ABSTRACT
This study investigated private indigenous enterprises in South Eastern Nigeria within the context of Igbo inheritance culture. Of particular interest is the continuity and performance of these enterprises. Many of these enterprises which are important contributors to wealth and employment creation, disappear from the business scene or experience significant decline upon the death or incapacitation of their founders. One issue that can help to account for the scarcity of long-established firms is the crisis of management succession. This study therefore sought to determine the effect of Igbo inheritance culture on management succession process; determine the effect of Igbo inheritance culture on enterprise continuity; determine the extent of relationship existing between factors associated with primogeniture (first born); and to determine the effect of gender-restrictive inheritance culture and multiple heirs’ inheritance. The research was conducted using survey design. The population of the study was 750 owner-founders/managers, middle managers and senior staff from the 44 private indigenous enterprises selected for the study. These 44 enterprises were selected from the 436 enterprises that registered with the States’ Ministries of Trade, Commerce and Industry in South Eastern Nigeria. A sample size of 511 respondents was drawn from the population using Tara Yamane’s sample size formula. A stratified sampling technique was also used to determine the proportionate allocation of questionnaire to owner-manager, middle managers and senior staff. The instruments used for data collection were the structured questionnaire, interview schedule and empirical research findings from available related literature. The reliability of the instrument was done through test-retest method. The result gave a reliability index of 0.96, indicating a high degree of consistency. The data collected from the field were presented in percentages and analyzed with descriptive statistics to answer the research questions while corresponding hypotheses were tested using Z – test statistic at 0.05 alpha level. The study found that Igbo inheritance culture had a negative effect on management succession process; Igbo inheritance culture had a negative effect on enterprise continuity (the management succession process in private indigenous enterprises in South Eastern Nigeria, jeopardises rather guarantees the sustainability or longevity of these enterprises); factors associated with primogeniture (first born) rule of inheritance affect management succession process; gender-restrictive inheritance culture had a negative effect on management succession; and multiple heirs inheritance culture had a negative effect on management succession. The conclusion of the study is that management succession is influenced by the Igbo inheritance culture. The principles and practices under-girding customary inheritance culture in Igbo society constitute inappropriate mechanism for intergenerational transfer of ownership. Based on the findings of the study, it was recommended that in order to achieve effective succession in these enterprises, owner-founders should pay ample attention to managing culture; the founder should lay the foundation for a successful entrepreneurial succession and enterprise continuity before his old age or ailment; women should be provided with equal education and access to managerial positions could raise economic growth by as much as one percent. The study’s major contribution to knowledge include: model modification or the development of an improved systems’ cybernetic model of the transform of the culture process captioned: MANAGEMENT SUCCESSION SYSTEMS’ CYBERNETIC MODEL.
CHAPTER ONE INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Private indigenous enterprises are a very important part of the Nigerian economy. In virtually every country of the world, private indigenous enterprises are seen as an engine of growth and are among the most important contributors to wealth and employment creation (IFERA, 2003:235; Sharma, 2004:5; Tan and Fock, 2001:123; Ward, 2004:240). In countries at same levels of development with Nigeria, private indigenous enterprises contribute a much higher proportion to Gross Domestic Product (Oyeyinka, 2010:5). According to Oyeyinka (2010:6), studies by the IFC in 2003 show that approximately 96% of Nigerian businesses are private indigenous enterprises. Private indigenous enterprises represent about 90% of manufacturing/industrial sector in terms of number of enterprises and contribute approximately 1% of total Gross Domestic Product and approximately 14% of total manufacturing contribution to Gross National Product.
