AN INVESTIGATION OF FACTORS AFFECTING THE SUSTAINABILITY OF FAMILY BUSINESSES IN CAMEROON

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

A family business is a company in which ownership and control are held by members of a single family or multiple generations of a family. These businesses are often characterized by strong family ties, shared values, and a long-term perspective on success (Fritz, 2019). According to Olson et al. (2020), family businesses range from small, local enterprises to large multinational corporations. They play a significant role in many economies worldwide and often have unique dynamics related to succession planning, family governance, and balancing family interests with business objectives. Additionally, family businesses constitute a significant portion of the economic landscape in Cameroon, contributing to employment, wealth creation, and overall economic growth. These enterprises often have unique characteristics compared to their non-family counterparts, including a strong sense of tradition, long-term orientation, and a focus on familial values. However, in the majority of countries, economic growth is mostly driven by entrepreneurship. Particularly in developing countries like Cameroon, family businesses, many of which operate within the small and medium-sized enterprise (SME) sector, stand at the forefront of this growth trajectory. These businesses are widely recognized as the primary drivers of employment, playing a crucial role in poverty reduction and fostering greater equality within societies( Eckrich, C.J., Fassler, M.L., & SageHayward, W. 2021). Furthermore, family businesses form the backbone of entrepreneurship, with many small and medium-sized enterprises (SMEs) being family-owned and operated. These businesses range from small retail shops to larger enterprises spanning multiple generations. Throughout history, the symbiotic relationship between families and businesses has been prominent (Frost, 2021). The fundamental need to earn a livelihood and support one's family often serves as the underlying motivation for initiating and expanding a business venture (Holliday, 2021). Alongside various other incentives, aspirations for lifestyle improvement and wealth accumulation significantly influence the decision of family members to engage in entrepreneurial activities within their family context. Across the economic landscapes of numerous nations, family businesses continue to hold sway (Heck and Stafford, 2021; Klein, 2020), constituting a substantial portion of the private sector. These businesses bear the responsibility of driving economic prosperity and job creation in many economies. For instance, in countries like the US, Canada, and Slovenia, family enterprises make up approximately 80 to 90 percent of all businesses and contribute around 50 percent to employment and Gross National Product (Phan et al., 2015; Dun et al., 2017).  Furthermore, studies have also indicated that roughly 66% of new job opportunities worldwide stem from family-run enterprises (Perreault, 2018). Similarly, Etcheu (2017) asserts that in Cameroon, 90% to 95% of businesses are small to medium-sized enterprises, predominantly family-owned, and account for about 49.7% of total employment (Perdrix, 2018). Since the mid-1980s, numerous African nations have undertaken economic and financial reforms aimed at achieving macroeconomic stability and enhancing economic governance. However, these reforms in many cases have fallen short, particularly in areas concerning fiscal and monetary management. In Cameroon, family businesses typically commence as small-scale sole proprietorships with only a handful of hired employees, often influenced by geographical, ideological, or psychological factors. These employees play a vital role in the day-to-day operations of the business, overseen by the owner-manager who typically assumes responsibility for both the physical and psychological well-being of the workers (Cho, N.M., Limungaesowe, S., & Vilardndiisoh, A., 2018). A closer examination of the country's economic growth drivers reveals a heavy reliance, exceeding 50 percent, on Household and Sole Proprietor Businesses. This sector primarily comprises informal units, characterized by unstable performances and lacking guarantees of sustained growth. Many of these businesses are family-owned, with capital concentrated in the hands of a single individual, and involve the proprietor's family members in management roles, often relying on minimal financing from bank loans. One of the significant weaknesses observed in many African economies, including Cameroon, is the lack of a clear understanding of the role of entrepreneurship in driving economic development. However, like any other business, family-owned and operated businesses in Cameroon and elsewhere encounter numerous challenges from their inception through to management, impacting their longevity. For instance, according to a report by the Family Business Consulting (2019), only approximately 30% of family businesses manage to survive into the second generation, with just 12% remaining viable into the third generation, and a mere 3% operating into the fourth generation and beyond. Dyer & Whetten (2016), in their work on "Entrepreneurship Theory and Practice," note that despite family businesses often outperforming non-family controlled firms in terms of social responsibility, they struggle to endure over time. Similarly, Wayne (2020), in his study on "Creating a Sustainable Family Business," found that less than 30% of family businesses make it to the third generation of family ownership. These challenges inevitably raise concerns about the sustainability of family businesses in general, as well as the specific factors contributing to their lack of sustainability. Therefore, a survey will be conducted in order to investigate factors affecting the sustainability of family businesses in Cameroon.

