Crisis and Turnaround in German Medium-Sized Enterprises: An Integrated Empirical Study (Familienunternehmen und KMU)

Thomas Wittig aims at gaining additional insights into the crisis and turnaround process of SMEs, investigating both, the turnaround success and the impact of turnaround on the family role in family firms. Based on a specifically developed integrated conceptual turnaround model, the author collected a sample of 209 turnaround cases of German medium-sized companies from restructuring experts working for German banks. Employing a variety of carefully selected statistical analyses he identifies key factors for turnaround success and finds specific archetypes of crises and turnaround. The study concludes with an analysis of the impact of a successful turnaround on the family firms within his sample. Based on the study's insights he provides both, recommendations for future research and a set of practical implications for all relevant stakeholders of a turnaround situation. Contents Conceptual Model of Crisis and Turnaround Analysis of the Turnaround Performance Archetypes of Crisis and Archetypes of Turnaround Impact of Turnaround on Family Ownership and Control Target Groups Researchers and students in the fields of strategic management, crisis & turnaround and family business Family firm managers and shareholders, credit risk managers working for German banks, management consultants with focus on crisis and turnaround The Author Dr. Thomas Wittig wrote his dissertation under the supervision of Prof. Dr. Andreas Hack at the Witten Institute for Family Business (WIFU) at Witten/Herdecke University Foreword 6 Preface 8 Table of Contents 11 List of figures 17 List of tables 19 List of abbreviations 21 1 Introduction 23 1.1 Motivation 23 1.2 Research questions and contributions 26 1.3 Outline of study 29 2 Overview of literature and applicable theories 33 2.1 Selected literature reviews 33 2.1.1 The conceptual work of Pearce and Robbins (1993) 34 2.1.2 The survey of John (1993) 37 2.1.3 The meta-study by Pandit (2000) 38 2.1.4 The literature overview by Eichner (2010) 39 2.1.5 The review by Trahms et al. (2013) 42 2.2 Selected empirical evidence 44 2.2.1 The study by Sudarsanam and Lai (2001) 45 2.2.2 The study by Eichner (2010) 48 2.2.3 The study by Hauschildt et al. (2006) 51 2.3 Introduction of selected applicable theories 54 2.3.1 Contingency theory 54 2.3.2 Principal-agent theory 55 2.3.3 Resource-based view (RBV) 57 2.3.4 Theory of gestalts 58 2.4 Introduction to selected family firm research 59 2.4.1 Definition of family firms 59 2.4.2 Selected studies on family firms in crisis and turnaround 60 2.4.2.1 The case study of Cater and Schwab (2008) 61 2.4.2.2 The study of Gómez-Mejía et al. (2007) 62 2.4.3 Introduction of selected applicable theories for family firms 64 2.4.3.1 Principal-agent theory for family firms 64 2.4.3.2 Familiness – RBV 65 2.4.3.3 Socioemotional wealth (SEW) 66 3 Theoretical framework 68 3.1 Basic research context 69 3.1.1 Five-stage crisis and restructuring model 70 3.1.2 Specifics within the crisis and turnaround process in Germany 72 3.1.3 Implications for the data collection process 77 3.2 Crisis 79 3.2.1 Definition of crisis and crisis stages 80 3.2.2 Crisis diagnosis 82 3.2.3 Crisis typology 84 3.2.3.1 Review of existing frameworks 85 3.2.3.1.1 Crisis characterization 85 3.2.3.1.2 Crisis models 86 3.2.3.2 Typology approach for this study 87 3.2.3.2.1 Crisis characterization using crisis contribution factors 89 3.2.3.2.2 Crisis model structure 89 3.3 Turnaround management 91 3.3.1 Turnaround plan 92 3.3.2 Process of turnaround management 92 3.3.3 Content of turnaround management 94 3.4 Result of turnaround management 95 3.4.1 Company perspective 96 3.4.2 Owner family perspective 97 3.5 Internal and external context 99 3.5.1 Internal context 100 3.5.2 External context 101 3.6 Summary 101 4 Conceptual model 103 4.1 Research criticism and modeling approach 105 4.2 Homogeneity of the research sample 109 4.3 Model of the turnaround result – company perspective 112 4.4 Model of the crisis 114 4.4.1 Operational crisis contribution factors (operational CCFs) 115 4.4.1.1 Resource-related CCFs 115 4.4.1.2 Organization and process-related CCFs| 119 4.4.1.3 Policy related CCFs 121 4.4.2 Managerial crisis contribution factors (managerial CCFs) 121 4.4.2.1 Top management CCFs 122 4.4.2.2 Family CCFs 125 4.4.3 Portfolio crisis contribution factors (portfolio CCFs) 127 4.4.3.1 Market-related CCFs 128 4.4.3.2 Product-related CCFs 129 4.4.3.3 Acquisition-related CCFs 130 4.4.4 Financial crisis contribution factors (financial CCFs) 131 4.4.5 External crisis contribution factors (external CCFs) 133 4.4.6 Crisis context 137 4.4.7 