Preventing the downfall for declining small businesses in a declining industry

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Abstract

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1. Introduction

In the past, a lot has been written about industry evolution (Jovanovic & MacDonald, 1994; Klepper, 1997; McGahan, 2000, 2004). The previously mentioned researchers have developed a good idea of how industries evolve over time, however there has been a surprisingly small amount of research on the declining stage of industries (Sundberg, Sundberg & Lilja, 2015). Within declining industries, businesses are facing difficulties and they try to seek creative solutions to keep or enhance their position. Existing research neglects the fact that declining industries are not necessarily doomed to failure (Sundberg et al., 2015). Examples of declining industries can be found in large industries, but also in small industries. An example of a big declining industry is the physical music industry (industry for compact discs, cassettes and vinyl) (Fox, 2005). Examples of smaller industries can be based on the Dutch dairy industry and the leisure industry. Farmers have difficulties because the prices are under pressure and the demand has declined, especially from Asia (CBS statline, 2015). This results in lower prices for the products and problems for the farmers, because in this way they cannot pay their bills (Nos, april 2016). Another example could be found in the Dutch leisure industry. When talked about bungalows and campgrounds to rent, there is oversupply and price competition. Dutch people are less willing to make long holidays in their own country and the competition between the businesses within the industry is very high (CBS Statline, 2016). Next to industries, businesses evolve also over time (Miller and Friesen, 1984). For businesses it is important to find ways to be innovative and distinctive within their industry, especially in declining industries. If businesses are not willing to meet the current needs of the industry, they will fail. The biggest example of this is Nokia. Several authors (e.g. Diederen et al., 2003; Favre et al., 2002) found evidence that innovations are related to higher firm performance and chances of firm survival. But, today’s companies no longer succeed by frequent introduction of new products or use of first-class technology alone. Companies have realized that they also must seek sustaining competitive advantage from the effective management of resources (Tahvanainen, 2000; Bamiatzi and Kirchmaier, 2014).

The fact that businesses and industries vary over time in performance is nothing new. Life cycle models have been demonstrated that businesses and industries have different challenges during their existence. To classify business and industries during their life, several researches developed and described organisational (Haire, 1959; Miller & Friesen, 1984) and industry (Miles, 1993; Beldona; 1997) life cycle models. With these life cycles the current situation of businesses and industries is described and they also give suggestions for the problems businesses face. Actually, a clear solution for declining businesses, which are in a declining industry, does not yet exists. According to Bamiatzi and Kirchmaier (2014), “firms can employ distinctive strategies in order to overcome an industry decline”. Within this research, the first step to a new business model for declining businesses in a declining industry will be given. It is called: Management Sharing, introduced by Han Verheijden (2012).

This business model assumes that a third party (the operator) can exploit a business on behalf of the owner. Management sharing can bring businesses sustainable competitive resources, which they cannot obtain by themselves for any reason. This because of the fact that businesses together share their main resources. Next to that, economies of scale will save costs. A comprehensive description and model of management sharing can be found below.

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1.1 Research goals

6 First, two important terms are introduced for this research. The ‘owner’ and the ‘operator’. The owner is the current owner of a declining business in a declining industry. The operator is a person or organization that takes the exploitation over from the owner of a specific business. Later on, the operator is also called the parent organization. When the operator has more businesses to manage, the more economies of scale. According to the model, the owners can be found in the business united and the operator can be found in the management level. The contract period for management sharing should be determined between the owner and the operator.

2.1 Short description

Firstly a short description of management sharing is given. Han Verheijden (Leisure expert and researcher) is the founder of the idea of management sharing. It is a new concept in the literature. The most important reasons for owners to share management are:

• The business does not possess enough skills in one or more tasks • The business owner does not have succession

• The business is too little for an own management/exploitation

As mentioned earlier, this business model assumes that a third party (the operator) can exploit a business on behalf of the owner. The turnover should be divided between the owner and the operator in a fair way. The operator is able to combine and spread their management costs over more businesses through a lease or rental agreement. Via this way, the operator can improve his operating income, without investments in property. The owner, who leased his business to the operator, does not sell his business

Management sharing should bring businesses within the decline stage more sustainable competitive advantage. Due to lower management costs because of economies of scale, there is more margin and space to invest. It is also able to use high quality resources, which they do not possess. In this way they can differentiate themselves from others. Next to the fact that the operator exploits the whole business, it should also be possible that only a few operational tasks will be shared, this should be specified in the contracts (e.g. only marketing or finance). Later on in this research, the ownership and decision rights will be discussed. Because management sharing is a new concept in the literature (Verheijden, 2013), there are no clear guidelines on how to set up this business model between businesses.

2.2 A more detailed look

7 Management sharing has similarities and differences with franchising. Franchising is a form of cooperation between a franchisor that offers a formula and a franchisee, which offers entrepreneurship and invests capital (Croonen & Brand, 2016). It is extremely criticized in the last three years (Croonen & Brand, 2016). Different journalists (Smit, 2016; Bos; 2016) suggest that franchisors are too powerful and abuse their franchisees. Problems with franchising are for example that, franchisors impose too much obligations on franchisees. Other problems arise from the division of the turnover and costs. At management sharing, the business units all keep their individual identity and do not make use of a brand name/ identity. So, for example the marketing department works for all the individual business units level separately, and take their individual unique selling propositions in mind, just another reason why management sharing could be successful. However, this means also that there will be a tension between the operator and owner. The operator wants to reach economies of scales. The same confrontation can be found within the franchising literature (Kaufmann & Eroglu, 1999). Later on within this research this tension in management sharing is discussed more. In table 1.1 the similarities and differences are given. Management sharing could also be seen as one big consultant group, which has knowledge of any aspect of the industry. Management Sharing Franchising Differences Use of a parent organization/operator Use of a franchisor Each units keeps its own brand name/ identity Corporate brand name/ identity Sharing back and front office tasks Sharing front office tasks and some back-office Sharing a few resources optionally or take over

the whole management. Sharing a business format with an own identity and internal procedures. Payment methods currently unknown (One of

the research questions) Individual businesses pays entry fee and royalties Maybe joint ownership or individual ownership

(One of the research questions) Asset ownership at the individual business level (but franchisor owns the intellectual property rights to the brand name and the business format) Operational management of units done by operator Operational management of units done by owners (e.g. franchisee) Similarities Legally Independent business units Legally independent business units Important benefit: Economies of scale Important benefit: Economies of scale Table 1.1: Differences and similarities between Franchising and Management Sharing

2.3 Ownership/decision and fee structure

8 hands of the parent organization. As can be seen in the model, the ownership/fee and decision rights are question marks. Within this research, the third research goal contains these aspects of the management-sharing concept.

