore,where an SMEsowner is also themanager, themanagerwouldessentiallybereportingtohimself.ValuablethirdpartyinsightandadviceintotheSME’sdealings,whichcouldhavebeengleanedfromanaudit,maynowfallbythewayside.

Qualifying SMEs, in terms of the newAct, now have to choosebetweenstayingwithastatutoryauditorhavinganindependentreviewdone.Thefollowingtablegivesasystematiccomparisontohigh‐lightkeydifferencesbetweenthetwoengagementtypes.

Table1.AuditversusIndependentReview(Adaptedfrom:AICPA,2015;Kennelly,2012;MannWeitz&Associates,2012)

Attribute Audit Independentreview

Assurancelevel Reasonableassuranceabouttheabsenceofmaterialmisstatements.

Limitedassuranceabouttheabsenceofmaterialmisstatements.


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Attribute Audit Independentreview

Objective Reasonableassuranceaboutthefairpresentationandab‐senceofmaterialmisstate‐ments.Anauditopinionisprovidedregardingthelevelofassurance.

Limitedassuranceena‐blingabasisforreportingwhetheranymaterialissuesarosefromtheproceduresconducted.

Internalcontrolinvestigation

Yes No

Testinternalcontroleffectiveness

Dependentonauditstrategyandriskassessment

No

Thirdpartyverification

Yes No

Proceduresinsupportofassurancerequirements

Yes No

Financialstatementpreparationisamanagementresponsibility

Yes Yes

Fraudinvestigation No NoPerformsinquiryandanalyticalprocedures.

Yes Yes

Performverificationandsubstantiveprocedures.

Yes No

Practitionercredentials

Registeredpublicauditor Lesserrequirementofbeingaregisteredaccountant

Costimplications Involvesthemostworkandriskandthusthecostissubstantiallyhigher.

Notaslabourorriskintensiveandthusasubstantiallylowercostimplication.


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Basedontheabove, it isobviousthatanindependentreviewisnotonlyacheaperalternative,butis lessintrusiveintotheoperationsandactivitiesoftheentity.

IntheSouthAfricancontexttherefore,considerationisnowgiventothespecificrequirementsthatwouldallowanentitytoqualifyforanindependent review as opposed to an audit. Regulation 26 of the Actprescribesthemethodthatshouldbeusedtodeterminewhetherastatutoryauditisstillmandatoryorwhetheranindependentreviewmaybeused.Shev(2012)explainsthatthemethodbywhichthisdeterminationismadeisbasedoncalculatingtheentity’sso‐calledPublicInterestScore(PIS),whichisessentiallycalculatedbyallocatingpointsinthefollowingmanner:

Onepointforeachemployee(basedontheaveragenumberofemployeesasdefinedintheLabourRelationsActNo.66of1995)thatworkedatthecompanyduringthefinancialyearunderreview.

OnepointforeveryZAR1million3(orportionthereof)inturnovergeneratedduringthefinancialyearunderreview.

OnepointforeveryZAR1million(orportionthereof)ofthirdpartyliabilitythecompanyhadatyearendofthefinancialyearunderreview.

Onepointforeveryindividualwhodirectlyorindirectlyheldabeneficialinterestintheissuedsharesoftheentityduringthatyear.

Usingtheabovepointscalculation, furtherinter‐relatedcriteriapoints are considered todeterminewhether an entity is considered aqualifyingentityforandindependentreview,orwhetheritshouldstillconductanaudit,asillustratedinthetablebelow:

Table2.Summarizedauditversusindependentreviewrequirements(Adaptedfrom:SAICA,2012;CQS,2012)

PublicInterestScore

Managementstructure

Accountingrecordcompilation

AuditvsIndependentReview

<100 Owner (NotApplicable) None<100 Non‐owner (NotApplicable) Independentreview

3ZAR(orSouthAfricanRand)isthelocalcurrency.AtthetimewritingtheexchangeratewasapproximatelyZAR13.20toUSD1.00.


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PublicInterestScore

Managementstructure

Accountingrecordcompilation

AuditvsIndependentReview

100to349 Owner Internal Independentreview100to349 Owner Independently None100to349 Non‐owner Internally Audit100to349 Non‐owner Independently Independentreview350+ (NotApplicable) (NotApplicable) Auditrequired.Whatfurthercomplicatesthedecisiontochoosebetweenanaudit

oran independentreviewforSMEs, is thefactthatthePIScalculationmay fluctuate fromyear toyear (Shev,2012),whichwill result in theauditingrequirementsintermsoftheActalsopotentiallychangingfromyeartoyear.Ininstancessuchasthese,theinitialcostsavingbenefitsofnotperforminganauditmaybenegated.Withnocontinuityintheauditengagements,itmaybedifficultforauditorstoplacerelianceonpreviousfinancialstatementsandthusverifyingtheopeningbalancesmayrequiremoretimeandeffortfromauditors,therebymakingtheauditevenmoreexpensivethanwhatacontinuousengagementmighthavebeen.SomeofthemajorbenefitsanddisadvantagesbetweenthetwooptionsthatareimportantforSMEstoconsider,areprovidedinthetablebelow:

Table3.Auditversusindependentreviewconsiderations(MacIntyre,2015)

Audit Independentreview

Auditworkismorerigorousandcontainsmorein‐depthprocedureswhichmayprovidemanagementwithvaluableinformationthatcancontributetotheSMEssustainabilityefforts.

Itislessrigorousandthussubstantiallycheaperthanastatutoryauditandislessadministrativelyburdensome.

Itgivesahigherlevelofassurancethatthefinancialstatementsareafairreflectionofthebusiness.

Itisaneasierprocess,thussavingtheSMEtimespentwiththereviewer.

Therequirementtoreviewinternalcontrolscanprovideusefulrecommendationstomanagement.

Givesamoderateformofassurancetostakeholdersandthirdpartiesthatthefinancialstatementshavebeenreviewedbyanindependentperson.


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Audit Independentreview

MoreonerousprocesswhichcanbetimeconsumingandcanplacealargeadministrativeburdenontheSME.

Lessdepthofwork.Thusnotproducingasmuchvaluetomanagementintheformoffeedbackandrecommendations.

MuchcostlierthananIndependentreview.

Norequirementtoreviewinternalcontrolsorproduceamanagementletter.

Basedontheabovetherefore,theauditexemptiondecisionisan

importantconsiderationinanSME’ssustainabilityconsideration.CarefulthoughtandcontemplationisrequiredfromSMEownerstochoosewhatisbestintermsoftheircompany’svisionandmission.

4. BankPerspectiveonSMEAuditedFinancialStatementsAsmuchasaccesstofinanceisregardedasakeythreattoSME

sustainability,banksarenottookeentotaketheblameforthelackoffinanceavailability.WierschandShane(2013)foundthatbanksattributetheperceptionthatbanksaren’tlendingmoneytofactorssuchasalackofdemandforcreditfromSMEs,asymmetricinformationfromSMEsandthe inability toshowhowloansweregoing toberepaid.According toOECD (2009) tougher regulationsareoften impartedonbanks,whichthengetspassedontoclients,whileBergerandUdell(2006)alsofoundthatbanksoftenusefinancialstatementswhenconsideringloanapplications.ThequestionthatneedsansweringthereforeiswhetherauditedfinancialstatementsimprovethechancesofSMEsgettingloanapplicationsapproved.

ToanswerthisquestioninaSouthAfricancontext,theapplicablerequirementsfromthefourlargestbanks,which,accordingtotheBankingAssociationofSouthAfrica(2014)representapproximately82%ofthebankingmarket share,wereobtainedandanalysed.Therelevant loanapplicationinformationwascollectedfromtheirwebsites,supplementedbyhardcopyapplicationsavailablefromthebanksthemselves.Finally,theinformationrequirementswerealsoclarifiedbydiscussionswithloanofficersatthedifferentbanks.TheresearchfoundthattheSouthAfrican


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bankshaveessentiallyadaptedtothenewActbynolongerrequiringSMEstosubmitauditedfinancialstatements,butthatstatementssuchas(andconfirmationof)thei)cashflowstatements,ii)managementstatements,iii)businessplansandiv)theprovisionofsecurityarecurrentlyofmoreimportanceinevaluationloanapplications.Therefore,theconclusionthatcanbedrawnisthathistoricalfinancialinformation,suchasauditedfinancialstatements,isbecomingoflesserimportancecomparedtomorecurrentinformation,suchascashflowstatements,businessplans,managementaccounts,andespeciallysomeformofsecurity,allindicatingtheSMEs’abilitytomaketherequiredrepayments.

