Abstract
Strong interconnections between family and business which are innate to family firms can prove to be the source of conflict. Of all conflicts, those between family members and especially between siblings erode the family’s harmony and can risk the firm’s continuity. The passing of the family firm’s control from the founders to the next generation is a critical stage for the family firm and can be a catalyst for conflict. This article extends the use of game theory in family firm succession to explicitly include the noneconomic factors related to the family dimension, focusing on the emotional cost of conflict resulting from sibling competition. The results show that this cost is fundamental in terms of successor selection. The article shows that the collaborative family outcome, which results from family members cooperating and acting as a unit, is better in promoting firm intergenerational succession and ensuring that the founder’s preferred child is appointed successor.
Highlights
The overlap between family and the business, each with its own issues and possible conflicts, means that the family firm is especially exposed to conflict
The succession process in the family firm can lead to siblings competing for the executive control of the firm which can result in conflict, with repercussions on both the family and business dimensions
Research shows that conflict is pivotal in the family firm and hampers the firm’s performance and compromises family harmony and cohesion (Eddleston & Kellermans, 2007)
Summary
The overlap between family and the business, each with its own issues and possible conflicts, means that the family firm is especially exposed to conflict. Given the negative impact that sibling conflict can have on the firm and the family it is imperative to improve the understanding of the role it plays in the context of family firm succession. We respond to this need by expanding the limited literature on conflict in family firms to include the impact of sibling competition on the choice of the successor. Our Nash subgame perfect results show that the emotional cost of conflict resulting from sibling competition plays a key role on successor outcome. We finalize by reflecting on the findings, and suggest future avenues of research
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