2.4 This research

From the paragraphs above, it is important to know that some industries facing difficulties and are in the decline stage. An example was shown of the music industry. The same occurs for smaller industries, remember the Dutch leisure and Dutch diary industry. Specifically for declining businesses within a declining industry, Han Verheijden came up with the concept of the Management Sharing structure. A business structure for individual businesses to prepare them for the future. This research aims to address this business model and explore the types of businesses for which this model is interesting as well the potential fee and decision rights structure for this concept. To investigate this model, the case of the Dutch leisure industry is used. The leisure industry was chosen, since a lot of businesses within these industries are in the maturity or decline stage of the organisational life cycle. Given that most of the businesses within this industry are facing problems, this is the perfect situation to develop a new theory. Summarized, the leisure industry is recognized by oversupply and price competition. Causes of these facts are, low exploitation costs1_{, the eliminated law “Wet} openlucht recreatie” and the unequally divided law system. So, in the Dutch leisure industry there is need for a new concept, which could be the solution for some declining businesses and give them sustainable competitive advantage. But besides the businesses, the industry is also requiting a new concept, which gives the industry more variety. When the variety within an industry increase, so does the performance (Miles et al., 1993).

To reach both, management sharing could be the solution. As mentioned earlier, management sharing is about sharing different resources to resource economies of scale. So,when businesses share management; they share resources. When businesses posses more high quality resources, they are better able to respond to the environment and create a sustainable competitive advantage (Miles et al., 1993; Barney, 1991). If businesses are better able to create a sustainable competitive advantage, the industry variety increases due to, for example, creative resources. As mentioned above, when the variety increases within the industry even so the performance of the industry does (Miles., 1993). Resources are here defined as strengths that firms can use to conceive of and implement their strategies (Learned et al., 1969; Porter, 1981). Resources include all assets, capabilities, organizational processes, firm attributes, information, knowledge etc. controlled by a firm. The new business model management sharing should bring the participants more sustainable competitive advantage, by sharing valuable, rare, imperfectly imitable and non-substitutable resources (Barney, 1991).

In the upcoming chapter 3, current literature is used to investigate how industries and businesses change over time and how they could reach sustainable competitive advantage due to management sharing. This research is built on different existing models, which can be found in the literature review. As mentioned earlier, this research has different goals. The goals will be repeated for each section. After the literature review, the methodology is discussed. In chapter 5 the results are presented. This research concludes with a conclusion and discussion in respectively chapter 6 and 7.

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3. Literature review

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3.1.1 Importance of resources

How should declining businesses in declining industries survive in the decline stage and follow up the revival stage and reach sustainable competitive advantage instead of going bankrupt? Because threats and opportunities vary with life cycle stages, organizations are likely to have different needs, in terms of resources, in different stages of the organizational life cycle (Jawaher & McLaughlin, 2001). Miller and Friesen (1984) found that businesses in the decline stage are less innovative and more risk averse. Dodge and Robbins (1992) demonstrated that small businesses in the latter stages of the OLC are recognized by lower sales, bureaucratic management (e.g: stick to existing routines instead of learning new things) and they are faced with internal and external problems. The major internal problem they will observe is probably difficulties with their marketing activities (Dodge and Robbins, 1992). The main external problems they will face are problems with the cash flow and organisational design and personnel problems (Dodge and Robbins, 1992). One of Dodge and Robbins’ (1992) explanations for these consequences are that small businesses are generally imitative and find it difficult to focus on the changing environment. They simply repeat what others have already done using well-established routes (Levitt, 1988). Shane (2002) mentioned that these kinds of businesses have a lack of knowledge of ways to serve the market. However, to create a competitive advantage, small businesses should differentiate from others (Wiklund & Shepherd, 2005). Another explanation is that, having been successful, owners-managers are hesitant to make the dramatic changes necessary to reflect the direction and pace of environmental change (Ulrich and Wiersema, 1989). Wiklund and Shepherd (2005) found that businesses with higher entrepreneurial orientations are better able to create a sustainable competitive advantage. To overcome these problems and to be more entrepreneurial, excellent resources should be combined in an efficient and effective manner. Especially younger people could give the organisation an energy boost. So, which kinds of resources are necessary to reach a sustainable competitive advantage when businesses are in the decline stage?

3.2 Resource based view

A lot has been written about resources. A leading theory about resources is the resource based view (Wernerfelt, 1984). Rangone (1999) reviewed the literature between 1956 and 1999 and found the following: “According to the resource based view, which has his roots in economic theory (Penrose, 1959) and early strategy theory (Selznick, 1957; Ansoff; 1956; Andrews; 1971), the long-term competitiveness of a company depends on its endowment of resources that differentiate it from its competitors, that are durable and, that are difficult to imitate and substitute (Barney; 1991)”. But what are resources? Several authors have defined resources in different ways. The most important are described here. Grant (1991) and Azzone (1996) divided resources into homogeneous classes. Specified examples are, financial resources, physical resources, human resources, technological resources, reputation, and organisational resources. Others (Hall, 1992; Zahara and Dass, 1993; Collis & Montgomery, 1995) classify resources as tangible, such as human, financial or physical resources and intangible, such as reputation, organization and know-how or patents. Aakers’ (1989) contribution introduce the distinction between assets, something a firm possesses (for example; brand and retail location) and skills, something in a firm is able to do (for example; advertising, efficient manufacturing).

11 the assumption that firms’ resources must be heterogeneous and immobile. To measure how heterogeneous and immobile a firm's resources are and thus how useful these resources are for generating sustainable competitive advantage, Barney (1991) came up with four firm attributes. To explain the attributes, below the definitions are given written by Barney (1991).

• Valuable: “Resources are valuable when they enable a firm to conceive of or implement strategies that improve its efficiency and effectiveness”.