5. SME Perspective on Accounting and Audited FinancialStatements

Basedontheresearchdoneasreferredtointheprevioussection

concerningtheimportancebanksplaceonauditedfinancialstatements,furtherresearchwasconductedtogaugetheviewofSMEspertainingtothesamescenario,inotherwordswhattheSMEs’perceptionsareregardingtheimportanceofauditedfinancialstatements.Indoingso,theSMEdatabaseofa(registered)externalauditingfirmwithacountrywidefootprintwasusedtowithdrawthesamplefrom,resultingin60participantsspanningthecountryandcoveringvariousindustries.

TheresearchindicatedthattheSMEownersconcurredwiththefinding that South African banks no longer insist on audited financialstatementswhenassessingloanapplications.Theresearchfurtherindicatedthat SME owners/managers believe surety (95% of participants) andcurrentmanagementstatements,includingcashflowstatements(88%ofparticipants)areofmoreimportancetobankloanapprovalprocessesthantheavailabilityofauditedfinancialstatements.

ThisleadsustotheinevitablequestionofhowSMEscanimprovetheirchancesofhavingloanapplicationsgrantedbybanks.Withauditedfinancialstatementsnolongerrequired,andbankscircumspectofasymmetricalinformation,itstandstoreasonthatthemore‘reasonable’informationSMEscanpresenttobanks,themorelikelybankswillbetoacceptsuchinformationasreliable.ThisinturnshouldimproveaSMEschancesof


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convincingbanksoftheirsustainabilityandlowerriskassessmentsduringloanapplications.SianandRoberts(2009),ChimuchekaandRungani(2011)andHaronetal.(2013)allagreethatSMEs,moreoftenthannot,lackbasicaccountingknowledge.

ThislackofaccountingacumencanleadtoasymmetricinformationbeingproducedandsuppliedbySMEs,asa lackofunderstandingandvalueattributionleadstoanindifferentattitudetowardsaccounting.Thefollowing table is an extract of some of the more relevant statisticaleffectswithmediumtohighcorrelationsasperPearson’sstatisticalanalysis.

Table4.Pearson’scorrelationanalysis

Pearson’sCorrelation

UnderstandingAccounting

ImportanceofAccounting

Accountingisanecessary

evilUnderstandingAccounting

PearsonCorrelationSig.(2‐tailed)N

1

60

ImportanceofAccounting


.597**.00060

1

60

Accountingisanecessaryevil


‐.477**.00060

‐.664**.00060

1

60Accountingisvaluableformanagementpurposes


.547**.00060

.768**.00060

‐.490**.00060

**Correlationissignificantatthe0.01level(2‐tailed).*.Correlationissignificantatthe0.05level(2‐tailed)

The following statistically significant correlations found usingPearson’scorrelationanalysis,includei)theSMEowner/managerswithabasicunderstandingofaccountingcorrelatepositivelytotheviewthataccounting is important to their business sustainability, ii) that SMEowner/managerswithabasicunderstandingofaccountingcorrelatepositivelytotheviewthataccountingcanplayanimportantmanagerialroleintheir


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business,iii)thatSMEowner/managerswithlittleornounderstandofaccountingcorrelatenegativelytotheviewsontheimportanceofaccounting,theimportantforbusinesssustainabilityandthepossibilitythataccountingcancontributetobusinessmanagement,andiv)thatSMEowner/managerswhounderstandtheimportanceofaccountingcorrelatepositivelywiththeviewthataccountingcanhaveavaluablecontributionasamanagementtool.

TheresearchindicatesthatthevalueofaccountingasamanagerialtoolandasacontributortoSMEsustainabilityisdirectlycorrelatedwiththeSMEsunderstandingofaccountingandoftheperceptionofitsimportance.Likewise, the lack of basic accounting knowledge is directly, althoughnegativelycorrelatedwiththeperceptionthataccountingcanaddvaluetoSMEsustainability.

6. ConclusionThe value the SME sector contributes to national GDP and job

creation globally is irrefutable. As such, it is in the best interest ofworldwideeconomicwelfareforSMEstobesustainable,progressiveandeconomicallyviable.Thesegoals,however,areconstantlybeingchallengedduetotheverycompetitiveandunforgivingmilieuinwhichSMEsoperates.

Theyarefacedwithvariouschallengesrangingfromexchangeratepressures, employment requirements, keeping abreast of technologicaladvancestocompetingagainstbigcorporaterole‐players.Amongalltheadversities SMEs face however, few have a more direct and prolificinfluenceonSMEsustainabilitythanaccesstofinance.

The research conducted corroborated the findings fromearlierresearchthatheldthatbanksnolongerrequireSMEstosubmitauditedfinancialstatements,whenapplying for loans.At firstglance, thismayseemtobeapositivedevelopmentforSMEs.Theinitialthoughtwouldbe thatSMEswill shakeoff a costlyandadministrativelyburdensomerequirement. As banks abandon the requirement of audited financialrequirements,andtheaccompanyingreasonableassuranceofaccuratefinancialinformation,bankingregulationsarecontinuouslytighteningintermsofstringentloanprocesses.SMEsarehowevernothelplessinthese


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times.ResearchfromvarioussourcesfoundthatSMEsoftendonothaveabasicgraspofaccountingprinciplesandmethodologies.Theresearchconductedinthisstudyconfirmsthisconclusion.MostSMEsaretryingtosurviveinafinancialarena,withouthavinganyfinancialacumen.Variousresearchershavesuggestedthatbyabridgingshortfallsinbasicaccountingknowledge,bankingfearsconcerningsustainabilityandaffordabilitymayverylikelybeappeased.

SMEscanlearnfromtheseresults.Empoweringthemselveswithknowledge,inthiscasethelanguageofbusiness–accounting,purportstoholdsignificantadvantagesfortheirbusinesssustainabilityandexpansion.AsRohn(2016)said:

“Youmusteithermodifyyourdreamsormagnifyyourskills.”

In termsof limitations, this researchdidnot test theaccountingknowledgeofSMEparticipants indepth.Perceptionswererathertested.Further research as to the level of actual skillsets is required. FurtherresearchintothebasicaccountingskillsSMEswillfindusefulintheirdailybusinessdealingswillbeofgreatvalueaswell.

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STUDIAUBBNEGOTIA,LXII,2,2017,p.23‐34(RECOMMENDEDCITATION)DOI:10.24193/subbnegotia.2017.2.02

FOREIGNENTRYMODESOFHIGH‐TECHFIRMSINPOLAND1

NELLYDASZKIEWICZ2

ABSTRACT.Objective:Themainobjectiveofthearticleistopresenttheroleandimportanceofforeignentrymodesininternationalizationprocessandtheirkeydeterminants.Researchdesignandmethods:Aquantitativeresearchdesignwasused.Asurveywasconductedonthesampleof263firmsoperatinginhigh‐techindustriesintheterritoryofPoland.Toverifytheassumedhypothesesthestatistical instrumentswereusedincludingChi‐Square test and Cramer's V contingency coefficient. Findings: Theinvestigatedhigh‐techfirmsadoptawholerangeofentrymodesintheirinternationalizationprocess.However,researchresultsshowthatthechoiceofforeignentrymodesisdeterminedbythesizeofthecompany,paceof internationalization and internationalization intensity (measuredbyTNI index), namely bigger firms, born global and firmswith highinternationalizationindexaremorelikelytousemoreadvancedandentrymodescharacterizedbyhigh‐control.Implicationsandrecommendations:Polishhigh‐techcompaniesusemoreadvancedentrymodesincomparisonwithwholebusinesspopulation.Foreignentrymodechoiceisamultilevelphenomenonanditisinfluencesbyamultiplicityoffactors.Thus,itisalsodifficulttoinvestigateempirically.However,itprovidessignificantfutureopportunitiesforfurtherstudiesthatbringusclosertounderstandingthephenomenon of entrymode choice decision.ContributionandAddedValue:TheresearchresultspresentedinthisarticleareoneofthefirstinPolandinvestigatinginternationalizationandforeignentrymodesoffirmsoperatinginhigh‐techindustries.Theobtainedresultsremaininlinewiththemajorityofempiricalevidenceworld‐wide.

Keywords:internationalizationoffirms,bornglobal,high‐techs

JELClassification:F23,D211Thearticlecameintobeingwithintheresearchproject0PUS6,No.2013/11/b/hs4/02135financedbytheNationalScienceCentre,TheInternationalisationPatternsofSmallandMedium‐SizedEnterprisesOperatinginHigh‐TechIndustries2014‐2017coordinatedbyNellyDaszkiewiczfromGdańskUniversityofTechnology.

