The Risk That Became True – Cases Study of a Pakistani Family Business Portfolio Diversification

Abstract

Corporate diversification and firm performance are one of the most widely researched areas in strategy literature. However, the management and dynamics of failing family business portfolio diversification has remained largely unstudied. Responding to this gap in the body of knowledge, this chapter presents a three-generation family business case study from Pakistan by highlighting the challenges arising from unrelated diversification in a family business portfolio. The family business portfolio is multigenerational, displays a complex structure, and has shown transformation over the years. The chapter integrates three intertwined perspectives: governance, professionalisation and diversification and shows empirical evidence of the risks included in aggressive growth strategies in family business portfolios. This chapter contributes to the literature of family business portfolios by offering new information related to aggressive growth strategy introduced by the new generation of family business owners. This chapter indicates several important points in family business portfolio diversification. The main arguments of this chapter are that unrelated diversification remains a risk for family business portfolios and managing risks resulting from diversification to unrelated fields would require high managerial competencies from and high goal congruence among the owners. Also, problems with one business in the portfolio would require extensive governance mechanisms that these informally governed family business portfolios have not developed.