From the 1950’s, Nigeria began to make an unprecedented effort to encourage economic growth and development (Nwachukwu, 2005:16). According to Nwachukwu, between 1952 and 1959, the government introduced the Aid to Pioneer Industries Ordinance, gave import relief taxation and established the Nigerian Industrial Development Bank Limited to assist entrepreneurs engaged in industrial production, commerce, agriculture, and the exploration of natural resources. At independence, Nigeria, like other countries, saw that there was a great and urgent need to develop the economy through indigenous participation. This is because the economy inherited from the colonial government could not sustain the quest for national pride and greatness. Hence, various governments since independence had embarked on measures, programmes, policies and laws aimed at encouraging entrepreneurial activities among our people. Among such efforts or measures was the national development planning programmes. For example, the first national development plan in Nigeria was between
1962-1968; while the second plan was between 1970 and 1974. The third plan came between 1975-1980, while the fourth plan was between 1981 and 1985 (Olagunju,
2004:12).
In February, 1972, according to Olagunju, the Federal Government promulgated the Nigerian Enterprises Promotion Degree No.4 (as amended in 1977). The decree has the objective of promoting the spirit of entrepreneurship in Nigerians by setting aside certain enterprises exclusively for Nigerians. The decree, also realizing the shortage of capable managers who could manage businesses being bought over from foreigners, established the Industrial Training Fund (ITF) to offer managerial training to would-be manager. In 1977, the government established National Economic Reconstruction Fund (NERFUND), and People’s Bank. Further, because of the hopeless state of the Nigerian economy since early 1980s, the government in 1985 introduced the dreaded Structural Adjustment Programme (SAP). The programme was aimed at saving the economy of Nigeria from total collapse through liberalization of the economy, which allows greater private initiatives. Consequently, many enterprises were opened up for private participation. Also, one of the former President Obasanjo’s reforms of 2003-
2007 is the National Economy Empowerment and Development Strategy (NEEDS). One of the key strategies of NEEDS is growing private sector.
All these monetary, fiscal and industrial policy measures aimed at encouraging entrepreneurial activities among our people. This enabling environment provided by the various governments made private entrepreneurial activities to flourish all over the country (Olagunju, 2004:12). The south-east states, however, were not left out in the quest for industrialization. These states got themselves in virtually all types of enterprise namely, manufacturing, hospitality, cloth making, processing, farming, construction, service and transportation. Little wonder that Oyeyinka (2010:3) posits that approximately 96 percent of businesses in Nigeria are private indigenous enterprises. Some of these indigenous enterprises have grown from small to medium and large scale businesses and some of these firms have production facilities and organisational structures comparable to their multinational or state-owned counterparts. These enterprises were established with the specific goals and objectives to provide employment, facilitate economic growth, provide goods and services and boost the living standards of the masses (Olagunju, 2004: 12).
From the above, it is clear that the importance of private indigenous enterprises cannot be over emphasised. These private indigenous enterprises are fast becoming the dominant form of business enterprise in both developing and developed economies and
their influence, as well as their numbers, can be expected to increase substantially in the near future as these enterprises possess great potentials for employment, growth improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large scale enterprises(Ryan, 1995:12; Oyeyinka, 2010:2). In Nigeria for instance, private indigenous enterprises employ more than 50% of the private sector workforce (Oyeyinka, 2007/2010:2). In the developed world, private indigenous enterprises known as family businesses are the most important sources of wealth creation (Tan and Fock, 2001; Sanusi, 2003:16; Ward, 2004:240;Surdej and Wach, 2010:122). Further, private indigenous enterprises provide “more than half of Africa’s urban employment and as such as one – fifth of Gross Domestic Product in many countries” (World Bank, 1991:10). Private indigenous enterprises are reckoned as one of the engines of the post-industrial growth process since they are credited for nurturing across generations entrepreneurial talent, a sense of loyalty to business success, long-term strategies commitment, and corporate independence (Poutziouris, 2001:35).