2FacultyofManagementandEconomics,GdańskUniversityofTechnology,[email protected]

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Recommended citation: Daszkiewicz, N.,ForeignEntryModesofHigh‐TechFirms inPoland,StudiaUBBNegotia,vol.62, issue2(June),2017,pp.23‐34,doi:10.24193/subbnegotia.2017.2.02.

IntroductionForeignentrymodeadoptedbyafirmisitsstrategicchoice.Ithas

significantinfluenceonfirmperformanceoninternationalmarketsasitdeterminesthelevelofresourcecommitmenttotheforeignmarket,theriskofafirminthehostcountryandthenatureofcontrolafirmhasoveritsforeignactivities(Arregleetal.,2006).SMEsusuallychoosedifferent,i.e.lessadvancedforeignentrymodesthanbigbusinessesandmultinationals(MNEs).SMEsfacedifferentchallengesduringtheirexpansiontoforeignmarketandsotheytendtochoosecooperativeentrymodes,whilelargefirmswillratherchooseindependententrymodes(Bruneel,DeCock,2016).

Theindustryinwhichafirmoperatescanalsoinfluenceitsentry‐modedecisions(Gabrielssonetal.,2008).Accordingtovariousresearchresultshigh‐technology‐basedfirms(high‐techs)mayuseacombinationofdifferentmarketentrymodesthroughstrategicalliancestoenterforeignmarkets.Moreover,high‐techsoftendevelopdifferentsolutionsfordifferentmarketsatthesametime(Daszkiewicz,2016).

Themainobjectiveofthearticleistopresenttheroleandimportanceof foreign entry modes in internationalization process and their keydeterminants.Thearticleconsistsofthreesections.Inthefirstsectionitpresentstheliteraturereviewontheforeignentrymodesandtheirroleininternationalizationprocessoffirms.Thesecondsectionincludesthebasicdescriptionofthematerialandmethodsusedinempiricalresearch.Inthethird section the discussion on empirical results is carried out. Theempiricalresultswereobtainedonthesampleof263firmsoperatinginhigh‐techindustriesinPoland.

LiteratureReviewThediscussionontheroleand importanceofentrymode in the

processofinternationalizationoffirmsbelongstothekeyissuesofresearchinthefieldofbusinessresearchandinternationalization.Internationalization

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decisionofafirmincludesthechoiceofforeignmarketsandthestructuralnature of its activities in those markets (Carazo and Lumiste, 2010).BrouthersandHennart(2007)defineentrymodeastheoperationalformused to enter foreignmarkets. Thus, firmsmay enter foreign marketsi)alone,i.e.throughdirectexports,ii)inpartnershipwithotherfirmsviacontractswithdistributors,iii)bymakingadirectinvestmentinaforeigncountry(FDI).

Whenafirmdecidestoinvestequityithasatleasttwostrategicallyimportantchoices. Itmustchoose themode;eitherestablisha foreignoperationfromscratch(investinagreenfieldfacility)ortoengageinanacquisition(buyequityshareinanexistingforeignentity)(DikovaandvanWitteloostuijn,2007).Internationalizationliteratureprovidesmuchevidence that foreign entrymode choice is a very important strategicdecision for an internationalizing company. It determines the level of itsresource commitment, the risk in the host country and the nature ofcontrolithasoveritsforeignactivities(Arregleetal.,2006).BrouthersandHennart (2007)argue thatonceestablished, themodeof entry isdifficulttochange,becauseithaslong‐termconsequencesforafirm.

Particularmodesofinternationalizationdifferinmanyways.Wach(2012) identifies differences in: (i) scope of capital commitment, (ii)scopeofmanagementcommitment, (iii)scopeofcontrol, (iv)scopeofrisk, (v) scope of potential profits and (vi) scope of input costs. Theauthoralsostressesthatgenerally,thehighertheextentofmanagementinvolvementis,thehigherthescopeofcontrolandrisk.Inaddition,theincreasingofinvestedcapitalinvolvestheincreasingofthemanagementonforeignmarkets.Ontheotherhand,thelowertheentrycostsare,thelowertheprofitabilityofcarriedouttransactions.

AlsoAndersonandGanington(1986) focuson firms’controlofresourceswhenitentersforeignmarkets.Thus,resourcesmaybelocateddomesticallyorinaforeignmarketandafirmmayfullycontrolthemorthroughexportcontractagreement.Thescholarsdefine“control”astheabilitytoinfluencesystems,methodsanddecisions.Generally,highcontrolmodesincreasebothprofitabilityandrisk.

Hollenses(2010)identifiesthreecategoriesofforeignentrymodesaccordingtolevelofcontrolcriteria:

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1.Highcontrolmodes:(i)foreigndirectinvestment(FDI)informofwhollyownedsubsidiaries(WOS),(ii)directsellingtobigcustomers(OEMs).Bothentrymodesareequaltofullcontrolwithactivitiesinforeignmarkets.

2.Intermediatemodes:(i)strategicalliances(SA),(ii)jointventures(JV). These entrymodes are located in‐between high and low controlmodes;partnersusually share resources, technology,profits, and jobs(usually,thelocalpartnerprovidesmarket‐specificknowledge).

3.Lowcontrolmodes:(iii)indirectexport,(iii)directexport.Incaseofindirectexportthelevelofcontrolisthelowest.Itiswhenaparentcompanyusesindependentorganizationslocatedintheparentcompany’sowncountryorthirdcountry.Incaseofdirectexporttheparentfirmsellsdirectlytoanagent,distributororimporterlocatedintheforeignmarketwhichprovidesahigherdegreeofcontrolthanwithindirectexport.However,stilldirectexportbelongstothelowcontrolmodes.

Therearenumerousreasonsforfirmstoenterinternationalmarkets,but the level of technological development is considered to be its keydeterminants,especiallyofFDI(DikovaandvanWitteloostuijn,2007).Itisbecause,firmsoperatinginhigh‐technologyindustries frequentlyenterforeignmarketstocovertheircostlyR&Dinvestmentsorpreventproductobsolescenceandgainnewmarketshare.Moreover,throughFDI,MNEstransfer and share their proprietary knowledge, skills and knowledgewithlocalorganizationsinordertogainadditionalprofitoramortizeR&Dcosts.

Accordingtovariousresearchresults,high‐technology‐basedfirms(high‐techs)maystarttheirexpansionintoforeignmarketsshortlyaftertheircreation.Firmsinternationalizedearlyandfastarethosewhichdonot follow the traditional (stage‐based) internationalization path, andwhose internationalizationbeginsshortlyafter theirestablishment. Thesefirmsarecalledbornglobal.Atthebeginningofthe90tiesitwasbelievedthatthephenomenonofbornglobalprimarilyconcernedfirmsoperatinginthehigh‐techandhigh‐tech‐relatedsectors.Later,however,numeroussubsequentresearchledtofindingbornglobalalsoamongfirmsoperatingintraditional(low‐tech)industries.Yet,itisstillinhigh‐techindustrieswhere we find more born global firms than in traditional industries(Daszkiewicz,2016).


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Gabrielssonetal.(2008)foundthatbornglobalcommonlyuseacombinationofdifferentmarketentrymodesthroughstrategicalliancesto enter new markets. Moreover, born global often develop differentsolutionsfordifferentmarketsatthesametime.Thusthescholarssuggestthattheroleofindustryinwhichafirmoperatescaninfluenceitsentry‐modedecisions.

Inaddition,SMEsusuallychoosedifferent,i.e.lessadvancedforeignentrymodesthanbigbusinessesandmultinationals(MNEs).Itisso,becauseSMEsfacedifferentchallengesduringtheirexpansiontoforeignmarketandsotheytendtochoosecooperativeentrymodes,whilelargefirmswillratherchooseindependententrymodes(Bruneel,DeCock,2016).

TheoreticalPerspectivesandResearchAnumberoftheorieshavebeensofarusedtoexplaintheentry

modechoicedecision(CanabalandWhite,2008).BrouthersandHennart(2007)arguethatthemostcommonlyusedare:

1.Transactioncostanalysis(TCA,Williamson,1985)–thetheoryisbasedontheassumptionthatmanagerssufferfromboundedrationality,whereaspotentialpartnersmayopportunisticallyactifgiventhechance.ThreeTCAfactorsarehypothesizedtoinfluencedecisions:assetspecificity,uncertainty (both internal–behavioural and external–market specific),andfrequency.

