Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
The Culture of Small Business
M. Gordon Hunter
This article proposes the unique components of the culture of small business. Culture
research is reviewed from a national, large corporation, and small business. An adapted
framework is developed upon which the emerging themes of the current project are
mapped. Qualitative interviews were conducted with representatives of eleven multigeneration small businesses. Common components are related to pragmatism and
finances.
However, differences are noted in relation to customers, community
involvement, and family.
Track: Management
Introduction
This article describes small business culture. There is a hierarchy of cultures that
provide the context for the discussion in this manuscript. The most broad and
comprehensive culture is that which is related to a nation or society. Throughout this
document the term nation will be employed. Corporate culture, or organization culture,
is employed to describe the environment of large business. The term used in this
document is corporate culture.
There is an interaction between national culture and corporate culture. That is, usually
large businesses will carry out operations internationally. Thus, the employees will
originate from different cultures. It is this interaction that will have an impact on the
performance of a large business. At the most detailed level a small business will
develop a unique culture. This situation is the main focus of this manuscript. Thus, the
research question for the project reported on here is, “What are the components of
small business culture?” The components and types of small business cultures are
included here along with supporting descriptions from a multi-generation small business
project (Hunter and Kazakoff, 2008).
This document is organized as follows. First, an overview of national culture is
presented. Second, corporate culture is described. Third, the specific aspects of small
business culture lead to a discussion of multi-generation small business research
participants’ comments about aspects on the own small business. Conclusions are
presented about how a small business culture will contribute to positive performance
and long term success.
National Culture
Hofstede (1997 and 1984; Hofstede et al, 2010; and Hofstede and Minkov, 2010)
defined national culture as the “collective programming of the mind”. Individuals in a
specific culture possess taken-for-granted assumptions about their behavior. These
assumptions may only be questioned when contact is made with another dissimilar
culture.
_____________________________________________________________________
M. Gordon Hunter, Professor Information Systems, Faculty of Management, The University of Lethbridge
Lethbridge, Alberta, T1K 3M4, Canada, E-mail: ghunter@uleth.ca
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
Table 1: National Cultural Dimensions
Dimension
Description
Individualism
Individualistic cultures expect their
Collectivism members to be independent and look
after themselves.
Power
Distance
Uncertainty
Avoidance
Masculinity
Femininity
Long-Term
Orientation
Short-Term
Collectivist cultures have a tightly knit
framework of mutual dependencies and
obligations.
High Power Distance cultures accept
unequal distribution of power within its
society.
Low Power Distance cultures strive for
equalization and participation.
Strong Uncertainty Avoidance cultures
attempt to control uncertainty by strict
rules and codes of behavior.
Weak Uncertainty Avoidance cultures
are not as strictly controlled and
deviation is more acceptable.
Masculine
cultures
emphasize
achievement,
success,
and
assertiveness.
Feminine cultures emphasize caring,
close relationships, and harmony.
Long-term oriented cultures promote the
family, respect for older people, and
virtuous behavior such as hard work and
frugality.
Short-term oriented cultures develop
equal relationships, emphasize the
individual, and promote creativity and
self-actualization.
Adapted from Hofstede (1997 and 1984;
Hofstede et al, 2010; and
Hofstede and Minkov, 2010)
Table 1 presents an overview description of the five dimensions. These dimensions
may be employed to develop a profile of the national culture of a country. These
profiles then represent cultural variability across nations. Research regarding cultural
variability suggests differing perspectives (Ronen, 1986; Webber, 1969; and Yang,
1986). The “convergence” perspective proposes there is less cultural variability
resulting from globalization and the pervasive use of technology. The “divergence”
perspective outlines efforts by cultures to retain their distinctive identity.
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
Corporate Culture
Corporate culture is more related to a specific business than is national culture.
However, most research related to corporate culture relates to large businesses
because of their international, cross cultural presence. Employees represent different
cultures and it is important that employees understand the perspectives taken by their
colleagues from different cultures. Within the unique combination of national cultures a
corporate culture will develop which will impinge, either positively or negatively, upon
the corporation’s performance.