Even with private indigenous enterprises assuming such an important role as engine of growth – wealth creation, employment generation and poverty reduction, these enterprises are characterized by alarmingly deteriorating survival rates. Studies show that many of the enterprises disappear from the business scene or experience significant decline upon the death or incapacitation of their founders (Nwachukwu, 2005:21; Forrest, 1994:237; Wild, 1997:122; Sam, 2003:372; Liedholm and Mead, 1993; 9:159; Bjuggren and Sund, 2001:12; Poutziouris, 2001; Le-Breton-Miller, Miller, and Steier,
2004:305; Olagunju, 2004:9; Jordan, 2005; Scotland, 2010:1; Parrish, 2009:48; Momoh, 2010:2). Indeed, according to the Family Firm Institute, a research group in Boston, only 30 per cent of family owned businesses make it to the second generation,
10 per cent to the third generation, and 3 per cent beyond the third generation (Momoh,
2010:3). This paucity of long established firms has serious implications for national viability because prospects for economic development become limited where the wealth accumulated by each generation of indigenous entrepreneurs is lost when the owner die. Development, therefore, is anchored in the principle of cumulative legacy. A legacy of generational extinction of accumulation makes for underdevelopment (Ukaegbu, 2003:2). As a primary contributor to the economic and social well-being of the nation, their lack of longevity is a cause for concern.
Although there is a plethora of studies on the reasons for the general volatility of private indigenous enterprises (Abram, 2002:20; Nwachukwu, 2005:19; Esu, 2003:4; Sam, 2003:372), one of the greatest challenges facing indigenous African businesses and developed economies today and one potential source of this volatility which can also account for the scarcity of long-established firms is the crisis of succession, that is, uncertainty about the future of the organisation beyond the founder (Forrest, 1994; Willer, 1996:5; Sam and Kilby, 1998:134; Maphosa, 1999:169; Sam, 2003:372; Ukaegbu, 2003:1; 2010). It has been estimated that the worldwide survival rate of family businesses to the second generation is only thirty percent, while fewer than fourteen percent survive beyond the third generation (Venter, Boshoff and Maas,
2005:284). While all enterprises are susceptible to failure, regardless of ownership, private indigenous businesses contend with some unique issues among which is managing succession. This is in line with Magretta (1998:121) and Matthews, Moore and Fialko (1999:160) observation that one of the main reasons (if not the single most important reason) for high failure rate among first and second-generation businesses is their inability to manage the complex and highly emotional process of ownership and management succession from one generation to the next. This problem is not peculiar to indigenous African enterprises as Tootellan and Gaedeke (2000:223) and Willer, (1996:3) argue that history replete business failures that result from poor succession policies.
Succession, in organisational theory and practice, is the process of transferring managerial control from one leader or one generation of leaders to the next. It includes the dynamics preceding the actual transition as well as the after-math of the transition (Shepherd and Zacharakis, 2000). In the context of private indigenous enterprise(s), management succession is the process by which ownership and control of the production or commercial infrastructure accumulated by one generation of a nuclear or extended family is transferred to the next. Succession is a vital instrument in organisational growth, long-term stability, survival and sustenance. However, there are certain factors that do constrain succession process in private indigenous enterprises which in turn affects enterprise sustainability. For instance, apart from the founder’s inability to plan for the succession because to do so means acknowledging one’s mortality (Willer, 1996:3; Ukaegbu, 2003; Kets de Vires, 2007:29), there is the
increasing awareness of the influence that Igbo inheritance culture, is capable of exerting on management succession (Sam, 1998, 2003; Ukaegbu, 2003; Maphosa,
1999).
Culture is one basic assessment of whether a society is either developing slowly or rapidly (Mbakogu, 2004:41). Culture is described as the way of life of a certain group of people in a particular society (Iris and Prothro, 1965:19; Ukeje, 1992:395; Shoremi,
1999:94). No society exists in a vacuum, as such, existing cultural patterns of the people will determine whether and to what extent the society develops. Little wonder Isamah (1996:31) reports that “numerous studies of anthropologists have shown that the cultural patterns or practices of a people are closely related to the pace of industrialGdevelopment.” Similarly, Barney (1986:568) and Ott (1989:322) in their studies found that there is a relationship between culture and organisational performance. What is implied in this view is that cultural institutions pose serious constraints to the existence of enterprises.