• Rare: “A firm enjoys a competitive advantage when it is implementing a value-creating strategy not simultaneously implemented by large number of firms”.

• Imperfectly Imitable: “Valuable and rare organizational resources can only be sources of sustained competitive advantage if firms that do not possess these resources cannot obtain them, these firm resources are imperfectly immobile”.

• Non-substitutable: “Two valuable firm resources (or two bundles of firm resources) are strategically equivalent when they each can be exploited separately to implement the same strategies”. From Barney’s perspective there cannot be strategically equivalent resources if the firm want to reach sustainable competitive advantage.

To link these four aspects of resources of Barney (1991) and make it more practical for the new management structure, it will be linked with the vitality model developed by ZKA (an important leisure consultancy office from the Netherlands): “Het vitaliteitsmodel voor het classificeren van bedrijven aan de hand van kwaliteit en perspectief”. Translated this means: “The vitality model to classify businesses on the base of quality and perspective”. This model is composed of the ‘resources quality’ (X-axis) and the ‘resources perspective’ (Y-axis) of holiday parks (ZKA, 2014) With the vitality model we are able to select businesses, from the Dutch leisure industry, that are interesting for the management sharing structure. In the next section it is discussed for which businesses, from this industry, the management sharing structure is interesting on the base of the vitality model.

3.3. For which businesses is Management Sharing suitable?

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3.3.3 Combining the vitality model, the RBV and the profit model

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Figure 3.2: The resources vitality model

So, in the first row are the profit categories founded by Morris et al., (2002). The three most

15 - Accountability

- IT infrastructure - V, I - V, I Financial resources - Good cashflow genereating

business model - Possibilities to invest - Investors - V, R, I, N - R, I, N - V, R, I, N Intellectual and Human

Resources - Sales team - Brand Name

- Customer database

- V - R, I, N - V, I, N Technological resources - International website

- Vending stand and retail sales equipment - Protection via Patents - V, I - V, N - V, R, I N Table 3.2: Example of the resource vitality model in practice in the Dutch leisure industry

Experts within the Dutch leisure industry are now able to identify how many of the resource presented in column two a specific business possesses. If that is clear, it can be identified how many of the resources the business contains. In 3.3.4 it is further discusses how business for management sharing should be selected.

3.3.4 Selecting businesses for management sharing

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3.3.5 Sub conclusion

To answer the second research goal; It can be concluded that for businesses, which have high perspective resources, but less quality resources (at least 1, maximum 6) management sharing is interested. Within these businesses there is enough potential to survive, but they must be careful that they do not slip down in the decline stage of the organisation life cycles.

3.4 The ownership and decision right structures

We now have seen which businesses are potentially interesting for the management sharing structure. But how to set up this structure in terms of decision and ownership rights? Because management sharing is a new business model in the literature it has not received attention in the literature before. To find substantiated literature, franchise literature about decision and fee structures is used, because of the fact that management sharing has several similarities with franchising (remember table 1.1).

In the past literature much has been written about the ownership and fee structures in franchising (Windsperger, 2002; Paswan & Young, 2015). Examples of these contractual theories are the transaction cost theory; the agency cost theory and the property rights theory. The property rights theory of franchising is examined by Windsperger (2002). He emphasized the role of the franchisor’s and franchisees’ intangible knowledge assets as determinant of decision and ownership rights in franchise relationships. For this literature review, the core theory of Windsperger (2002) is used, because the property rights theory provides the theoretical basis for conceptualizing organizational integration in terms of common ownership (Kim & Mahoney, 2005). As became clear from the exploration discussion with the focus group, common ownership is an important subject in Management Sharing. This theory can improve our understanding of such business phenomena as vertical integration (Grossman and Hart, 1986) and shared ownership (e.g. joint ventures and franchising) (Hennart, 1993). According to the property rights theory (Grossman and Hart, 1986; Hart and Moore, 1990; Barzel, 1997; Baker et al., 2003) the structure of residual decision rights depends on the distribution of intangible knowledge assets that generate the firm's residual surplus. On the other hand, ownership rights have to be assigned according to the allocation of residual decision rights (Windsperger, 2002). In the first part, 2.4.1, the decision rights will be discussed. In the latter part, 2.4.2, the ownership rights will be discussed. In 2.4.3 there is a short summary with the main findings.

3.4.1 Decision rights

17 possessions the intellectual property rights keep also in possession of the individual business units. The knowledge assets are the most important assets. According to Hall (1993), these are the assets that can be the source of competitive advantage because they cannot be easily transferred and imitated. Here we can make the link with the resource based view of Barney (1991). So, to formulate the decision rights for the management sharing structure, this research will build further on the knowledge assets.

Windsperger (2004) found that residual decision rights have to be allocated according to the distribution of intangible knowledge assets between the franchisor and franchisee. More intangible knowledge assets of the franchisor, must lead to more centralized decision-making. The degree of centralization of franchising networks varies with the distribution of intangible knowledge assets between the franchisor and franchisee (Windsperger, 2004). Because the management sharing structure is the solution for declining businesses, which are have to less qualitative resources, the intangible assets should be higher in the headquarter of the management sharing. So, in the management sharing structure there must be centralization of decision making at the operator’s level. This also contributes to the economies of scale. To investigate how the decision rights are divided, Windsperger (2004) made the distinction between strategic and operative decisions. Strategic decisions are primarily made by the franchisor and operative decisions are normally divided between the franchisor and franchisee. Windsperger (2004) showed that examples of strategic decisions are: Procurement, product, accounting decisions and resale price decisions. Operative decisions are: advertising, employees’ training, investment decision, financial and recruiting decisions. This research suggest that at each business, that will be part of the management sharing structure, the operator considered which resources are the most important to share to benefit both the operator and the owner.

Kaufmann & Eroglu (1999) wrote also interesting literature about the appropriate boundaries of franchising, i.e. maintaining the required level of uniformity for the system to obtain economies of scale, while avoiding the danger of stifling efficient local market adaption. According to Kaufmann & Eroglu (1999) the business format franchising is comprised of various elements that manifest four distinct components: product/service deliverables, benefit communicators, system identifiers and format facilitators. They made a distinction between core and peripheral elements. They define core elements as those whose standardization must be enforced across all franchisees without exceptions since they are deemed indispensable for the system’s survival. Peripheral elements are those where the franchisor must balance the system-wide benefits of standardization against the benefits of adaptation to the idiosyncrasies of local demand (Kaufmann & Eroglu, 1999). Therefore, for the management sharing structure, the core elements will be the most important to centralize. The peripheral elements should be more managed within the business units.