2.Theresource‐basedview(RBV)–firmsdevelopuniqueresourcesthattheycanexploitinforeignmarketsoruseforeignmarketsasasourceforacquiringordevelopingnewresource‐basedadvantages.Firmsdevelopresource‐based advantages by acquiring or developing a set of firm‐specificresourcesandcapabilitiesthatarevaluable,rareandimperfectlyimitableandforwhichtherearenocommonlyavailablesubstitutes(Barney,1991).

3. Institutional theory ‐ a country’s institutional environmentaffectsfirmboundarychoicesbecausetheenvironmentreflectsthe“rulesofthegame”bywhichfirmsparticipateinagivenmarket.Researchinthisareahastendedtoconcentrateonhostcountryinstitutionalenvironmentsordifferencesbetweenhomeandhostcountry(BrouthersandHennart,2007).

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4.Dunning’seclecticframework‐eclectic(OLI‐ownership,location,internalization)frameworklinkconceptsthatearlierresearchhasshowninfluencethemodechoicedecision(Dunning,1993).ThethreecomponentsofDunning’sframeworkareownershiporfirm‐specificadvantages,locationadvantages(Daszkiewicz,2016).

Recently,BruneelandDeCock(2016)investigatedthestateoftheSMEentrymodeliteraturebyconductingasystematicliteraturereviewof47articles.Thereviewshowedthatthemostentrymodeapproaches,includingRBVareembeddedinTCEandOLItheories.Thus,TCEandOLIarethemostfrequentlyusedtheoreticalperspectives,followedbyRBVandNA(networkapproach).Manyresearchresultsshowthatnetworkshaveasignificantimpactontheinternationalizationprocesses–itspace,pattern,marketselectionandentrymode.Networkstriggerandmotivatefirms’internationalizationintentionandinfluencefirms’market–selectionand entry mode decisions (Daszkiewicz, 2014). Moreover, networkrelationshipsenableSMEstomovequicklytohighentrymodessuchassalessubsidiaries.Thus,networkalsoenablesthemtoleapfrogstagesintheinternationalizationprocess(Bell,1995;CovielloandMunro,1997).

MaterialandMethodsTheresearchintotheinternationalizationofhigh‐techfirmshas

beencarriedoutattheendof2015operatingintheterritoryofPolandwiththeuseofComputerAssistedTelephoneInterviewing(CATI).Randomsamplinghasbeenselectedaccordingtothefollowingcriteria(Daszkiewicz,2016):

1. Conductinginternationalactivities(atleastexportactivities)3.2. Belongingtooneoftheclassesofactivity(PKD‐PolishClassification

ofActivities),namely"high‐tech"or"medium‐high‐tech".

3Intheliteratureofthesubjectandnumerousresearchalsoimportersareconsideredinternationalisedfirms.Since,atthislevelofthedevelopmentofinternationalconnections,adoptingimportasthecriterionofinternationalisation,almosteveryfirmcouldberegardedinternationalised(theywouldonlydifferwiththeinternationalisationlevel).Therefore,exportwasadoptedastheinternationalisationcriterionintheresearch.


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3. Thenecessityoffulfillingminimumoneofthethreefollowingcriteriabythefirm:

• obtainingpatentsorsigninglicensingagreementsintheareasconsideredhigh‐tech.

• employingpersonnelwithhighscientificandtechnicalqualifications.• conductingindustrialresearchordevelopmentalworks,aswell

asactivitiespreparingtheresultsofthisresearchorworkstobeimplementedineconomy.

The target population was selected on the basis on the above

criteriaandthesurveyquestionnairewasdirectedto4075businessesfromthedatabase.Howeveritturnedoutthat857firmsinthedatabasewerenoteligiblefortheinvestigation,ordidnothavethecurrentphonenumber.Thus, thenetpopulationwas3218of internationalizedhigh‐techfirms.Duringthesurveyweobtained263fullycompletedquestionnaires(thereturnratewas8.2%),relevantforfurtherstatisticalprocessing.

Both,theliteraturestudies,andespeciallythereviewofvariousempiricalstudiesresultedinthefollowinghypothesistobetestes:

H1:Thesizeofthefirmispositivelycorrelatedwiththeuseofhighcontrolmodes(biggerfirmsaremorelikelytousehighcontrolmodes).

H2:Belongingtothegroupofbornglobalispositivelycorrelatedwiththeuseofhighcontrolmodes(bornglobalaremorelikelytousehighcontrolmodes).

H3:Internationalizationintensityispositivelycorrelatedwiththeuseofhighcontrolmodes(firmswithhigherinternationalizationintensitymeasuredbyTNIindexaremorelikelytousehighcontrolmodes).

The followingresearchmodel (figure1)presents thesupposedrelationshipsbetweenthechoiceofentrymode(dependentvariable)andtheindependentvariablesrepresentedbyhypothesisH1‐H3.

Thecalculationswiththeuseoftheobtainedsurveyresultsweremadewith theuseofStatistica®PLv.10software. In thesurvey, thelevelofstatisticalsignificancewasestablishedonthebasisofPearson'sχ2 and Cramer contingency coefficient. It is becausemost of the usedvariablesaredichotomous (that is, thereareonly twovariants:0and1) and because of such a small number of variants, rank correlationcoefficientscanbeheavilybiased.Insuchcases,thequotacoefficientsare

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Figure1.ResearchModelSource:adaptedfromBoyd,B.,DyhrUlrich,A.M.,andHollensen,S.,2012,p.8

muchbetter,andchi‐squarestatisticsareusedtomeasuretheirsignificance.Basedontheobtainedstatistics,levelpwasdoubledtoobtainasignificantlevelα (Creswell, 2014, p. 169).Broadly understood interpretation oflevelpassumesthat:

p<0.05–meansstrongrejectionofthenullhypothesis, 0.05<p<0.1–meansweakrejectionofthenullhypothesis, p>0.1–meansnorejectionofthenullhypothesis.ResultsandDiscussionAmongthesurveyedfirms99.2%uselowcontrolmodesintheir

internationalization process. Up to 60.8% of businesses use mediumcontrolmodesandonly6.9%highcontrolentrymodes.

Firmsize(biggerfirmswithahigherdegreeofinternationalexperiencearemorelikelytousehighcontrolmodes)Internationalizationpace(bornglobalaremorelikelytousehighcontrolmodes) Internationalizationintensity(firmswithhighervalueoftransnationalityindexaremorelikelytousehighcontrolmodes)

A. Subsidiaries(greenfield,brownfield),foreigninvestments

B. Joinventuresandstrategicalliances

C. Export(direct,indirect,cooperative)

Control


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SizeandChoiceofEntryModeThe research sample includes firms of every size class: micro,

small,mediumandlarge.TheshareofenterprisesbelongingtotheSMEsector among the surveyed firms is 82% (216 companies), while theshareof largeenterprises is18%(47 firms). In theanalysedresearchsamplewearedealingwithoverrepresentationofbothlargeandmediumenterprisesascomparedtothewholepopulationofenterprisesinPoland.

Table1.Sizeoffirms

Source:Daszkiewicz(2016,p.127)(N=263)

Sizeclass Number Cumulativenumber PercentCumulativepercent

Micro‐enterprises(1–9employees)

24 24 9 9Smallenterprises(10–49employees)

68 92 26 35Mediumenterprises(50–249employees)

124 216 47 82Largeenterprises(>250employees)

47 263 18 100

Thestatisticalanalysisthathasbeencarriedoutshowsthatthere

isastatisticallysignificantrelationshipofmoderateforcebetweenthesizeofthefirmandthechoiceofentrymodes(χ2=16,59486,df=3,p=0,00086,Cramer'sVcontingencycoefficient=0,2511939).

Thus,thefirsthypothesisthatbiggerfirmsaremorelikelytousehighcontrolmodesisconfirmed.

PaceofInternationalizationandEntryModeInthesampleofsurveyedfirms,44.49%accordingtotheadopted

classificationcanbeclassifiedasbornglobal,i.e.theyarefirmsthathavetakenfirstactionsonforeignmarketslessthan3yearsafterthefoundation.Inthecaseof53.99%ofthesurveyedfirms,thefirstexpansiontookplaceaftermorethan3yearsaftertheestablishmentofthefirm,whichwasatraditionalone.Theremaining1.52%ofcompaniesdidnotrespond.

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There is a statistical relationship of weak force between theinternationalizationpaceandthechoiceofentrymodes(χ2=9,594462,df =4, p =0,04784, Cramer's V contingency coefficient =0, 1924689).Thus,thesecondhypothesisthatbornglobalaremorelikelytousehighcontrolmodesisconfirmed.