In Igbo society, there are diverse inheritance rules or norms. The rules of inheritance include – primogeniture (first born), gender-restrictive inheritance rule, multiple heirship or inheritance (as a result of polygamy marriage)(Ukaegbu, 2003; Sam, 1998 and Maphosa, 1999). These inheritance cultural factors have been circulated to be of significant consequence on management succession because management succession in private indigenous enterprises in Igbo society does follow or is expected to follow the rules of inheritance (a situation where the founder bequeaths his assets, including his commercial enterprises to his heir(s)). An understanding of the socio-cultural environment in which the enterprises operate, the cultural context within which succession plans operates as well as their potential to be sustainable springboards for societal accumulation is crucial. The organisational world is vast in its detail, complexity and uniqueness. Thus, for an enterprise to achieve smooth succession and enterprise sustainability, it must jettison it traditional systems (traditional philosophy of life, and totality of beliefs, knowledge and customs), which are at variance with industrial culture (Ewurum, 1999:1). Giambatisca et al. (2005:987) in a comprehensive review of succession literature, suggest further that as successions tend to be very disruptive, incumbent leaders need to understand succession and to conduct ongoing succession planning to minimize organisational instability.
Management succession is a vital process in organisational life and the transition of the owner-founder has a more significant impact on a firm than other management transitions due to the influence and authority these leaders typically possess. The “pervasiveness of the Chief Executive’s impact on the firm and the symbolism of Chief Executive succession is considered different from turnover at lower levels” (Kesner and Sebora, 2004:124). A Chief Executive succession process has the potential of impacting individuals at every level of the organisation because the change of the founder tends to trigger other changes in an organisation, tends to be messy, unpredictable, complex and dynamic (Burns, 2005:27; Davis, 1999:; Cabrera-Suarez,
2005:38; Dawson, 2005; Haddadj, 2003). Kesner and Sebora (2004:224) note that, “Chief Executive succession may also represent a unique case because the nature of the Chief Executive’s job is substantially different from other organisational positions. The job is idiosyncratic, non-routine, and unstructured…there is nothing typical about the typical Chief Executive.”
Though succession at any level remains a vital instrument in organisational growth, long-term stability, survival and sustenance, to date there has not been an empirical work available in the literature that considered the issue of succession in business enterprises from a cultural perspective. Most empirical research thus far has addressed the owner-founder characteristics, organisational characteristics, demographic parameters of an enterprise, context and financial factors (De Massis, Chua, and Chrisman, 2008:186; Surdej and Wach, 2010:130; Davis and Harveston, 2001:45). In Nigeria, what appeared to predominate are mainly conference and journal papers. Maphosa (1999:378) posits that the success of African economies will to a very large extent depend on the organisation management practices and leadership styles. The x- ray of culture, a growing problem of management succession is a crucial topic. This study, therefore, seeks to examine the private indigenous enterprises in South Eastern Nigeria within the context of Igbo inheritance culture. Of particular interest is the degree to which the sustainability/longevity and performance of these enterprises is determined by factors related to the prevailing inheritance culture of Igbo society when the founder dies.
1.2 STATEMENT OF THE PROBLEM
The problem of this study is the difficulty in determining the effect of Igbo inheritance culture on management succession process in private indigenous enterprises. A crucial challenge in all private indigenous enterprises is management succession. There is a barrier in the ways the owners-founders do management succession because in Igbo society, selection of heir(s) is restricted to a specific social unit, typically the family which follows the cultural inheritance rules. Inheritance culture has remained an encumbrance to management succession in private indigenous enterprises. Given how essential the succession process is for the survival of enterprises in South Eastern Nigeria after the death of the founder, there is the need to find out the extent or the probability that Igbo inheritance culture have affected management succession.
1.3 OBJECTIVES OF THE STUDY
The main aim of this study is to examine the effect of Igbo inheritance culture on management succession in private indigenous enterprises in South Eastern Nigeria. Specifically, the objectives of this study are:
1. To determine the effect of Igbo inheritance culture on management succession process in private indigenous enterprises in South-Eastern Nigeria.
2. To determine the effect of Igbo inheritance culture on management succession outcome (enterprise continuity/discontinuity) in South-Eastern Nigeria.
3. To determine the extent of relationship existing between factors associated with primogeniture (first born) rule of inheritance and successful management succession.
