Family firm succession and corporate philanthropy: evidence based on internal legitimacy and external relationship-specific assets

Abstract

ABSTRACT Succession is a vital issue in family-business management. Drawing on legitimacy theory and social resource theory, we investigate the impact of family firm succession on corporate philanthropy activities. Using a sample of Chinese firms, we find that family succession significantly increases the level of corporate philanthropy, particularly for firms with great internal legitimacy threats and external relationship-specific asset dissipation. Moreover, succession firms with high corporate philanthropy experience an increase in future performance. Our evidence suggests that second-generation successors tend to take corporate philanthropy activities as part of their strategy to mitigate internal legitimacy threats and external relationship-specific asset dissipation in the succession process. Our results carry important implications for family firms that are concerned about succession in developing countries.