TNIandChoiceofEntryModeThetransnationalityindex(TNI)wascalculatedastheaverageof

foreignassets,salesandemploymenttothetotalonesandbeingexpressedasapercentageaccordingtothefollowingformula:

3 100 % where:At‐totalassets;Af‐foreignassets;St‐totalsale;Sf‐foreignsales;Et‐totalemployment;Ef‐foreignemployment

The average value of the transnationality index (TNI) for the

wholeresearchsample(N=263)is20.6,themedianis13.33,andthestandard deviation is equal to 19.48. It means that on average, in acontinuum from 0 to 100, the level of the internationalization of thestudiedfirmsislow,thatis,agreatmajorityofthefirmsinthesamplearepoorlyinternationalised.

Thereisastatisticallysignificantrelationshipofmoderateforcebetween the transnational index value and the choice of entry mode(χ2=37,89869,df=18,p=0,00399,Cramer'sVcontingencycoefficient=2704875).

Thus,thethirdhypothesisthatfirmswithhigherinternationalizationintensitymeasuredbyTNIindexaremorelikelytousehighcontrolmodesispartially confirmed(firmswithhigher internationalization intensitymeasuredbyTNIindexaremorelikelytousemediumcontrolmodes).


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ConclusionsThepresentedresearchisnotwithoutconsiderablelimitations.The

mostimportantisthelackoftherepresentativenessofthesample,therefore,thestudyresultscannotbegeneralizedtootherhigh‐techandmedium‐high‐techfirmsinPoland.Inspiteofthis,theresearchsamplecanberegardedlargeasforPolishconditions.Itshouldbealsostressedthatthesurveywasconductedalloverthecountryanditincludesallindustries,i.e.firmsrepresentingeachindustryarepresentintheresearchsample.

Basedonthecarriedoutanalysis,thefollowingconclusionscanbedrawn:

1. Theinvestigatedhigh‐techfirmsadoptawholerangeofentrymodesintheirinternationalizationprocess.

2. Thesizeofthefirmispositivelycorrelatedwiththeuseofhighcontrolmodes;biggerfirmsaremorelikelytousehighcontrolmodes.

3. Belongingtothegroupofbornglobal ispositivelycorrelatedwiththeuseofhighcontrolmodes;bornglobalaremore likelytousehighcontrolmodes.

4. Internationalizationintensityispositivelycorrelatedwiththeuseofhighcontrolmodes;firmswithhigherinternationalizationintensitymeasuredbyTNIindexaremorelikelytousemediumandhighcontrolmodes.

Foreignentrymodechoiceisamultilevelphenomenonanditisinfluencedbyamultiplicityoffactors.Thus,itisalsodifficulttobeinvestigatedempirically.However,itprovidessignificantfutureopportunitiesforfurtherstudiesthatbringusclosertounderstandingthephenomenonofentrymodechoicedecision.

REFERENCES

Andersen,O.(1997),“Internationalizationandmarketentrymode:Areviewoftheories and conceptual frameworks”,MIR:Management InternationalReview,27‐42.

Anderson,E.,andH.Gatignon(1986),“ModesofForeignEntry:ATransactionCostAnalysisandPropositions,”JournalofInternationalBusinessStudies,Vol17No3,pp.1–26.

Arregle,J.L.,Hébert,L.,andBeamish,P.W.(2006),“Modeofinternationalentry:Theadvantagesofmultilevelmethods”,ManagementInternationalReview,Vol.46No5,pp.597‐618.

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Barney, J.B., (1991), “FirmResourcesandSustainedCompetitiveAdvantage”,JournalofManagement”,Vol.17No1,pp.99‐120.

Bell,J.(1995),“TheInternationalizationofSmallComputerSoftwareFirms:AFurtherChallengeto‘Stage’Theories,EuropeanJournalofMarketing”,Vol29No8,pp.60–75.

Boyd,B.,DyhrUlrich,A.M.,andHollensen,S.(2012).Thechoiceofforeignentrymodesinacontrolperspective.In2012EFMDEntrepreneurshipConference.

Brouthers,K.D.,Hennart, J.F. (2007), “Boundariesof theFirm: Insights fromInternationalEntryModeResearch,”JournalofManagement,Vol33No3,pp.395–425.

Bruneel,J.,DeCock,R.(2016),“EntryModeResearchandSMEs:AReviewandFutureResearchAgenda”,Journalof SmallBusinessManagement,Vol.54NoS1,pp.135‐167.

Canabal,A.,andG.O.White(2008),“EntryModeResearch:PastandFuture,”InternationalBusinessReview,Vol17No3,pp.267–284.

Carazo,P.C.M.,Lumiste,R.(2010),“ForeignentrymodesofColombiansmallandmediumenterprises”,InternationalJournalofBusinessandEconomicsPerspectives,Vol.5No1,pp.16‐41.

Coviello,N.,H.Munro(1997),“NetworkRelationshipsandtheInternationalisationProcessofSmallSoftwareFirms,inInternationalBusinessReview,Vol.6No4,pp.361–386.

Daszkiewicz, N. (2014), “Internationalisation of Firms through Networks ‐EmpiricalEvidencefromPoland”(chapter4),inGubik,A.S.andWach,K. (eds.), International Entrepreneurship and Corporate Growth inVisegradCountries,Mickolc:UniversityofMiskolc,pp.57‐68.

Daszkiewicz, N. (2016), Internacjonalizacja przedsiębiorstw działających wbranżachhigh‐tech,PWN,Warszawa.

Daszkiewicz,N.,Wach,K.(2012),InternationalizationofSMEs:Context,ModelsandImplementation,GdańskUniversityofTechnologyPublishers,Gdańsk.

Dikova,D.,VanWitteloostuijn,A.(2007),“Foreigndirectinvestmentmodechoice:entry and establishment modes in transition economies”.Journal ofinternationalbusinessstudies,Vol.38No6,pp1013‐1033.

Dunning,J.H.(1993),Multinationalenterprisesandtheglobaleconomy.Wokingham,UK:Addison‐Wesley.

Gabrielsson,M.,KirpalaniV.H.M.,DimitratosP.,SolbergC.A.andZucchellaA.(2008),“BornGlobal:Propositionstohelpadvancethetheory”,InternationalBusinessReview,Vol.17No4,pp.385‐401.

Hollensen,S.(2010),GlobalMarketing–Adecision‐orientedapproach,5thedition,Pearson:Harlow,UK.

Sanchez‐Peinado,E.,Pla‐Barber,J.,andHebert,L.(2007),“Strategicvariablesthatinfluenceentrymodechoiceinservicefirms”,JournalofInternationalMarketing,Vol.15No1,pp.67‐91.

STUDIAUBBNEGOTIA,LXII,2,2017,p.35‐50(RECOMMENDEDCITATION)DOI:10.24193/subbnegotia.2017.2.03SIGNIFICANCEOFSUCCESSIONCOMPETENCIESIN

THEMANAGEMENTOFSILESIANFAMILYBUSINESSINTHESECTOROFSMALLANDMEDIUMENTERPRISES

MARIOLADŹWIGOŁ‐BAROSZ1

ABSTRACT.Thisarticlepresentstheissuesconcerningthecompetenceof successors of modern family businesses. Particular attention waspaid to the importance of leadership competences in managing amodernenterprise.Theroleofemotionalintelligenceisemphasizedasan important part of the successor competencies and competencesrelated to education and socialization. This research focused on theimportance of competence of successors in the area of emotionalintelligence in Silesian family enterprises in the sector of small andmediumenterprises.Thecompletionofreflectionsistheauthor’smodelof competence of successors, which deals with the competenciesgoverningtheefficientmanagementofmodernfamilyenterprises.Keywords:familybusiness,successor,competences,emotionalintelligenceJELClassification:L00,M12

Recommendedcitation:Dźwigoł‐Barosz,M.,SignificanceofSuccessionCompetenciesin the Management of Silesian Family Business in the Sector of Small andMediumEnterprises,StudiaUBBNegotia,vol.62,issue2(June),2017,pp.35‐50,doi:10.24193/subbnegotia.2017.2.03.