4. To determine the effect of gender-restrictive inheritance culture on management succession.
5. To ascertain the extent to which multiple heirs’ inheritance affect management succession in private indigenous enterprises in South Eastern Nigeria.
6. To modify System’s Cybernetic Model of the transform of the inheritance culture process and output of the improvement in the management succession in private indigenous enterprises in South Eastern Nigeria.
1.4 RESEARCH QUESTIONS
For this study to accomplish the set objectives, the following research questions are presented thus:
1. What is the effect of Igbo inheritance culture on management succession process in private indigenous enterprises in South Eastern Nigeria?
2. What is the effect of Igbo inheritance culture on management succession outcome (enterprise continuity/discontinuity) in South Eastern Nigeria?
3. To what extent is the relationship between factors associated with primogeniture (first born) rule of inheritance and successful management succession in private indigenous enterprises in South Eastern Nigeria?
4. What is the effect of gender restrictive inheritance culture affect management succession in private indigenous enterprises in South Eastern Nigeria?
5. To what extent does multiple heirs’ inheritance culture affect management succession in private indigenous enterprises in South Eastern Nigeria?
6. Can a model be modified of the transform of the inheritance culture process and output of the improvement in the management succession in private indigenous enterprises in South Eastern Nigeria?
1.5 RESEARCH HYPOTHESES
Based on the highlighted research objectives and research questions, the following research hypotheses are formulated to effectively guide and direct this study:
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1. Igbo inheritance culture has a positive effect on management succession process in private indigenous enterprises in South Eastern Nigeria.
2. Igbo inheritance culture has a negative effect on management succession outcome (enterprise continuity) in private indigenous enterprises in South Eastern Nigeria.
3. There is a significant relationship between factors associated with primogeniture (first born) rule of inheritance and successful management succession in private indigenous enterprises in South Eastern Nigeria.
4. Gender restrictive inheritance culture has a negative effect on management succession in private indigenous enterprises in South Eastern Nigeria.
5. Multiple heirs’ inheritance to a large extent affects management succession in private indigenous enterprises in South Eastern Nigeria.
6. A model can be modified of the transform of the inheritance culture process and output of the improvement in the management succession in private indigenous enterprises in South Eastern Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The following persons will benefit and use the information from the study. They include:
1. The managers, staff and policy makers in Nigeria will get to know more about culture management succession fit through the empirically-based information provided by the study.
2. Current, future generations and shareholders of private sector entrepreneurs in South Eastern Nigeria would know more about how culture can affect management succession; and how it could reward their ownership.
3. Researchers and students of Human Resources Management, Organisational Behaviour, Organisation Development, Management, Business Administration who need theoretical framework and empirical data on the effect of culture on management succession will benefit from the study.
4. The present research attempts to fill the gap in literature. The empirical findings will reveal the important relationships between culture, succession and organisational sustainability that, if managed properly, will lead to successful management succession and longevity of private indigenous enterprises.
1.7 SCOPE OF THE STUDY
The focus of the study is to determine the effect of inheritance culture on management succession in private indigenous enterprises in South Eastern Nigeria. The independent variable is Igbo inheritance culture while the dependent variable is management succession. The inheritance culture include – primogeniture (first born) rule of inheritance gender-restrictive inheritance culture, multiple heirs’ inheritance).
This research will also review literature on management succession process and outcome, succession planning, successor-related factors, explore the theories and
models of management succession and investigate the effectiveness of such theories and models in affecting succession transitions in private indigenous enterprises.
The scope of this research is narrowed to private indigenous enterprises in South Eastern Nigeria comprising of Abia, Anambra, Ebonyi, Enugu and Imo, all of which are predominantly inhabited by the Igbos. The choice is dictated partly by convenience, to reduce the variability that will arise out of different contextual factors and partly, and more importantly, by the principle of homogeneity of cultural traits which is a critical factor in cross-cultural studies. For the purposes of this research, the definition of private indigenous enterprise include all the family businesses (small and medium enterprises) employing no fewer than 5 and not more than 200 persons.