3.4.2 Ownership rights

18 centralized. However, in many cases this will be approximately unreachable due to the high investments. Ownership rights as residual income rights only exist when the franchisor’s and franchisees actions are at least partly non contractible (Hart, 1995). Due to the division of residual income rights between the franchisor and the franchisee, ownership rights are diluted. Windsperger (2011) found that the higher the franchisor’s incentive to invest in intangible knowledge assets, the higher the fees are and the more diluted residual income rights are compensated by ownership surrogates, such as tying arrangements. On the other hand, the higher the franchisee’s incentives are to invest in intangible knowledge, the lower the initial fees and the more ownership surrogates are included, such as exclusive customer clauses. To let individual businesses pay high fees is not relevant in the management sharing structure. This new model is for businesses, which are in trouble and have to less resources to survive within the industry by themselves. The management sharing structure should increase the residual profit of the business units. In this way, the residual income also increases. Because the management sharing has take care of this increase, the operator of the management sharing should be rewarded for it. However, how will the operator and the owner found each other in a way that it is a typical win-win situation for both? According to the principal agent theory in the franchising literature this research suggest that this will be based on royalties, because royalties heighten franchisor performance incentives (Maruyama & Yamashita, 2012). In management sharing this means that the operator gets paid on the base of his own performance. However, give a clear answer on this question, interviews with experts were conducted.

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4. Methodology

As pointed out, the context of studying the new management sharing structure was suited in the leisure industry, since this industry is declining and counts many businesses that are in the decline stage. Hereby it can be researched how the industry responds to the idea of management sharing and how they should design this concept in terms of decision and ownership rights. Moreover, the industry needs a reformation and the management sharing structure could be the solution for this. So, the perfect situation to take this industry as the case.

The methodology part will be structured as follows. Firstly, in 4.1 the research design will be discussed. Secondly, in 4.2 the facts and stats are given of why the leisure industry, together with their businesses, is declining and what the main reasons are. To get first useful insights for this research, a focus group was composed. This resulted in useful information for the research. In 4.3 this focus group is discussed. To form the results, experts about the leisure industry were interviewed. In 4.4 the experts interview method will be discussed. In section 4.4, the data analysis method identified. Lastly, the controllability, reliability and validity of this research will be discussed in 4.6.

4.1 Research design

Since the management sharing structure is a new business model in the literature, the concept is not discussed in the literature before. To find an answer on the research question, a theory development approach is the most suitable, because of its independence from prior literature or past empirical observations it is particularly well suited to new research areas (Eisenhardt, 1989). To do this, a case study approach (Eisenhardt, 1989) within the Dutch leisure industry was selected. This study focuses on understanding the dynamics within single settings and at the same time building a new theory out of the conclusions (Eisenhardt, 1989). It also has a more ‘how and why perspective’ on the gathered data (Yin, 1984). Therefore, a case study approach is appropriate for the research in the new management sharing structure. In order to be sure to get a well-structured theory development process, that contribute both to the probability of building a theory and to the reliability of the outcome, this study will follow the planned steps of (Eisenhardt, 1989; van Aken, Berends, & Van der Bij, 2012). The goal of this research is to get insights from the industry if they see potentials to set up this structure and how they interviewees should divide the decision rights and ownership structures. To reach this goal:

- (1) Firstly a focused group was composed to get useful first insights before this research about the industry and management sharing. In section 4.3 this is discussed more. - (2) Secondly, to form the results, one-on-one semi-structured interviews were held with six experts in the leisure industry. Because Bogner and Menz (2009) mentioned that there are disagreements on how expert interviews should be taken in a way that they are valid or not, the method will be explained in section 4.4. First, a description of why the leisure industry is relevant for the management sharing structure.

4.2 Empirical setting

20 research is also focused on the same category holiday parks. Pietersma (2012), Verheijden & Toonen (2012), stated that the offers for holidays in the own country have increased, but the demand is under pressure for years. Between 2002 and 2011 the bungalow offers have increased with 15.6 %, however the demand for bungalows in the Netherlands has only increased with 10.9% (CBS Statline, 2011). Pietersma (2012) also found that between 2002 and 2011 the domestic campsite holidays have decreased with 10.0%, but at the same time the offers for campgrounds have increased with 14.8% (CBS Statline, 2011). So, the Dutch market for bungalows and campgrounds is characterized by oversupply and price competition (Pietersma, 2012). The current situation of the Dutch leisure industry has not changed. Actually, the current situation is worse than a few years ago. Between 2012 and 2016 the bungalow offers have arise with 10.7 %, but the demand has decreased with -8.8 %. For the domestic campsite holidays there is more perspective, the offers for campgrounds have decreased with -7.19% and the demand have arised with 21.87 % (CBS, statline 2016). See also Appendix I.

According to Pietersma (2012) there are two reasons for the oversupply of the Dutch leisure market and the price competition. First, the organisational life cycle, as discussed above, for most of the holiday parks are extremely long. This means that parks in the declining stage easily can run their business without financial problems, because most of the holiday parks are family businesses. So, the ground has been fully paid by the previous generations and the funding pressures and exploitation costs are relatively low. Despite the fact that these firms have no future perspectives and lost the connection with their customers they are able to run their business easily (Pietersma, 2012). The second reason for the oversupply is caused by the government. Since 2008 the law “Wet openlucht recreatie” is eliminated, therefore the decision to start campsites is now in hands of the local municipalities (2006, Hoofdstuk III, § 8b, artikel 21b). The local municipalities admitted a lot of farms in the Netherlands to run a ‘mini campsite’ next to the primary business. These campsites are recognized by extremely low fixed costs, therefore these families have no productivity norms and they can easy run their subsidiary. (Pietersma, 2012). The government also limit established businesses within the industry with permits to invest. For example, especially in times of oversupply and price competition, innovative services and unusual stays can be the solution (Pietersma, 2012). But because of an unequally divided law and regulation system, it is much easier for farmcamps to be innovative and entrepreneurial if compared to holiday parks. Farmcamps are easier getting permits to invest in comparison with established holiday parks (Pietersma, 2012).