IntroductionAsthemarketeconomyrelies,toaconsiderableextent,onfamily

firms,thesuccessionproblemhasbecomecommonandpressing(BracciandVagnoni,2006,p.8).Theexperienceshowsthat50%offamilyfirms1FacultyofOrganizationandManagement, SilesianUniversityofTechnology,Zabrze,Poland,mariola.dzwigol‐[email protected]

MARIOLADŹWIGOŁ‐BAROSZ

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willbeabletodealwithsuccession‐relatedproblems,whereasasfewas15% of companieswillmanage to hand the company over to the thirdgeneration(SułkowskiandMariański,2009,p.39).Theuniquecharacteroffamilycompaniesmaytranspirefromtheirprevalence,thelatterresultingfromalong‐termvision,anabilitytotakepromptdecisionsandabilitytobehaveinaccordancewithtrust,loyaltyandpersonalrelationships.

The fact that numerous Polish companies are now facing keydecisions related to the transferofpower,knowledgeandproperty isgettingmoreandmoreobvious.Thefirstwaveofsuccessioniscoming.Therefore,thecompanyfounders–theoneswhotookrisks,sacrificedtheirwork,energyandmoneytoestablishtheirbusiness–areabouttohandtheircompaniesovertotheirsuccessors.Thefirstintergenerationalchange is connectedwith thenecessity to define by a seniormemberandthefamily,anewvisionofthecompany,aswellastoestablishnewsystemsofvaluesandformalregulationsastothepropertyandpowerinthefamilyfirm.

However,underthehighlyundeterminedconditions,themanagersof contemporary companies have to adopt the roles of change leaders,knowledgemanagers,managers‐entrepreneurs,teammanagingmanagers,decision‐makerswillingtotakerisks,analysts,coachesandmasterslookingafterthedevelopmentoftheirowncompetencies.Itisoneofthesignsprovingthatthebusinessenvironmentisundergoingsignificantchanges,andthattheexecutivesareabouttofacemoreandmoredauntingtasks.

Theconceptofmanagementinfamilybusinessesrequiresadifferentapproach to functions executed by contemporary managers and theirsuccessors.Moreover,itrequirestoelaboratenewmodelsofeducation,“tailored”totheneedsoffamilybusinesses,which,inthelargerextent,willtakeintoconsiderationthefollowingaspects:developmentofleadershipskills,developmentandimprovementofemployees’competencies,practicalmotivationskills.Inthefamilybusinesses,onecancombinebusinessandtheirfamilybyshapingentrepreneurialvaluesduringtheupbringingofthe generation of successors, the latter regarded as future managers(Więcek‐Janka,2014,pp.139‐155).

Owners of family businesses require from their successors tohavenumerousmulti‐disciplineskills,theacquisitionofwhichisahighlytime‐andwork‐consumingprocess.Theacquisitionanduseoftheskillsaretoensurethatthefamily‐runenterprisewillcontinuetodevelopincompliancewithadeterminedstrategy.

SIGNIFICANCEOFSUCCESSIONCOMPETENCIESINTHEMANAGEMENTOFSILESIANFAMILYBUSINESS

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Competenciesofsuccessorsaresubjecttostudiesbynumerousmembersofthescientificcommunity.Elaboratingasetofcompetenciesfor successors, necessary to run a family business, is a complex andambiguousprocess.Familyenterpriseswhich,underthelong‐termstrategy,anticipatesuccessionprocesses,shouldtakeintoaccountthesuccessors’competenceprofiles.Takingintoaccountthecomplexityofthebusinessenvironment,itseemstoberightlyjustifiedtodeterminetheessentialcompetencies,allowingtocopewithchallengesimposedonsuccessorsinthecontemporaryfamilybusinesses.

The aim of the paper is to draw the readers’ attention to thesignificanceofcompetenciesofsuccessorsincontemporaryfamilyfirms,withaparticularemphasison the leadershipcompetencies,emotionalintelligenceandcompetenciesrelatedtotheupbringingandsocialisation.

1. Importance of Leadership Competencies in theModern

CompanyHavinga strong leadershipbackground is abasic condition for

the development of each company. This truth was confirmed by aresearch on “Leadership competencies” conducted by Deloitte. In theresearch172managers fromthe largestPolishcompanieswereaskedabout roles of leaders. Then, in April 2014, the same question wasposedonanation‐widescaletoarepresentativesampleof1,110Poles.As a result, anewmodelof leadership competencies couldhavebeenestablishedinPoland(ThorandGeorgijew,2014).

At somepoint, a groupof business experts, scientists, advisorsand HR practitioners selected and defined a Model of LeadershipCompetencies that are necessary to manage a modern company. Tenmost important competencies were defined, these being necessary foreffectivemanagementinnewtimes;thecompetenciesthatwouldmatchpresentandfuturechallengesimposedoncompaniesinthepost‐crisisperiod.A recentdecalogueof anew leader is supposed toencompassthefollowingcompetencies(ThorandGeorgijew,2014,p.12):

adoptingawiderperspective.Interpretingthecompany’sstancein the broad business context, assessing properly its developmentopportunities,recognisingpotentialthreatsandlimitations;beingfamiliarwithmarkettrendsandbeingabletomakeuseofthesaidphenomenatothebenefitofthecompany.


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focusontheincreaseingoodwill.Astrongpro‐successattitude,building a strongmarketpositionof the company; setting challengingtargetsandmakingeffortstofulfilthem;recognisingnewopportunitiestoachieveacompetitiveedgeandgrowth,promotinginnovations.

developingvisionsand fulfilling them.Beingable topresentadevelopmentstrategyinaclearway,beingabletofulfilthestrategywithpassion.

flexibility in the operation of the company. Being able to acteffectivelyandconstructivelyunderpressureandinstressfulsituations.Beingabletoadjusttochangeableexternalconditions.

promoting changes. Recognising and promoting advantagestriggeredbychanges(change leaders);creatingapositive,pro‐changeattitude,recognisingrisksconnectedtochangesandtakingresponsibilityfortherisks.

financial perspective. Making use of financial analyses whileelaboratingstrategictargetsandtakingkeydecisions.

building effective relationships. Fostering a net of effectiverelations within the company and beyond; adhering to ethical rules,declarations,andconsequencesbetweendeclarationsandactions.

talentdevelopment.Creatingfavourableworkconditions,beingwillingtoacceptsuggestionsfromworkers,developingtheemployer’sgoodreputation.Promotingtalentsandeducatingagenerationofsuccessors,delegatingcompetenciestoskilledmanagers.

influencingothers.Providingclearandcoherentmessagesandideas.Informingoftheplansastothecompanydevelopment,acceptingaroleofaleaderandauthority;commitmenttotheelaborationofnewideasandinnovativesolutions.Energy,passionandinvolvement.

buildingavalue‐basedcompany.Buildingastability in the long‐term.Showingrespectfordiversity,businessethics,responsibilityandunderstandingoftheCSR2rules,allaredistinctivefeaturesofaleader.

Thereisnodoubtthatmanagersareresponsiblefordevelopingbehaviouralpatterns,organisationalchanges,andlearningnewwaysofhow to act. They are also responsible for initiating and propagatingknowledge‐basedsolutionsinthecompanies.2Corporate Social Responsibility – (CSR) A concept according to which companies,whenelaboratingtheirstrategies,deliberatelytakeintoconsiderationsocialissuesandenvironmentprotection, aswell as relationshipswith variousgroupsof stakeholders(Wołkowicka,Dąbrowski,2012,pp.79‐89)


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Regardless of the economic situation, the executives still valuepeoplemanagementmost.Over65%ofthesurveyedmanagers,withinthe scope of Talent Club3, believe that staff flexibility when facing aproblemisthemostimportantqualityofagoodemployee.Therespondentsclaimedthatmanagers,althoughactingincriticalsituations,shouldnotact ruthlessly,manipulate, solve problems in an authoritarianway orrelentlesslypursue theiraims.Themanager shouldbe surroundedbypeople whom they like working with, people who create a positiveatmosphere atwork and form an effective and powerful team. Thosemanagers who make use of their employees’ talents, knowledge andskillsinordertopursueonecommonaimachievethebestresults.Themanager shouldbecomea leader forhis/heremployees, highlight theaims and allow the staff to choose the best way. The employers arelookingforcreativeandindependentworkersforwhomtheworkplaceisnotnecessarilyasynonymforaratrace,sincesuccessesareachievedbythosewhocanactalongwiththemanagedteam.Thusthemanagersrejectasuselessandunneeded,theruthlessnessandlackofsensitivity,somuchpromotedsomeyearsagobythebestexecutives.However,themanagersstatedthatthemostvaluableassetsaretheprofessionalismandexpertise of employees, being a well‐educated and talented expert inone’sarea4.