1.8 LIMITATIONS OF THE STUDY
Certain limitations inhibited the effective and smooth collection of data for this research work.
(1) The survey research design has the limitation that it is one shot or at most two shot
and that limits its ability to generate data with which to test the causal relationship of the variables without resorting to rigorous statistical analysis. This limitation however, could be overcome by also doing an oral interview.
(2) The oral interview has the limitation that the interviewing situation could change especially if more than one field data collector is used. This limitation however, is overcome by the researcher doing most of the field work.
(3) The questionnaire research instrument has the limitation that its structured nature may compel some respondents to give answers that they do not fully endorse. This shortcoming can be overcome by also using an oral interview schedule which has open-ended questions.
(4) The oral interview schedule has the limitation that its unstructured nature makes it difficult to analyse the responses. This shortcoming is overcome by also using frequency and calculating relative frequencies and percentages.
(5) Time: The study was limited by the amount of time available to conduct the study.
Study of this nature and magnitude is usually time consuming because of the area of coverage. Also, it will not be easy to trace the whereabouts of some of these businesses especially where there are no street addresses.
(6) Attitude of Respondents: Some of the respondents feel very reluctant to give out information. This attitude delays the work and may force one to go to enterprises where she has some measure of relationship. In addition, some of the respondents especially from failed enterprises may not be in the position to give accurate information about the company. The founder, who is the most knowledgeable source of information, is no longer around to be interviewed.
(7) Funds: The researcher spent quite huge amount of money to source information from the Internet. Most of the journals sites are classified and require foreign currency for access to be obtained.
1.9 DEFINITION OF TERMS
For the purpose of clarity, some operational definitions are proffered.
Culture: Culture as a total way of life of a people which evolves from social relations and interaction; which provides socially acceptable patterns for meeting human needs; which is cumulative; is meaningful to humans and is learned by members of a society in the course of its development.
EnterpriseContinuity/Longevity: Enterprise continuity/longevity means the prospects for a firm to exist for long after the death of its founder without a significant decline in human and material input as well as organisational output.
Inheritance Culture: This is the practice of passing on property (including business enterprise), titles, rights and obligations to the founder’s heir (s) upon his death. Intercoder/Interrater Reliability: This is the process of assessing the level of agreement between two coders.
Management Succession: This refers to the process by which commercial investments of any type is transferred from the owner-founder to his prospective survivors – heir(s). These could be members of a nuclear family in a monogamous household such as a wife and children, or members of a compound family in a polygamous household, namely wives and children. Survivors could also be members of the extended family such as uncles, aunts, nephews, nieces, and cousins.
Multiple Heirship: This is the process of sharing or dividing the founder’s property among his many sons(heirs) after his demise.
Negative Succession Outcome: This is a situation where the business collapses or seriously declines due to: poor choice of successor, family in-fighting due, inadequate grooming of the successor and others.
Omenani/Omenala: These are approved ‘doings’, ‘customs’ or ‘ways’ of the land;
what the ancestors have sanctioned either to be observed or to be avoided.
Positive Succession Outcome: Where the controlling interest but not necessarily management of the business is transferred to the next generation of the family, and there is minimal disruption to the operations and value of the business. Primogeniture:Primogeniture means first born.
Primogeniture Rule of Inheritance: This is the right of the first-born child usually the eldest son, to inherit the parent’s entire estate without his siblings.
Private Indigenous Enterprises: These are small, medium and large scale enterprises that are privately owned by a family. The family possesses controlling ownership, controlling management, and the ability to transfer the management of these enterprises to the heirs (next generation).
Thematic Analysis: This is a form of pattern recognition within the data, where emerging themes become the categories for analysis.
Traditional Culture: This is purely indigenous and original distinctive life style, basic ideas, beliefs, and customs of a people.
This material content is developed to serve as a GUIDE for students to conduct academic research
THE EFFECT OF IGBO INHERITANCE CULTURE ON MANAGEMENT SUCCESSION IN PRIVATE INDIGENOUS ENTERPRISES IN SOUTH EASTERN NIGERIA>
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