4.3 Focus group

Because management sharing is a new concept in the literature, this whole research started with some exploratory research about Management Sharing, a focus group was composed for an informal talk about Management Sharing. According to Carey (1994) a focus group is defined as: “Using a semi structured group session, moderated by a group leader, held in an informal setting with the purpose of collecting information on a designed topic” (p. 226). Morgen (1996) agrees with this definition. Morgan (1996) added the three major components of the focus group research. A method devoted to data collection (1), interaction as a source of data (2) and the active role of the researcher in creating group discussions for data collection (3). The focus group is a tool for understanding people’s attitudes and opinions about different issues (McLafferty, 2004; Carrey, 1994). Next to that, a number of researchers also suggest focus groups for the development of a new ‘issue’. This is especially the reason why a focus group for this research is useful (Gray-Vickery 1993, Morgan 1996; McKinley et al. 1997).

21 Netherlands. The outcomes of the focus group are used as background information for this research. Within this research you might find references to it. A complete summary of this session can be found in Appendix V.

4.4 Experts interviews

As introduced in 4.1, the core of the study method is done by conducting interviews with experts from the Dutch leisure industry. Bogner, Littig and Menz (2009) did research on using expert interviews as a research method. Interviews with experts are bringing benefits for the outcomes of researches. It is evident that expert interviews offer researchers an effective means of quickly obtaining results and, indeed, of quickly obtaining good results. Next to that, the organizational structures behind the experts in institutions can often serve as an easy point of entry to the field of research. (Bogner et al, 2009). If the interviewer and the interviewee share a common scientific background or relevance system, the level of motivation on the part of the expert to participate an interview can increase. (Bogner et al, 2009). Past research about expert’s interviews contains the differences between the various forms of expert interviews and their role in research design, as well as the specifics of interviewing and interaction in comparison to other qualitative interview forms. Bogner et al. (2009) defined different types of expert interviews and a way to define and select experts. In the upcoming sections, one interview type for expert’s interviews will be discussed and the selection method for experts will be presented.

4.4.1 The theory-generating expert interview

There are different types of expert interviews. Explorative expert interviews, systematizing expert interviews and theory generating expert interviews (Bognar et al., 2009). Explorative expert interviews are normally used for preparing interview topic lists or for better structuring a problem (Bognar et al., 2009). Systematizing expert interviews are used for gathering information which otherwise is not accessible or when the focus is on the comparability of different researches (Bognar et al., 2009). For this research, the theory generating expert interview is the most relevant. “The

essence of the theory-generating interview is that its goal is the communicative opening up and analytic reconstruction of the subjective dimension of expert knowledge” (Bognet et al, 2009 p. 48).

The goal of researchers, with this type of interviews, is to formulate a theoretically rich conceptualization of (implicit) stores of knowledge, conceptions of the world and routines, which the experts develop in their activities. (Bognet et al, 2009). After the interviews, qualitative theory is drawn up via theoretical sampling and comparative analysis. Theoretical sampling is here defined as ‘the process of data collection for generating theory whereby the analyst jointly collects, codes and analyses his data and decided which data to collect next and where to find them, in order to develop his theory as it emerges’ Glaser, (1978). According to Glaser (2009) sampling takes place in the initial stages of a study and in the data collection stages. Because Bogner et al. (2009) mentioned that talking to experts in the exploratory phase of a project is an efficient and concentrated method of gathering data, interviews for this study will take place before and during the data collection. Talking to experts in the exploratory phase of a project is an efficient and concentrated method of gathering data (Meuser and nagel, 1991). Therefore, the researcher planned an explorative interview with different experts from the Dutch leisure industry. This conversation will bring probably important points for the individual interview between the expert and the quali-expert.

4.4.2 Defining experts

22 refers to a specific field of action, by virtue of the fact that the expert acts in a relevant way. To get a better idea of the definition, below the ‘requirements’ for being an expert are discussed.

Technical knowledge: “Contains information about operations and events governed by rules, application routines that are specific to a field, bureaucratic competences and so on” (Bogner et al., 2009).

Process knowledge: ”Process knowledge relates to the inspection of and acquisition of information about sequences of actions, interaction routines, organizational constellations, and past or current events, and where the expert, because of his or her practical activity is directly involved or about which she or he at least has more precise knowledge, because these things are close to his or her field of action” (Bogner et al., 2009).

Interpretative knowledge: “That is to say the expert’s subjective orientations, rules, points of view and interpretations, which suggest a picture of expert knowledge as a heterogeneous conglomeration” (Bogner at al., 2009). Within this interview we defined and selected experts on the base of this definition. This means that individuals who consists this research have technical, process and interpretive knowledge. They act in a specific field (the leisure industry) and in a relevant way, for example a senior consultant at a high-class consultancy office.

4.4.3 Selecting experts

From the above given definition, the experts could be selected. However, ‘expert’ remains a relative concept in as much as the selection of persons to be interviewed depends on the question at issue and the field being investigated by the researcher (Bogner et al., 2009). Next to that, Gläser and Laudel (2009) founded that the success of expert interviews depends on the quality of the interviewees. So, due to this reasons it is clear that the interviewees cannot be randomly selected. Theoretical sampling will be used to select the experts. Because of the fact that: “Outsiders are

hardly able to judge the abilities of an expert” and “We interview experts for the reason of accessing their special knowledge”, that is knowledge we do not possess. How could we assess how much knowledge they have?” (Gläser and Laudel, 2009). ZKA, an important consultancy business within the

leisure industry, was asked to select the most relevant experts. Due to the background within the leisure industry of the researcher of this research, together they were able to select the best experts to gather the data. Now, the interview style will be discussed. There were six experts interviewed. Below the experts are shortly discussed. The last part of this section, 3.3.5, contains a short motivation and support why the interviewee is called an expert.

• Nemy van der Reest

Independent researcher and owner of van der Reest advies. Van der Reest has a lot of experiences within the Dutch Leisure industry and is/was involved with a lot of partnerships between businesses within the Dutch leisure industry.

• Paul Schuttenbelt

Owner of multiple holiday parks. He invests a lot in beautiful accommodations and cares about efficiency for their parks. He already makes use of software to manage his holiday parks.