Fayolle et al (2008) employed Hofstede’s (1997, and 1984) dimensions of national
culture to investigate corporate culture. They determined that, “…corporate culture
depends greatly on the deep values of the company’s founder-managers.” (Fayolle et
al, 2008:227)
Fayolle et al (2008) adopted a description of corporate culture originally adopted by
Schein (1984) as follows:
“…the pattern of basic assumptions that a given group has invented, discovered,
or developed in learning to cope with its problems of external adoption and
internal integration, and that have worked well enough to be considered valid,
and, therefore, to be taught to new members as the correct way to perceive,
think, and feeling relation to those problems.” (Schein, 1984:3)
Another definition of corporate culture describes the, “…shared philosophies,
ideologies, values, assumptions, beliefs, expectations, attitudes, and norms that knit a
community together” (Kilmann et al, 1986; and Trice and Beyer, 1993).
More recently, Yildiz (2014) employed Hofstede’s (1997, 1984) national culture to
examine the effects of corporate culture on entrepreneurship. Corporate culture in this
study was defined as,”…the set of values, attitudes, expressions, understandings, [and]
norms shared by members of an organization…” (Yildiz, 2014:37). This investigation
showed a relationship between societal culture and entrepreneurship.
Two of
Hofstede’s (1997, 1984) had a significant effect on entrepreneurship. Power distance
was positive. That is the more equal managers and subordinates felt the more positive
performance. Also, masculinity was negative. Thus, the more masculine the
entrepreneur the higher the likelihood an aggressive entrepreneurial spirit would be
adopted.
Corporate culture provides a means for socializing employees to adopt an approach to
thinking and behaving in a common way (Whiteley et al, 2013). It facilitates employees
to identify with the values desired by management (Harris and Ogbonna, 2011). It
represents an easily adopted control mechanism (Jackson and Parry, 2008).
“Thus, corporate culture discourages dysfunctional work behaviours, as it commits
members of the organization to do things for and with one another that are in the best
interests of the organization.” (Ogbor, 2001:594).
Mueller investigated the relationship between corporate culture and knowledge
management (Mueller, 2012). Her conceptual document focuses on identifying
research opportunities at the juncture of corporate culture and knowledge management.
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
It is interesting at the outset that she presents three perspectives on corporate culture.
First, the “functionalist perspective” (Golden, 1992; and Schultz and Hatch, 1996)
suggests corporate culture is a manageable asset (Barney, 1986; Deal and Kennedy,
1982; Pascale and Athos, 1981; Peters and Waterman, 1982; and Wilkins and Ouchi,
1983).
Second, the “metaphorical perspective” (Smircich, 1983) contends that
companies are cultures rather than having a culture. Third, the “dynamic perspective”
(Hatch, 1993; and Sackman, 1991) assumes corporate cultures have functions involving
employees socially relating to each other and aligning their efforts.
Lee and Yu (2004) investigated Corporate Culture and organizational performance.
Chowdhury (2013) developed a framework, Three Pillars of Productivity, involving
strategy, operations, and technology. This framework is based on Corporate Culture.
The strategy, differentiation or low cost for example, must be set within the mission and
vision of the company. Further, strategy must reflect changing market conditions.
Operations, how business is conducted, must entail a well-defined plan which supports
the strategy. Technology must support efficient operations and management decisions.
All three pillars must be aligned.
Small Business Culture
Small businesses are unique. They are not little big businesses (Welsh and White,
1981). The concept of Resource Poverty (Thong et al, 1994) applies. This concept
outlines the lack of resources associated with skills, time, and finances. A small
business has few employees. So, not all of the necessary skills will be available. Also,
with few employees time to manage may not be available. Further, access to financial
resources will be limited because most small businesses are privately owned with a
small asset base to support acquiring credit.
There are two aspects of “Liability” (Liao et al, 2008/2009) which may negatively affect
small business. The “Liability of Newness” describes internal issues related to a lack of
business processes; and external experience relating to stakeholders, such as
customers and suppliers (Mellahi and Wilkinson, 2004). The “Liability of Smallness” is
similar to Resource Poverty (Thong et al, 1994) where access to necessary resources is
limited (Mellahi and Wilkinson, 2004).
The remainder of this section reviews literature related to investigations into small
business culture. To begin the culture of family firms is analyzed within the context of
general systems theory (Vallejo, 2011). It is noted that the focus of their investigation
was on family firms which may be small or large. However, the aspect of family is an
important aspect of small business. The remainder of the section reports on
investigations that focused on small business including identifying processes to support
efficient operations (Haugh and McKee, 2004; and Stoica et al, 2004); and the concept
of “place” (Thomas et al, 2011).
