Impact of effective governance structure on succession process in the family business: exploring the mediating role of management succession planning

Abstract

PurposeThe aim of this research is to analyze empirical evidence of the effect of governance structure (GS) on perceived success of the succession process. It is also reported that in India, family firms have a more informal organization structure and governance and have an informal and unplanned approach to bringing the successors into family business. Previous studies have reported that GS is an important factor for a successful succession process. This study examines the role of management succession planning as an intervening variable to achieve perceived success of the succession process.Design/methodology/approachData have been collected using a questionnaire schedule with 113 respondents who are successors from family business firms in Kerala, India. The study uses snowball sampling technique. Partial least square-structural equation modeling has been used to do data analysis.FindingsThe results of the study showed that GS has a significant positive effect on the success of the succession process. GS has a significant positive effect on management succession planning. Management succession planning partially mediates the relationship between GS and perceived success of the succession process.Research limitations/implicationsThe results of the study indicate the effect of GS on the relationship between, perceived success of the succession process and management succession planning. The mediating role of management succession planning in the above relationship is also confirmed. Therefore, before starting the succession process a good GS should be put in place for ensuring the success of the succession process. Family firms must implement the succession plan well to make the succession process successful.Originality/valueThe main contribution of the study is to empirically investigate the effect of GS and management succession planning to enhance the success of the succession process.