23 • Merlijn Pietersma

Pietersma is senior consultant at ZKA. ZKA is, as mentioned, an important consultancy office in the Netherlands. Pietersma writes regurly interesting articles about the Dutch leisure industry. He is also an innovative thinking person and brainstormed a lot about management sharing.

• Gerrit-Jan Hagendoorn

Hagendoorn is owner of the Beerze Bulten. The Beerze Bulten is one of the best holiday parks within the Netherlands and for a few years ago it is named as the ‘Best Campsite of Europe’.

• Han Verheijden

Verheijden is owner of Verheijden concepten. He has a lot of experience in different businesses within the leisure industry. He is the ‘founder’ of the name: Management Sharing. In different presentations and some articles, he talked shortly about this.

• Tim Slager

Slager is owner of “Molencaten Vakantieparken”. Molencaten is a chain of seventeen different high quality holiday parks in the Netherlands. Molencaten is interested for this researches, since this chain of course also want to reach synergies and economies of scale as well as management sharing.

4.4.4 Interview style

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4.5 Data analysis

After the experts are interviewed, the next important step is forming clear results. “There is no “sure-to-please” standard template for writing emergent theory in theory-building research” (Eisenhardt,

1989 p: 29). The results were based through clearly comparing the results of the interviews with the literature given in the literature review. Therfore, the goal of the data analysis is to create propositions that are based upon the obtained data and are related to the existing literature. An important next step for further research might be the testing of these propositions.

4.6 Controllability, reliability and validity

Yin (2003) came up with three important criteria, which are commonly used to assess the quality of the research: controllability, reliability and validity.

4.6.1 Controllability

Controllability demands the study to be described in such a way that others are able to replicate it to see if similar outcomes are reached (van Aken et al., 2012). Since the controllability is seen as the fundament for the reliability and validity. The controllability of this research is high. Firstly because of a clear description of the data collection method is given in this methodology. The second reason is because of the fact that the transcripts of the expert interviews are completely given in Appendix IV. If other researchers are able to view the transcripts of the interviews and are able to see where the findings came from, other researchers could replicate this research to verify findings (van Aken et al., 2012).

4.6.2 Reliability

Reliability means, “Demonstrating that the operations of a study – such as the data collection

procedures – can be repeated, with the same results” (Yin, 2009 p.40). So, the reliability is related to the data collection method. To ensure a good reliability, several biases must be taken into account: the researches bias, instrument bias, respondent bias and the situation bias. Within this research, the researches bias is reduced because of the feedback of two important fellow students. Next to that, also the supervisor, which is an experienced researcher, gave important feedback during this whole research. This is in line with the quote of Yin (2009), he mentioned: “The general way of approaching the reliability problem is to make as many steps as possible and to conduct research as if someone were always looking over your shoulder”(Yin, 2009 p.45). The instrument bias was minimized by

creating a clear methodology and to set up the interviews on the base of the interview Guide (Emans, 2012). During the interview no adjustments were made at the interview. Probably this was a result of the focus group meeting. Respondent bias was eliminated, since different experts were interviewed with different backgrounds. All the interviewees were very open and the researcher did not feel that they avoid some questions. Although this is a subjective feeling, as mentioned earlier the complete transcripts of the interviews can be found in appendix IV. To minimize the situation bias, the interviews were taken on different moments in time on different places. So, this bias is minimal. Summarizing the reliability, because all of the biases are generally low, the reliability potential is high of this research; no major changes were made during the interviews.

4.6.3 Validity

25 instrument and techniques were discussed. Next to that, as mentioned earlier, the Interview Guide of Emans (2004) was used to create valuable questions by starting with a few variables.

Internal validity means: “Seeking to establish a causal relationship, whereby certain conditions are

believed to lead to other conditions, ad distinguished from spurious relationships”. (Yin, 2009 p: 40).

Findings of this research are related to current literature and tied ‘findings’ were found. According to (Eisenhardt, 1989), if the research has tied findings to existing literature, it will enhance the internal validity. Next to that, because experts with different backgrounds are asked to participate in this research, it is likely that this will increase the internal validity.

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5. Results

Within this section the results from the interviews are discussed. This research has three goals. The first two were discussed in the first and second part. In the first part; a clear description of management sharing is given and in the second part an explanation for which businesses management sharing is suitable was given. To verify the findings from the literature, questions about these subjects were asked to the experts. First these findings will be discussed and later on the third research question within this research, how to divide the ownership and decision rights for a good working management sharing structure, will be answered.

The interviews with the experts from of the leisure industry showed that they all saw the same four categories of businesses in the industry. Some categories of declining businesses, but also some businesses with still a lot of potential. Most of them did see the declining industry. This refers to our part about the Dutch leisure industry in 4.2. More about this will be discussed in 5.1. In 5.1 also the recognisability of management sharing is discussed as well as the potential for this structure. In 5.2 it is discussed what the experts think about the decision structure within this business model. Who would have the most decision rights? The experts all agreed that the operator should have the most influence, but how to realize this? According to the literature it became clear that the person with the most influence should have the most ownership rights. In 5.3 this part this is more explicitly discussed. Finally, in part 5.4 the most important aspects of Management Sharing can be found, concerning the division of ownership and decision rights. In the next chapter six different a suggestion is made how to set up the management sharing structure in response to the experts. Lastly, at the discussion and conclusion part the results are discussed and compared to the current literature.

5.1 About the industry and the knowledge/acceptance of Management sharing

Since it became clear from questions one and two that all the experts saw the fact that a lot of businesses within the industry are in the decline stage and that the industry is dominated by ‘uncertainty’, it is concluded that the found literature about the industry reflects the reality. Question one was about how the experts should evaluate the industry and question two was about the different categories of businesses they saw in the literature.

27 parent organization really wants to help him, the opportunity to a successful cooperation would be better. Next to that, the experts particularly mentioned that the resource skills at most of the declining businesses are too low. Participant 5 mentioned: “’Owners of these park are managers of everything”. He continued: “Manager of the back and front office, manager of the catering, manager of the swimming pool etcetera”. So they do not focus on the tasks they can do well. Respondents Quotes about question 4 the degree thee see potential in Management Sharing and why.

Respondent 1 “The owners of leisure parks are coming from the agricultural sectors. They don’t like to co-operate and don’t built a good fit between business and the environment”.