Vallejo (2011) proposed a theoretical model to analyze the culture of family firms. The
framework is based upon general systems theory which proposes the interaction of a
number of sub-systems. In this instance there are four interacting sub-systems. Within
the firm there are the ownership sub-system and the business sub-system. These two
sub-systems support the operation of the firm. There is also a third internal sub-system
known as the family sub-system. This sub-system is the major contributor to the culture
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
of the firm. It also has an impact on the ownership and business sub-systems. These
three sub-systems also interact with an external sub-system known as the community
sub-system. Overall, there is a process of socialization, “…which the employees of the
family firm learn the skills, attitudes, and behavior patterns of the owning-family culture.”
(Vallejo, 2011: 49).
Vallejo (2011) also suggests a phenomenon of “familiness”. This concept, “…is a result
of the interaction of the family system with the firm and which leads to the firm
possessing a unique bundle of resources…” (Vallejo, 2011:48). Thus, the familiness
concept contributes to the potential for the firm to attain a competitive advantage
because of its unique composition of resources.
There are also four values which contribute to the culture of the family firm. They are as
follows:
1. Commitment
“…the extent to which an employee identifies with the firm…” (Vallejo,
2011:52). Loyalty is influenced by the internal sub-systems.
2. Harmony
“…achieved by encouraging active participation in the decision-making
process, such that employees become involved in the management and
personally assume the objectives of the firm.” (Vallejo, 2011:53).
3. Long-term orientation
“…the view of the firm as a legacy to pass down to future generations…”
(Vallejo, 2011:54).
4. Customer service
“…firms consider dedication and concern for customers to be one of the
key elements in their competitive strategy.” (Vallejo, 2011:54).
Haugh and McKee (2004) investigated the culture of small business. They determined
that the culture of small business is composed of:
 Survival
o The desire to continue to exist
 Independence
o Retain decision making power and not be influenced by others
 Control
o Regulate employees (internal) and suppliers (external)
 Pragmatism
o Action and behavior towards a certain course of action which is successful
 Financial prudence
o Conservative approach to expenditures
These culture components promote the efficient operation of the small business.
Methods of information processing by SMEs relates to effective overall performance
(Stoica et al, 2004, and Stoica and Schindehutte, 1999). Four types of small business
cultures are described in Table 2.
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
Table 2: Small Business Culture
CULTURE DESCRIPTION
Adhocracy “…centers on entrepreneurship, creativity and adaptability.
Flexibility and tolerance are givens. New markets and new
sources of growth are important.”
(Stoica et al, 2004:253)
Clan
“…values cohesiveness, participation and teamwork.
Employee commitment is achieved through participation.
Cohesiveness and personal satisfaction are more important
than financial goals.”
(Stoica et al, 2004:254)
Market
“…focuses on competitiveness and goal achievement.
Driven
Emphasis in on productivity and responsiveness to market.
Leadership is decisive and achievement oriented.”
(Stoica et al, 2004:253-254)
Hierarchy
“…stresses order and regulations. Leadership style is
administrative.
Tracking and control are emphasized
relative to clearly stated goals.”
(Stoica et al, 2004:254)
Adapted from Stoica et al (2004)
The conclusion is that that Adhocracy and Clan cultures process information more
effectively. These cultures seem to represent both a small business in its early stages
(Adhocracy) and into maturity (Clan).
Thomas et al (2011) investigated small business via the concept of “place”. They define
the term suggesting, “…businesses build place in a variety of ways each according to
their own culture and business model.” (Thomas et al, 2011: 286).
Positivity is one aspect of small business culture (Caspersz and Thomas, 2015). The
term “positivity”, “…represents an affirmative bias and orientation…” (Cameron et al,
2003:5).
“…positivity [is] a crucial characteristic of leading and managing in the family business
context…” (Caspersz and Thomas, 2015:60).
It is important to align family values and norms with the goals and objectives of the
small business (Olson et al, 2003). The culture involves the shared meanings of
employees. The business model invokes an attitude towards involvement with the
community. This community involvement was evident in Hunter and Kazakoff (2012a
and 2008). They determined that multi-generation small business took a proactive
approach to participating in the local community. They participated in local fund raising
events and sponsored minor league teams in various sports.