1.2 Statement of the Problem

Family businesses play a vital role in the economic landscape of Cameroon, contributing significantly to employment, innovation, and wealth creation.  Given that they encounter several difficulties from their inception to management and, ultimately, their longevity, family-owned and operated businesses in Cameroon are not immune to the problems that beset family businesses globally. In Cameroon, this state of affairs has been noted in numerous family-run enterprises. The concern is that a large number of Cameroonian family businesses go down when their founders pass away, leaving a large number of people without jobs, especially considering the significance of this industry and its contributions to the country's economy. Furthermore, family businesses struggle with succession planning, which involves transferring leadership and ownership to the next generation. Likewise, inadequate succession plans can lead to conflicts, lack of direction, and ultimately, the demise of the business (Nkam, Sena and Ndamsa,2017). Unavoidably, this has a detrimental effect on Cameroon's economic growth. Thus, it is in the light of these that the study seeks to investigate factors affecting the sustainability of family businesses in Cameroon.

1.3  Objectives of the Study

The main purpose of this study is to investigate factors affecting the sustainability of family businesses in Cameroon.. Specifically, the study will;

1.Assess the environmental based factors influencing the sustainability of family businesses in Cameroon

2.Assess the financial based factors influencing the sustainability of family businesses in Cameroon

3.Assess the managerial based factors influencing the sustainability of family businesses in Cameroon

4.Proffer possible strategies required to ensure the  sustainability of family businesses in Cameroon.

 1.4 Research Questions

The following questions have been prepared for the study:

What are the key environmental factors affecting the sustainability of family businesses in Cameroon?

How do financial factors impact the long-term viability of family businesses in Cameroon?

What managerial factors play a significant role in determining the sustainability of family businesses in Cameroon?

What strategies can be recommended to enhance the sustainability of family businesses in Cameroon?

1.5 Research Hypotheses

Ho: There are no significant factors affecting the sustainability of family businesses in Cameroon.

Ha: There are significant factors affecting the sustainability of family businesses in Cameroon.

1.6 Significance of the Study

The findings of the study will inform the development of policies, programs, and initiatives aimed at supporting family businesses in Cameroon. Also, policymakers will be able to design targeted interventions to address critical issues such as succession planning, access to finance, and regulatory compliance. By disseminating best practices, lessons learned, and practical insights, the study can empower stakeholders to make informed decisions and implement effective strategies for enhancing the resilience and competitiveness of family enterprises. Additionally,  subsequent researchers will use it as a literature review. This means that other students who may decide to conduct studies in this area will have the opportunity to use this study as available literature that can be subjected to critical review. Invariably, the result of the study contributes immensely to the body of academic knowledge with regard to factors affecting the sustainability of family businesses in Cameroon.

1.6 Scope of the study

The scope of this study is to evaluate on management skills required to enhance the entrepreneurial competencies business education graduates in Cameroon. Empirically, this study will investigate the causes of unemployment in Cameroon, determine whether there is a relationship between entrepreneurship and unemployment in Cameroon, assess the contribution of entrepreneurship on employment generation in Cameroon and investigate the problems affecting the effectiveness of entrepreneurship towards the reduction of unemployment in Cameroon.

Geographically, the study will be delimited to residents of Douala, Cameroon

1.7 Limitation of the study

In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents. In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed. 

More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other schools, local governments, states, and other countries in the world.

 1.8 Definition of Terms

Sustainability: is the ability to maintain or uphold a certain condition or process over a long period of time without causing harm to the environment, society, or economy.

Family business: is a company in which ownership and control are held by members of a single family or multiple generations of a family. These businesses are often characterized by strong family ties, shared values, and a long-term perspective on success (Fritz B. Simon 2019).