Propositions for the model of crisis 140 4.5 Model of the turnaround management 142 4.5.1 Operational restructuring moves 145 4.5.1.1 Resource restructuring moves 145 4.5.1.2 Organizational and process-restructuring moves 152 4.5.1.3 Policy-restructuring moves 153 4.5.2 Managerial restructuring moves 154 4.5.3 Portfolio restructuring moves 157 4.5.3.1 Portfolio-restructuring moves by transaction 158 4.5.3.2 Portfolio-restructuring moves by strategy change 160 4.5.4 Financial restructuring moves 162 4.5.4.1 Liquidity improvement restructuring moves 163 4.5.4.2 Restructuring moves to reduce the financial liability burden 166 4.5.5 Turnaround management context 170 4.5.6 Propositions for the model of turnaround management 173 4.6 Model of internal and external context 175 4.6.1 Internal context 177 4.6.1.1 Company facts 178 4.6.1.2 Management 180 4.6.1.3 Company strategy and products 180 4.6.1.4 Company finance 182 4.6.1.5 Family firms 185 4.6.2 External context 190 4.6.3 Proposition for the model of internal and external context 191 4.7 Model of the turnaround result – owner family perspective 193 4.8 Variable operationalization 194 4.9 Summary 196 5 Sampling and descriptive results 198 5.1 Sample collection 198 5.1.1 Key parameters of the sample collection process 198 5.1.2 Operational conduct of the sampling process 200 5.1.3 Result of the sampling process 201 5.2 Results 203 5.2.1 Descriptive statistics 203 5.2.1.1 Crisis 205 5.2.1.2 Turnaround management 210 5.2.1.3 Internal and external context 216 5.2.1.4 Turnaround result 224 5.2.2 Correlations 227 5.2.3 Model simplification 229 6 Analysis of the turnaround performance 231 6.1 Statistical methodology 231 6.1.1 Introduction of the statistical approaches 232 6.1.2 Statistical power and sample size 235 6.1.3 Bootstrapping as robust method 236 6.2 Model of moderating effects 236 6.3 Approach I: Univariate regression 241 6.3.1 Univariate regression – crisis variables 243 6.3.2 Univariate regression – turnaround management variables 246 6.3.3 Univariate regression – context variables 248 6.3.4 Regression of the moderation effects 250 6.4 Approach II: Complete model 258 6.4.1 Methodology 258 6.4.2 Multicollinearity 259 6.4.3 Results of the complete model 261 6.5 Approach III: Partial models 263 6.5.1 Methodology 264 6.5.2 Results of the partial models 265 6.6 Approach IV: Simplified models 267 6.6.1 Methodology 267 6.6.2 Stepwise regression 268 6.6.3 Results of the simplified models 270 6.7 Discussion 272 6.7.1 Comparison of the modeling approaches 272 6.7.2 Comprehensive discussion of the results per variable 275 Verweisquelle konnte nicht gefunden werden. 275 6.7.3 Conclusion 284 7 Archetypes of crisis and archetypes of turnaround 286 7.1 Clustering and segmentation in crisis and turnaround research 287 7.1.1 Classification of crisis 287 7.1.2 Classification of turnaround management 289 7.2 Statistical methodology 290 7.2.1 Clustering variables 291 7.2.2 Clustering algorithm 292 7.2.3 Number of clusters 293 7.2.4 Validating the clusters 293 7.3 Cluster analysis of crisis characteristics 294 7.4 Cluster analysis of turnaround management characteristics 301 7.5 Relations between crisis and turnaround clusters 306 7.6 Discussion 308 8 Impact of turnaround on family ownership and control 312 8.1 Definitions 315 8.2 Proposition development 317 8.3 Statistical methodology 321 8.4 Descriptive analysis of family role changes 323 8.5 Univariate analysis of the family role change 328 8.5.1 Analysis of family ownership change 328 8.5.2 Analysis of family control change 330 8.6 Crisis and turnaround archetypes and the family role change 335 8.6.1 Crisis-cluster-specific family role change 335 8.6.2 Turnaround-cluster-specific family role change 336 8.6.3 Combined effects of crisis and turnaround clusters 337 8.7 Discussion 341 9 Conclusions 345 9.1 Summary of key findings 345 9.2 Implications for managers, shareholders and stakeholders 352 9.2.1 Managers and shareholders 352 9.2.2 Family shareholders 354 9.2.3 Stakeholders, especially banks 355 9.3 Implications for future research 355 9.4 Limitations 357 Appendix 1 – list of restructuring specialists 359 Appendix 2 – questionnaire 360 Appendix 3 – correlation tables 376 References 407 Front Matter....Pages I-XXII Introduction....Pages 1-10 Overview of literature and applicable theories....Pages 11-45 Theoretical framework....Pages 47-81 Conceptual model....Pages 83-177 Sampling and descriptive results....Pages 179-211 Analysis of the turnaround performance....Pages 213-267 Archetypes of crisis and archetypes of turnaround....Pages 269-294 Impact of turnaround on family ownership and control....Pages 295-327 Conclusions....Pages 329-342 Back Matter....Pages 343-403