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Dynamics of Family Business Portfolios: A Comparison of Growth Strategies in Rural and Urban Businesses

In recent times, the exploration of portfolio entrepreneurship, characterised by the simultaneous ownership of multiple businesses, has experienced a significant upswing in research. This trend spans not only the broader entrepreneurial landscape but also within the intricate realm of family firms. These family-owned enterprises, emblematic of businesses steered by kin, are increasingly diversifying their ventures, aiming for sustained growth and entrepreneurial success.

The spotlight on family business portfolios intensifies due to their expanding engagement in numerous business endeavours simultaneously. Understanding the context in which portfolio entrepreneurship unfolds is crucial, as it profoundly influences the actions and outcomes of family firms. A critical aspect gaining traction is the delineation between rural and urban family business portfolios. This distinction becomes paramount in unravelling their distinctive growth patterns, considering the spatial and resource-related disparities inherent in these contexts.

Despite the heightened interest in family business portfolios, there exists a noticeable gap in the literature. Specifically, there’s a dearth of exploration into the mechanisms governing how rural and urban family business portfolios grow. The crux of the matter lies in understanding whether growth predominantly occurs organically (internally) or through external avenues like acquisitions and partnerships. Furthermore, the literature lacks insights into whether this growth involves related or unrelated diversification. Grasping these growth paths and discerning their variations between rural and urban landscapes is imperative for a comprehensive understanding of transgenerational entrepreneurship and value creation.

Central to this exploration is the family’s entrepreneurial legacy, transmitted through the intricate processes of grooming and imprinting. This emerges as a linchpin underlying mechanism dictating the growth trajectories of family business portfolios. In the rural context, traditional grooming practices take precedence, coupled with a marked preference for low risk-taking. Contrastingly, in urban settings, contemporary grooming practices are more prevalent, fostering a willingness to embrace higher risks.

Delving into the growth trajectories of family business portfolios in rural and urban settings, key insights emerge, significantly contributing to various literature streams. A primary contribution lies in illuminating the growth dynamics of these portfolios in rural and urban landscapes, thereby filling a critical gap in existing knowledge. While empirical research extensively probed into the antecedents of portfolio entrepreneurship, the specific growth modes and diversification strategies adopted by family business portfolios remained shrouded in ambiguity, particularly concerning rural versus urban dynamics.

Furthermore, a noteworthy revelation emphasises the dynamic nature of family business portfolios, acknowledging that they may deviate from anticipated trajectories. This flexibility in growth approaches aligns with the intricate realities of family business dynamics and enriches our comprehension of their complexities.

Delving deeper into the mechanisms of family business growth, it becomes evident that the family’s entrepreneurial legacy is a torchbearer for future generations. Passed down through grooming practices and imprinting, these mechanisms are profoundly influenced by the rural versus urban context.

In rural settings, the prevalence of conservative family traditions and values are observed. This manifests as a commitment to continuity in professional practices, respect for authority, and a deference to decisions made by others. These characteristics resonate with the close-knit family structures often found in rural areas, fostering a unified approach to business management. Limited opportunities and resources in these settings contribute to risk aversion and a preference for traditional grooming practices that imprint low risk-taking behaviours.

Contrastingly, in urban environments, a different ethos prevails. Modern traditions and values centre around independence, openness to new ideas, and a diminished level of “clan control.” Abundant entrepreneurial opportunities and resources in urban contexts support contemporary grooming practices, imprinting a proclivity for high risk-taking.

A comprehensive exploration of family business portfolios in rural and urban contexts unravels critical insights. The growth trajectories diverge significantly, with rural businesses favouring internal growth and related diversification, while their urban counterparts opt for external growth through partnerships and acquisitions, often venturing into unrelated areas. The nuances of upbringing impact future portfolio development, providing senior generation members with insights to adapt grooming practices. Rural business families may consider more contemporary grooming for external and unrelated growth, while junior generation members can leverage these insights to break free from path-dependent patterns and shape their approaches to raising future generations within the business.

Insights by: Dr Jay Wasim and Parnia Ahmed