Family Systems Affect Business Practice

What is the purpose of a business? Standard economic models base their assumptions that firms aim at maximizing profits. Businesses in practice are also accustomed to measuring success in terms of revenues and profits. However, this way of practicing businesses, according to Henrich (2020), is WEIRD—that is, Western, Educated, Industrialized, Rich and Democratic. WEIRD cultures are highly individualistic and analytical. We tend to focus on ourselves—our accomplishments and aspirations and obligations chosen by ourselves—rather than on our predetermined, ascribed social roles and obligations.

WEIRD societies only make up about 12 per cent of the world’s population — the rest of the world lives much differently. In contrast to nuclear families, the building block of WEIRD societies, many societies have family systems that deeply value kinship ties, collective thinking and ascribed, predetermined social roles and obligations.

This divide has a significant impact on the way business is practiced in each culture. The WEIRD societies cultivate businesses that pursue revenues and profits while societies valuing kinship ties put more emphasis on employment than profit, focusing instead on how businesses fulfill ascribed social and familial obligations by creating jobs for kin members.

What is endogamy?

In this paper, my collaborators and I investigate how business outcomes are affected by one particular aspect of family systems – the suppression or support of cousin marriage. We follow Henrich (2020) in defining the latter, endogamy, as the practice of marriage within a specific social group (the ingroup). This practice accepts or even supports marriages between close cousins, reinforcing kinship ties, creating dense networks of family connections and resulting in a strong group identity. In contrast, exogamy, practiced in WEIRD societies, prohibits cousin marriage and encourages marriage outside the ingroup, weakening kinship ties.

Persistent Effects of the endogamy tradition

My research partners and I examined data from surveys of over 3,000 informal entrepreneurs from eight countries in sub-Saharan Africa. Data were collected by the World Bank between 2011 and 2020. As these informal businesses were not registered with the government, their performances were mostly shaped by family systems such as the practice of marriage rather than government regulations or rule of law.

We found that informal businesses in societies with endogamy and exogamy traditions had different purposes. When additional financial resources from family members or friends were available, we observed a larger increase in employment but a smaller increase in revenue among informal businesses in societies with the endogamy tradition relative to those with the exogamy tradition.

This is consistent with our expectation that when people have a strong in-group identity, they view it as their responsibility to create jobs for people that are part of their in-group. Business owners therefore use additional resources to hire family members – even when there’s no extra work needed. In WEIRD societies with the exogamy tradition, people tend to be more individualistic and informal businesses are more revenue-driven.

Interestingly, we find that the effects of the endogamy tradition can be persistent. Even if cousin marriage is no longer practiced contemporarily in a given area, the outlook and cultural norms associated with it, attributing the highest importance to the in-group, are likely to persist. It is because these cultural norms can be transmitted from parents to children over generations.

Evolution of the Endogamy Tradition: Colonial Legacy

However, cultural norms associated with the endogamy tradition can also evolve when societies go through momentous changes. In places where these two cultures clash, we often see a turn towards the more individualistic exogamy model. We verified this idea by investigating the large-scale European colonization in Africa as a cultural intervention.

We found that the endogamy tradition was especially weakened in former British colonies, because the legal systems and administrative practices of the British Empire were largely based on British individualism, a cultural trait that is particularly alien to the endogamy tradition.

Henrich (2020) argued that Western Christianity weakened the endogamy tradition in Europe by banning cousin marriage. However, we found that the impact of the large-scale European missionary activities in colonial Africa on the endogamy tradition was limited. This is probably because Christianity faced strong competition from Islam and mass conversions in Africa were often based on loose conditions.

Managerial Implications

Our research has important implications for managerial practice. We document that the genesis of the division in business purposes can go all the way back to historical family systems. It is therefore essential for business owners and managers to consider the deep roots of the social and cultural norms of the communities with which they interact. The managerial implications also go beyond informal sectors. Multinational firms operating in sub-Saharan Africa can benefit from a more thorough understanding of the continent’s considerable ethnic and cultural diversity. In addition, multinational firms should be aware that their informal subcontractors might have different business purposes because of their exposure to different informal institutions.

Peng Zhang is an Assistant Professor of Managerial Economics at SFU's Beedie School of Business. She received her PhD in Economics from the University of Cambridge in July 2018.  Her research fields include Development Economics, Investment Strategy in Africa and Applied Microeconomics.

References

Estrin, S., Mickiewicz, T. & Zhang, P. (2022). The endogamy tradition and the business performance of informal owner-manager ventures in sub-Saharan Africa. Working paper.

Henrich, J. (2020). The WEIRDest people in the world: How the West became psychologically peculiar and particularly prosperous. Penguin UK.