Is the First Generation More Successful? Research in Indonesian Micro, Small, and Medium Enterprises

Abstract

Micro, Small, and Medium Enterprises (MSMEs) are business sectors that can survive during the Indonesia monetary crisis. Even though it is a reliable business sector, MSMEs still faces various obstacles making it challenging to develop. One of the barriers faced is unoptimized organization’s performance. Many researchers explain that most MSMEs in Indonesia are family-run businesses. This study examines whether there are differences in entrepreneurial performance by generation in family businesses. The novelty of this study is that, although several researches were studied on small firm performance, yet this is the first study that depicts how the entrepreneurial performance differences based on generation. We distinguish generations into three groups: first generation, second generation, and third generation. Purposive Sampling technique is employed, where 143 MSMEs with family ownership in the Special Region of Yogyakarta are collected. We test our developed hypotheses using One Way ANOVA approach. The results prove that there are differences in entrepreneurial performance by generation. The first generation has better entrepreneurial performance than the next generation. Furthermore, they provide implications to MSME owners with family ownership to be able to prepare for succession well, hence the company can continue to survive for generations. We also provide new insights into attempts to maintain entrepreneurial performance in small firms.