Project
This exploratory investigation adopted a qualitative perspective employing Narrative
Inquiry which is defined as, “…the symbolic presentation of a sequence of events
connected by subject matter and related by time.” (Scholes, 1981:205). The subject
matter is contextually rich which involves a research participant’s account of personal
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
experiences. The time aspect relates to temporally bound which means the account
has a start and an end with an intervening sequence of events.
McCracken’s (1988) Long Interview Technique supports the Narrative Inquiry approach.
The technique allows the research participant to reflect upon the subject matter in a
relatively unbiased and free flowing manner. An interview protocol is developed which
serves as a guide for the discussion. The questions are general in nature and nondirective in manner. Based upon a number of interviews themes are identified which
support the development of a framework to describe aspects of the subject under
investigation.
This project involved twenty research participants from eleven small businesses. Those
who were interviewed for the investigation are active participants in their small
businesses. They ranged from 2nd to 4th generations. They commented upon issues
relating to their involvement in the business and their impressions of the business
Founder, in all cases their Father or Grand-Father.
The Founders or previous generation involved in the business were true entrepreneurs.
Evidence of their entrepreneurial spirit was demonstrated by their keen eye for a
business opportunity and their unique skill and desire to establish their own business.
They not only worked hard but strived to provide quality products and services. The
Founders became renowned by their customers (many of whom were repeat
customers) and in the community in general. They may have been civic leaders or
sports enthusiasts. Invariably in our interviews there was a positive and complimentary
comment that started, “My Father …” For each Founder there comes a time when they
realize it is time to move on. The process of coming to this realization is different for
each individual Founder.
The remainder of this discussion is organized based upon an amalgamation of two
frameworks as shown in Table 3. The small business culture research conducted by
Vallejo (2011) and Haugh and McKee (2004) identified a number of components.
Table 3: Small Business Culture Components
Adapted
Vallejo (2011) Haugh
and
Component
Component
(2004)
Component
Employees
Commitment
Independence
Harmony
Control
Long-term
Long-term
Survival
Orientation
Customers
Customer
Service
Pragmatism
Pragmatism
Finances
Financial
Prudence
Adapted from Vallejo (2011) and Haugh and McKee (2004)
McKee
The remainder of this section describes each adapted component in relation to the
themes which emerged in the current project.
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
Employees
Very early in their association with the business the research participants may have
worked part time while attending school. This involvement provided an initial, and
valuable, learning experience about the attitude, atmosphere, and work ethic of the
small business.
The participants all desired to be accepted by employees as competent contributors to
the operations of the business and that they did not acquire their position simply
because they were a family member. While there was a strong sense of family there
was also a desire to prove, both to employees and themselves, that they held a specific
position on merit and could perform it well.
The research participants felt it was their responsibility to ensure appropriate and well
trained employees.
Long Term Orientation
Issues were identified which relate to activities and tasks of organizing and acquiring
infrastructure to support future operations.
Thus, implementation projects for
information technology are being carried out to support future more efficient operations.
Further, while no specific plans exist the idea about expansion opportunities were being
considered given the right set of circumstances.
Stewardship relates to the feeling of responsibility for maintaining a family asset for
future generations. A multi-generation small business will have existed for some time
not only because of the astute management skills of the owners, but also because of
the long term perspective taken by the owners to maintain the family asset. In order to
maintain the family asset for other family members and for subsequent generations it
may be necessary to make financial commitments that may not generate large
immediate returns but which may contribute to the longevity of the family business.
Thus, while a business may be operated more efficiently through say leasing the land
for the business office in the long run it might be more effective to purchase the land.
Customers
The important aspect with respect to customers is providing a quality product or service.
Beyond the quality consideration a decision must be made regarding a focus on a few
customers or a larger market. Fewer customers facilitate the quality provision.
However, a larger diversified market may assist in the response to economic down
turns. For many research participants these was also a desire to establish and maintain
a long term relationship with each customer.
Pragmatism
This issue involves a focus on what works for the small business. Internally there is a
concentration on what product or service is being provided with a quality consideration
as described above. Also, many of the research participants commented on the joy and
challenge of their work. They like what they do. Externally the small business must be
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
able to respond to current market conditions. It is a matter of how the small business
can respond to changes in the business environment.
Finances
The only comment here, but a very important one, relates to the small businesses’
conservative approach to finances. An established small business will be able to
access financial resources through cash flow or borrowing. With a down turn in the
economy cash flow may be eroded. In a subsequent investigation (Hunter and
Kazakoff, 2012b) financial institutions responded positively to small business requests
for further borrowing. When operating from a conservative financial position the
financial institutions felt the small business represented low risk.
