In the Shadow of Predecessors: Intergenerational Succession and Strategic Change in Family Firms

Abstract

Intergenerational succession is arguably one of the most critical issues in family firms, and is a complex organizational process which often results in changes of business strategies. During the succession process, the first-generation predecessors usually maintain some extent of authority (i.e. some first-generation family members staying in the board/top management team after the second-generation successors have become board chair/CEO) in the family business, so as to legitimate their heirs’ role, empower and nurture the heir-successors. But in such a power-transfer process, predecessor-incumbents are often trapped in a paradox of both empowering and dominating their heir-successors. This study of listed family firms in China, shows that in such contexts, predecessors’ authority remained in the family firm actually constrains the successors’ managerial autonomy, and hampers their ability to implement strategic change. We also investigate individual-level contingencies, i.e. whether the successor is son/daughter of the predecessor and whether the successor is returnee, and show that the negative effect of predecessors’ authority on strategic change depends on both the extent of predecessors’ influences on successors’ decisions, and successors’ capabilities to resist their predecessors’ domination. The findings in this study provide insights for future research in executive succession, especially in the context of family business.