“I see potential in Management Sharing, above all I see potential in the experienced parent organization. They must offer important resources, like marketing and a good rental model.” But, it will be difficult to build the confidential relationship because of the characteristics of the most entrepreneurs within this sector.

Respondent 2 “Some owners do not like the business anymore. But they cannot sell it, because of the high prices. For them this is an ideal situation to keep the

ownership but only do the things he likes”.

“Yes, I see potential in Management Sharing. When you have, let me say, 5 parks. The manager of the parent organization can improve the quality and scale efficiencies can be reached. Respondent 3 “’Owners of these park are managers of everything: manager of the back and frond office, manager of the catering, manager of the swimming pool etcetera. If he continues with this, he will fall down with his business”. “I think, with Management Sharing, you will improve the quality of the leisure industry. You will offer the guests more. Owners can’t do that by themselves. It is an advantage for the entrepreneur, because the businesses increase in value”.

Respondent 4 “There are a lot of small businesses that do not possess the skills in different operational tasks, this could be the solution for this”.

“Yes, I see potential in it. Not for the type of business I possess, but more for the lower quality of business within our sector”.

Respondent 5 “The industry is declining. I believe that there takes a big shift place in the job for holiday parks”. “Safety and freedom are in the future the most important tasks” Example: “People feel more anxiety due to all the things that are happen right now, if they become older they will have a nice life where safety is very important. With Management Sharing an organization can provide the guidelines that are needed for this”.

“I see potential in it. It can be started very little. For example, with two neighbours. If one of them becomes older and older, the other could take over the exploitation of their business. With this way the ‘operator’ can improve their turnover and the ‘entrepreneur’ can enjoy his life”.

28 entrepreneur can invent 10 reasons why not to do it, no trust, family reasons, but if he calculates it, it will be profitable. Nowadays it are more emotional reasons why entrepreneurs don’t like to share management.”

Respondent 6 “Within our industry, there is are lot of small family businesses. These businesses are run by the whole family or by one entrepreneur. They are manager of everything. But do not possess the skills or have time to do, for example; marketing activities (SEO)”

“Management sharing could be the solution, but I think it is really difficult to build a trustful relationship. Which is the most important”. The prisoner’s dilemma is an important theory to take into account”. “Next to that, it should be including more than a few business, for example ten. To make use of scale economies”.

Table 5.1: Quotations about question four

Given these points, it can be concluded that all the experts see potential within Management Sharing. However, it also became clear that a trustful relationship is very important within this kind of construction. Respondent 1 mentioned that the start of such relationship should be addressed from the verb: “to help”. Respondent 6 also mentioned that ‘trust is a problem’. He called it the: “Prisoner’s dilemma”. The experts also announce the need for a ‘problem solving structure (e.g. Management Sharing)’, because a lot of oweners are not up to date with current technologies and did not invest money in the right things. The following quote illustrated this: “Owners did not invest in accommodations. Nowadays they cannot offer their guests, for example, mobile homes. If they made investments in accommodations a few years ago, it had been very lucrative nowadays”. (Respondent 6; also respondent 1, 2,3,4 and 5 talked about this). In 5.2 the questions 6,7 and 8 are discussed. In chapter 6 of this research, question 5 is presented. This question was about the most important functions to share. Chapter 6 consist a brief advice about how to organize management sharing.

5.2 Willingness and issues with decision rights

This section will discuss the opinions of the experts regarding the decision rights. Do business owners have the willingness to participate within the management sharing structure? It is expected that there will be tension between the current owner and the operator/parent organization. However, how big is that tension? Or is the tension less than expected? The following table presents the quotations of the experts about these topics. This table gives answers on the questions 6, 7 and 8. Some answers of the experts combined. Q6: Who should have the most decision rights? Q7: Do you think that entrepreneurs are open to cooperate with an operator? Q8: How to deal with the current entrepreneurs in management sharing?

Respondents Quotes about question 7 ‘The willingness of owners to participate with the management sharing structure’.

Quotes about question 6 & 8 ‘Who

29 Respondent 1 “As mentioned earlier, to build a

trustful relationship is essential and difficult. But, some entrepreneurs are easier with this I think. But the willingness by most of the entrepreneurs isn’t that high, I think”. “You really have to offer them help and you really have to fulfil your commitments”.

“This is of course a very important aspect. From out of the perspective of the operator/parent organization I would say; they (operator) should have the most decision rights to make it a real success, because I think most of the entrepreneurs don’t like this”.

Respondent 2 “I know different entrepreneurs where Management Sharing can start this Monday. They only like a few tasks of their work. If you come there, they will say yes”.

“I am not sure, but I think if you give 25% of the turnover to the entrepreneurs I talk about, they probably will try it. And to make the tension less, you should split the investments. No shared ownership of investments”. “The current entrepreneurs can still do only the little work they really like.”

Respondent 3 “Yes. With Management Sharing they can improve their business value. Next to this, they maintain a connection with the environment. If he continues with the declining line, he better stops right. So, next to the facts you told me, it is also an important point that it makes your business ready for the next ten years.

“Difficult point. There will be a tension. But maybe It depends on how you present it to the entrepreneurs. Out of the parent organization/ operator there should come a financial promise to the entrepreneur. Something like: “Work with us and lower your costs. In this way you guarantee something, that could make it easier for them to start”. The operator should have a big influence. The current entrepreneur should only do what he liked and what he can do well. But only if he likes it. Respondent 4 “Not for our type of business (very high quality), but for others it could very helpful. They ‘need’ assistance in operational tasks like marketing, a good automation concept etc. “Hmm. The tension, I think and I definitely understand it. I grow up here, I know every tree and I don’t like to sell this. But there will be for sure also other situations. To make the tension less strong, you should make clear agreements”. “The idea you suggested sounds good to me. The current entrepreneur should do only a few things, the management and the decision management should must lie at the operator”.

Respondent 5 “Yes. Some definitely. Others should be convinced. But management sharing is also importance for the future. It is more for the new generation. A generation that is likes to co-operate”.

30 Respondent 6 “Hmm… I doubt. Do not forget

that, I think, 80% of the entrepreneurs within this industry is older than 55. It is difficult to attract them for this kind of systems I think. Although it will be good for them I think”.