The following two themes (Family and Community Involvement) emerged from this
investigation. They are in addition to the adapted themes outlined in Table 3. Further,
while the family theme does not relate to large corporations, community involvement is
operationalized in a different manner by small business compared to large corporations.
Family
In a family owned and operated business the two, family and business, are inseparable.
The theme that was mentioned the most often by the research participants was related
to family.
The relationship between family and business becomes more complex as the business
progresses into subsequent generations. From the founding entrepreneur the small
business may be passed on to a number of subsequent generation individuals. Some
of these individuals may be siblings, or cousins, or related through marriage. These
more extended relationships within the family create more complex situations within the
business. These dynamics must be addressed and any issues resolved. The important
aspect is that the family members, whatever their relationship to each other, are
prepared to get along and they approach their involvement in the business from a
common and agreed perspective.
The generally used term “sibling accommodation” relates to dealing with nonparticipating family members who have the right to share in the financial assets of the
small business as it passes from one generation to the next. During this time, there
exists a high potential for sibling rivalry (Friedman, 1989; and Ward, 1987) regarding the
intergenerational allocation of financial assets. A clear statement about sibling
accommodation will reduce the potential for family conflict (Handler, 1991). The
statement should document all of the stakeholders’ rights and an equitable method for
disbursing each family member’s share. Again, as above, it is important to devise a
disbursement plan that not only responds to each individual’s financial needs but also
does not negatively affect the future operation of the business. The guiding principle of
maintaining the family asset is reflected in an individual family member’s attitude that it
is “our” business and not necessarily “my” business.
Starting from the second generation, there is the necessity to have and maintain an
attitude that the business is more than just a business. It is a valuable family resource
which must be maintained for current non-participating family members as well as those
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
family members in future generations. The concepts of Stewardship Theory rise to
paramount importance within the multi-generation family business. For a small
business to continue successful operations over a number of generations, it is
necessary for a steward to emerge who will make decisions within the business which
will have implications beyond the business reflecting a desire to serve all the members
of the family. A term which reflects the importance of this individual is “multi-generation
hero”. This person steps forward and acts as a steward for both the business and the
family (participating and non-participating members) and takes a multi-generation
perspective.
Community Involvement
The research participants had a desire to participate in their community with initiatives
beyond the product and service provided by their small business. Naturally, there was
an advertising component to these initiatives. But, it was also interpreted as a way to
give back or contribute to the broader community. The research participants viewed
themselves as good corporate citizens desiring to make a contribution. They
participated in volunteer events and charity organizations. The result was positive
recognition for employees and the small business.
Conclusion
This manuscript reports on culture related themes identified by qualitative interviews
with representatives of eleven multi-generation small businesses. No differences were
determined for two of the five adapted small business culture components. With
regards to pragmatism, most organizations, large or small, will focus on what they do
best. Also, a conservative approach to managing financial resources will benefit any
organization.
The following comments represent the further contribution made by this investigation.
They relate to family, community involvement, and customers.
Stakeholders are associated with any business. Large corporations will include
investors and the focus will be on immediate financial returns. The small business,
however, will have stakeholders that are either family members or employees who are
treated as family members. A long term orientation will be taken. Employees will be
trained and encouraged to participate in decision making. Participating family members
will make decisions about maintaining the family asset which may be passed on to
subsequent generations. They will also be cognizant of non-participating family
members and their issues related to the family asset.
Community involvement will be approached in a specific manner. Any corporation,
large or small, will tend to participate in community activities. The large corporation
employees will participate as relative anonymous representatives of that corporation.
However, small business employees will participate representing the name of the small
business owner. This approach represents a more personal involvement of everyone
associated with the small business.
Customers are important to any organization. Because of access to a limited market,
customers are even more important to a small business. Thus, small business adopt a
Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia, ISBN: 978-1-922069-89-4
more personalized relationship with customers. The small business owner/manager will
know the customers and their needs and desires regarding specific products and
services. Effort will be made to retain customers for repeat acquisitions.
Finally, culture is important to the operation and viability of any business. The culture of
a small business is unique and very personal. Those family members who run a small
business relate very closely with customers, employees, and non-participating family
members.
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