One of the key types of strong leadership was defined by M.SmolińskiandL.Zakrzewska(SmolińskiandZakrzewska,2017,pp.14‐19). The authors stated that a leader is a highly efficient person; theefficiency helps them to be a strategist, originator, talent hunter andleader.Theycanboastknowledge,charisma,honesty,emotionalintelligence,stressresistanceandabilityto learn.Thepositionoftheleadershouldbeforgedoutofone’sattitude,passion,commitment,courteousnessandempathy.Suchacombinationdeterminestheleadershipeffectivenessanditsquality.3Findingsofthereportentitled„Polishmanagersinthetimeofcrisis”areacontinuationofastudyconductedundertheprogrammeTalentClub–PolskiMenedżer2009.Thestudywascarriedoutbymeansofonlinequestionnairestobefoundatwww.talentclub.pl,fromMarchtoSeptember2009.285respondentstookpartinthesurvey.Thestudy„Polski Menedżer 2009” covered 1,461 managers, participants in the Talent Clubprogramme.Thestudywasheldfrom19.09.2008to30.09.2009.

4„Wyścigszczurówtoprzeżytek”,www.rp.pl/artykul/551452.html.


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2. RoleoftheSuccessors’CompetenciesRelatedtoEmotionalIntelligence

Thereisnotasingleareainlifeinwhichemotionalintelligence

wouldnotplay an important role.Theemotional intelligence acts as adriveforpeopletodeveloptheirownpotential, itallowsthemtotakehold of negative attitudes, helps to set interpersonal boundaries andalso, facilitates the development of satisfactory relationships, both inprivateandintheprofessionallife.

Emotionalintelligenceisacompetencethatispersonaltoeveryhuman,individuallydeveloped,understoodastheirabilitytorecognizetheirownandotherpeople’semotionalstates,aswellastheabilitytomake use of their own emotions and tackle other people’s emotionalstates (Mikołajewska and Mikołajewski, 2013, p. 3). It involves one’sability to control and regulate one’smood,which, in turn, is helpful incopingwithvarious situations.Theability tounderstandemotionsandmakerightuseofthemplaysakeyroleinthehumanlife.

ThestudiesonemotionalintelligencewereinitiatedbyH.Gardner.Hedistinguished(MikołajewskaandMikołajewski,2013,p.3):

intrapersonalintelligenceinvolvingthecapacitiesofunderstandingandcontrollingone’sownemotions(relationshipwiththeself),

interpersonalintelligenceinvolvingthecapacitiesofunderstandingandcopingwithinterpersonalrelations(relationswithothers).

Interpersonal intelligence, also known as social intelligence,meansone’s capacity to getonwellwithpeople andbewilling to co‐operatewiththem.Italsomeanstheempathy,thecapacitytoenterintodeeprelationshipwiththeothers,understandtheirneeds,andpromotedesiredattitudesandreactions.Moreover,thesocialintelligenceconsistsofempathisingwithotherpeople’semotionsandbuildingoftrust.

The importance of social intelligence in family enterprises hasbeenconfirmedbythefindingsofthereportentitled„Competenciesofthe future in the familybusinesses2017”(Report:Kluczoweskładnikisukcesu,2017,p.15).Theanalysisofresponsessubmittedbyallcompaniesproves that social intelligence is themost desired competence of thefuture.Over¾ofsurveyedbusinesspeopledeclareboththewillingnessandneedtodevelopthesaidcompetence.


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Thestudiesonthespecificcharacterofdiagnosesandassessmentsof the use of successors’ competencies confirm that the competenciesrelatedtoemotionalintelligenceareessentialforsuccessionprocesses.

A list of successors’ competencies, needed in the successionprocess,elaboratedonthegroundsofastudycarriedoutbyE.Więcek‐Janka iA.Hadryś‐Nowak(Więcek‐JankaandHadryś‐Nowak,2016,pp.61‐72) in 2014, enumerates 20 competencies, out of which elevencompetenciesrefertoemotionalintelligence.Onecanfindhere:diligence,communication skills, organisational skills, accuracy, resourcefulness,commitment,resistancetostress,firmness,ambition,motivation,courage.Itwas emphasised that themost frequently chosen competencies are,amongothers,diligenceandcommitment,whereas thecompetenceofdiligencewas granted the highest averagemark. Furthermore, Polishsuccessors of family businesses stated that the abilities to introducechangesandadapttotheclosestandmoreremoteenvironmentoftheenterprisearethemostusefulskillsinthesuccessionprocess.Adaptiveskills,i.e.theabilitytochangeandtheabilitytoactandmakedecisionsare also regarded as competencies related to emotional intelligence.The classification of successor competencies used in the successionprocessimpliestheirvariousorigins.Providingthefamilyenterprisewithmulti‐generation resources and development, and ensuring that theenterpriseishighlyefficientare,toalargeextent,dependentonrelevantcompetencepotentialofsuccessors.

Thosefamilyenterprisesthatanticipatesuccessionprocessshouldfocusondevelopingthecompetenceprofilesoftheirsuccessors,whiletaking into consideration the role played by the competencies related toemotional intelligence. The findings were confirmed by the author’sown research5. 19 competencies were selected from 33 competencesgrouped in 11 emotional intelligence‐related competence subgroups6.According to the successors, these emotional competencies are of keyimportanceintheprocessofsuccessionincompaniesownedbyfamilies.Inordertoselectanenterprisesownedbyafamily7forthepurposeofthe5Badania zrealizowano na terenie województwa śląskiego w okresie od września2016r.dolutego2017r.

6Doboru oraz podziału kompetencji dokonano na podstawie: Goleman, D. (1996),EmotionalIntelligence:WhyItCanMatterMoreThanIQ,BantamBooks,NewYork.

7The Chief Statistical Office in Poland is not in possession of data relating to thenumberoffamily‐ownedbusinessesregisteredinPoland,includingontheterritoryoftheSilesianProvince.


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current study, a company that shouldmeet specific criteria of sampleselection, a pilot studywas conducted by telephone, e‐mail or face toface. Finally, from a group of 296 enterprises, 46 enterprises wereselectedthatmetthestudycriteria.

Theseenterprisesweredividedintotwogroups.27family‐ownedenterprises8participated in a series of studies aiming at selecting thesignificant competences of the successors in the area of emotionalintelligence,meetingthefollowingcriteria:

• afamily‐ownedenterpriseisabusinessactivitywhereatleasttwofamilymemberswork;atleastonememberhasanimportantimpactonmanagementoftheenterprise;familymembershavemajorityofsharesintheenterprise,

• suchanenterpriseisconsideredafamily‐ownedbusiness,• suchanenterpriseintendstohandoverthebusinessontothe

nextgeneration,• it isa capital company–a limited liability company (spółkaz

ograniczonąodpowiedzialnością)orajointstockcompany(spółkaakcyjna)accordingtotheCommercialCompaniesCode,

• theenterprisehasbeenoperatingonthemarketforatleast10years,

• thecompanybelongstothegroupofSMEs,• the family‐owned enterprise is owned by at least the second

generation(ithasundergonetheprocessofsuccessionatleastonce),• thecompanyissituatedinPoland,ontheterritoryoftheSilesian

Province9.8Survey studies completedwith27 successorswhomanage family‐ownedenterprises atleastasthesecondgeneration(89%ofthestudiedenterprisesareownedbythesecondgeneration,while 11% are owned by the third generation). All studied enterprises arelimitedliabilitycompanies(sp.zo.o.)operatingintheSMEsector(48%‐smallenterprises,52%‐mediumenterprises).Thedominantenterprisesareserviceprovidingcompanies(52%),tradecompaniescompose22%,whileproductionandmixedenterprisescompose15% and 11%, respectively. The studied successors represent enterprises that vary intermsof the timeof operationsof a family‐ownedbusinesson themarket. Enterprisesoperatingonthemarket formorethan15yearsand less than20yearscompose33%;similarly,enterprisesthathaveexistedonthemarketforover20yearsandlessthan25years–30%.Participationofenterprisesfunctioningonthemarketformorethan5yearsandlessthan15yearsaswellasmorethan25yearscomposes26%and11%,respectively.

9Theselectionofaprovinceinwhichenterpriseswerechosentotakepartinthestudywasintentional.ItwasassumedthattheSilesianProvinceischaracterizedbystrongfamilytraditionsinbusinessaswellasthedevelopedbusinessbehaviorstandards.