“That’s big. We only buy parks and in shared-ownership I don’t see a lot potential. It is difficult. And if you are the parent organization and you are doing the marketing, you also want to improve the quality. So, you must have one ‘manager’ that improves the whole business. If the entrepreneur also is the owner, I think it will caus problems.

Table 5.2 Quotations about the willingness of management sharing and the expected tension of management sharing

These quotations make clear that the experts think that the willingness for owners to participate in Management Sharing probably is high enough, however the way of approaching these owners is difficult. Most of the owners are inaccessible to co-operate within an extreme form. The operator (organization) must create awareness under the owners to see the potential and value of management sharing. According to the experts the potential is high. If owners with a declining business within the leisure industry do not take action to change their management structure they “better stop right” (Respondent 3). For the decision rights it is better that the operator has full control about the functions they share. The current owners can assist and help were needed.

5.3 Ownership rights within Management Sharing

As became clear in section 5.2 there is probably a high tension between the ownership and decision rights. But how should it be divided in order to reach a structure or division that leads to a well-functioning system? The experts were asked to give their opinion about this. Which possibilities are there and, next to that, who should pay for a structure like management sharing? And how? The following table 5.3 presents the quotes of questions 9 and ten.

Q9: Who should pay for this construction? And what kind of payment construction? Q10: How should the ownership be divided?

Respondents Quotes about ‘how should the ownership be divided”

Quotes about “Who should pay for management sharing and how?”

Respondent 1 “Difficult. I think one captain on the ship is the most important. One manager/person that takes the lead. You have to make important appointments for this. But the entrepreneur should always be the owner. If people get the feelings that the parent organization / operator wants to fully take over their business in the future, I think they will be hesitate to work with the parent organization / operator”.

“The entrepreneur should pay the operator/ parent organization for the function or functions he wants. For example, only marketing or only assistance for a good rental system. Payments should enhance a percentage of the turnover, not the profit”. “The first business will be the most difficult, but if the operator has more business they can repeat their business model which will results in cost savings”.

Respondent 2 “The parent organization/ operator should rent the business from the entrepreneur. But in the future, I think most of the investments are

31 coming from investors. The

investors are the owners of the investments they made and the operator / parent organization should rent it to customers. It will be good if in the parent organization also an investor takes place”.

Respondent 3 “The current entrepreneur should stay the owner. But you need a kind of ‘change-agent’ to manage the business and to change current things commissioned by the parent organization / operator.

“The entrepreneur should pay for it. I believe in a fixed and variable system. A amount of money fixed and the others variable, with this way you drive the parent organization/ operator in a way it must perform for their money. This could also benefit in the ‘game’ to convince the entrepreneur to go for management sharing”.

Respondent 4 “The operator should pay the entrepreneur of course.” “After that, the current entrepreneur should only do a few things where the operator needs him. The operator is now the big boss”.

“This is difficult. It depends on the situation. In some times I would say you better can buy it as a whole, but there will be also other examples”. “I would suggest, to check out on a percentage of the turnover”.

Respondent 5 “The current entrepreneur is only the rightful owner, but the operator has the full decision capacity”. You have to make clear contracts for the period of the management sharing process and both parties should be satisfied before it starts”.

“The current entrepreneur should rent it to the operator”. “The current entrepreneur just wants to have enough money to life + some return on their real estate (4/5%)”.

Respondent 6 We do not believe in shared ownership. It is so complicated. The chance that it succeeds is much lower than the chance that is will cause problems.

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5.4 Sub-conclusion

Therefore, the answer on the last research goal can also be given now. The question was: How should the ownership and decision rights be divided? Experts think that the decision rights should be in hands of the operator. The owner could assist the operator in different tasks. The operator needs the owner, however on first hand he should be on the background. He just rents his business to the operator. The ownership rights should stay in hands of the owner, he should rent it to the operator. However, the experts mentioned that this is related to the expectations and future plans of the operator. The experts mentioned different constructions, which could be the solution for different expectations. In chapter 7 this is further discussed. Different options are given for the organization of management sharing, based on the outcomes of the interviews with experts to reduce the discussed tension between the owner and operator.

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6. How to organize management sharing?

Management sharing could be the solution for declining businesses in a declining industry according to the experts. The third question of this research was about the decision and ownership rights. How to organize management sharing according to the experts? Within this section different options are given for management sharing. These parts are derived out of the interviews with the experts First, in 6.1; an important finding is discussed about the emotional and rational thinking, many experts mentioned this. After that, in 6.2, it is discussed that management sharing could be implemented on different scales. In 6.3, three agreement constructions between the operator and owner are discussed; the answer on the third research question.

6.1 Emotional and rational thinking

When talking about management sharing with the experts, almost all of them talked about the emotional feelings of the current owner. Current owners in the Dutch leisure industry are having a self-sustaining background. Earlier generations also worked on the campsites or they came from the farming industry. Important in this case, is that this brings also some character traits. These are very hard working people, with a lot of passion, however some of these people are facing problems with cooperation. They hesitate to corporate, these are tough people. One of the experts asked some owners to try management sharing. He computed for those owners that it would be very profitable to go for management sharing. They all were at age and with this construction they would be financially independent for the next ten years. But instead of believing the rational data, they could easily come up with ten reasons not to do it. They do not trust each other, due to family feelings etc. The advice from the experts and this research is also that if the industry believes in management sharing, the industry associations (in this case: Recron Nederland) should take action to make people familiar with management sharing. Furthermore they should create awareness that people who are trying to share their management, are very smart owner. They should frame it in such a way that it becomes more interesting in the market.

6.2 Different scales

Management sharing could take place on different scales. It can start really approachable, for example with two businesses, which are established next to each other. If one business is declining and the owner does not have succession for his business, the neighbour could be his new operator. Because they are established next to each other, economies of scale can be easily achieved. They can close one office and they also need less staff (normally). But the experts see also potential in a big management sharing organization in combination with a parent organization as outlined in the introduction. This type of management sharing will be discussed further in this section. In this way the parent organization is the operator and provides multiple independent businesses with the resources they needed. Some businesses could also completely be exploited by the parent organization. So according to the experts there are two ways of management sharing:

• Partial management sharing (only a few resources)

• Full management sharing with a parent organization or operator