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On the basis of calculations, it transpired that the successorssharedthesameviewsastoallcompetencies.Withregardtotheabove,itwas concluded that as essential successors’ competencies one shallviewthecompetencieswhich:

got5pointsfromatleast50%successors, theaverageamountofpointsgrantedtoagivencompetenceby

successorsequalled,atleast,4.5. table 1 below presents competencies that fulfilled the above‐

mentionedconditions.Table1.Keycompetenciesofsuccessors,relatedtoemotionalintelligence

No. SUCCESSORS’KEYCOMPETENCIESRELATEDTO

EMOTIONALINTELLIGENCE1 Self‐esteem2 Self‐efficacy3 Awarenessofone’sownabilitiesandopportunities4 Awarenessofone’sownlimitations5 Abilitytoconsciouslycontrolone’sownemotionalstates6 Abilitytocopewithstress7 Abilitytosay“no”firmlyandinawaywhichdoesnotharmotherpeople8 Argumentationskills9 Effectivecommunication10 Abilitytosettleconflicts11 Abilitytocreatevisionsandencourageothertofulfilthem12 Abilitytowinsupporters13 Charisma14 Abilitytoworkinagrouptoachievecommonaims15 Optimism16 Willingnesstochange17 Willingnesstotakedecisionsandact18 Willingnesstoactandtakedecisionswhenunderpressure19 Willingnesstotakeresponsibilityfortasksandtheirexecution

Source:Author’swork.Theimportanceofcompetenciesintheareaofemotionalintelligence

wasalsounderlinedbyL.Weroniczak,whodefinedthefollowingqualities,i.e.(Weroniczak,2012),p.81):


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• communicationskills,• empathicperception,• abilitytosolveconflictsthroughcooperation,• understandingofchangeprocesses,• seeingdiversityasaresource,• regardingthecompanyandthefamilyasintertwinedsystems,

aspsychologicalandsocialskills,necessarytocreatespacethatpromotesanintergenerationaldialogue,existinginthesuccessionprocess.

Themanagingof the family enterprise is undoubtedly a test ofsuccessors’competencies.Itisofgreatimportanceformanagerstohavecompetenciesrelatedtoemotional intelligenceasthemanagersshape thecultureof the entire organisations, set development trends andmotivatethestafftoworkmoreeffectively.Creatingtheempathy‐basedatmosphere,being,moreoftenthannot,afactorthatbuildsteamstability,aresomeofthecorecompetenciescontemporarymanagersandbusinesspeopleshouldhave.Thosemanagerswhocanactwiselyandkeeptheirteamstogetherarealsoabletocarryonandexpandtheirfamilybusinesses.

3. ModeloftheSuccessor’sCompetencies inContemporary

FamilyBusinessesSuccessors of contemporary companies have to face numerous

challenges,oftenregardedbytheseniormembersofthefamilyfirmasachancetomaintainthecompany,furtherdevelopitorevenrestoreit,ifthecasemaybe.Themostessentialpersonalitytraits,fromtheperspectiveoftheentrepreneurialprocessincludereadinesstotakerisks,motivationfor achievement and inner control, thanks towhich a businessman isawareoftheirabilitytoaffecttheenvironmentandcontroltheactionstobetaken.Moreover,thepersonalitytraitsofeffectivebusinesspeopleincludedeterminationandpersistencetoreachone’saim,passionandabilityto inspireotherpeople,diligenceandabilitytomakedecisions.Manyofthesaidtraitsareshaped,notentirelyconsciously,byparentsintheenvironmentofthefamilybusiness(Gutkova,2014,pp.4‐5).

Moreandmorefamilybusinesseshavebeenfacingadecisiontolaunchaprocedureof succession,which ismainlyconnectedwith thehanding over of responsibility andmanagement. And to this end the


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futuremanagersofsuchcompaniesarerequiredtopossessdeterminedcompetencies.Oneshouldbearinmindthatthespecificcharacterofthefamilybusinessmanagemententailstheneedtotakeintoconsiderationnotonlyeconomicaspects,butalso interpersonalrelations in theirbroadsense.Thus,itisnecessaryforthesuccessorstopossessnotonlytextbookcompetencies;oneshouldalsohaveintuition,imagination,courageanddetermination.

Selecting a successor requires from the seniormembers of thefamilycompanies theability toassesscandidatesobjectively,notonlythrough the prism of family bonds, but mainly with regard to theiracquiredcompetencies.ThestudyonthespecificcharacterofdiagnosisandassessmentofcompetenciesoftheappointedsuccessorsunderthefirstsuccessionstageinthefamilybusinessesinPolandwasconductedbyE.Więcek‐Jankain2014.Thestudy,whichinvolved106successorsandpotential successorsof family firms,brought about resultson thesignificanceof successors’ competenciesand features.20 featuresandcompetencieswereassessed.

Theacquireddatamaybedividedintotwogroups:traitsconnectedwiththecharacter(relatedtoinbornfeatures)andothertraitsconnectedwiththeupbringingandsocialisation.Onanalysingthe findingsof theauthor’s research, one should conclude thatdiligence, courage, precision,commitment and expertisewere regardedby the successors as themostusefulpersonalitytraits.Withregardtoothertraitsviewedasveryuseful,the surveyedunderlined, inmost cases, those traits that canbe acquiredthroughupbringingandsocialisation.

Thesurveyedhighlightedthattheexpertisetheyacquiredwhileworking for a family company, opportunities to make independentdecisions affect their commitment to work. They claim that the saidcommitment is a proof of diligence, whereas the latter proves one’sprecision.Therespondentslinkedthecouragewiththeupbringinginafamily. Parents shape, during the upbringing process, their children’scouragetotakedecisionsandtheirattitudetoself‐determination.Andthat is inextricably connectedwith courage (13‐17% of the surveyedselectedthesefeaturesasthemostusefulones).

Three traits were selected as the least used in the successionprocess:ambition,intelligenceandinnovativeness.Theyareconnectedwith inborn personality‐relatedqualities of people (merely 4%of thesurveyedregardedthemasthemostusefulinthesuccessionprocess).


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Presentedpercentagedatarelatedtothemostusefultraitsmeanthatinthesuccessors’opinionthetraitsandcompetenciesacquiredduringtheupbringinginthefamilybusinessaremoreusefulinthedevelopmentofentrepreneurial competencies, involving the improving, at the sametime,oftheirsuccessionpotentialastopersonaltraits.

When analysing the studies of authors quoted in the work, aswell as the results of our own studies relating to the competence ofsuccessorsoffamilycompanies,thefollowingthreecompetencegroupsarespecificallyemphasized:

1) competencesrelatingtoupbringingandsocialization,2) leadershipcompetences,3) emotionalintelligencecompetences.Themodel of competences of successors of the today’s family‐

ownedenterprisespresentedinFigure1contains34competencesfromthe three competence groups listed above, preconditioning efficientmanagementofcontemporaryfamily‐ownedbusinesses.

It should be underlined that themanagement of a family firmrequires, apart from having traditional competencies tomanage suchcompanies, to focuson the roleof these competencies, resulting fromthecompany’sspecificityinthefieldofbusiness,specialemphasisbeingplacedonemotionalintelligence.Differencesbetweenfamilyfirmsandnon‐family firms evolve mainly around values, organisational cultureandaimhierarchy.Thistypeofenterprisesfeaturesaspecificidentity,aswellasvaluesandproblemsrelatedtotheconductedactivity.

Managing a family business ismore difficult than a non‐familybusiness and then “managing” a familywhich is not connected to thebusiness. It transpired that the levelofdifficulty inmanaginga familybusiness isnotasimpleaggregateof levelsofdifficulty inmanagingacompanyandafamily;itissomethingconsiderablygreater,asanyfailureinthecompanyimmediatelyaffectsthefamily,whileanyfamilycrisishasaneffectonthecompany(Blikle,2012,p.39).Apartfrommarketrights,aspectsofatypicallyeconomicandfinancialcharacter,apartfromstrategicaspectsofthemanagement,thereappearstreamsofnon‐tangibleresourcesofaspecificcharacter.Withintheentities,aspecificroleisplayedbyfamilybonds, attachment to family values and determination to prolong theentrepreneurial “dynasty” (Tomski, 2011, p. 147). This, among others,bringsabout that thechallengesthe familybusinesssuccessorshavetofaceareconstantlygrowing,which,inturnrequiresfromthesuccessorstopossessspecificcompetencies.


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Figure1.Modelofcompetenciesofsuccessorsinmodernfamilycompanies.

Source:Author’swork.

• Diligence • Courage • Precision • Commitment • Expertise

• Adopting a wider perspective • Focus on the goodwill increase • Developing visions and fulfilling them

• Flexibility in the operation of the company

• Self‐esteem • Self‐efficacy • Awareness of one’s own abilities and

opportunities • Awareness of one