Abstract
The generational change in the family business opens up expectations of strategies such as sustainability, professionalisation and internationalisation. Yet, there are gaps in current literature which fail to explain whether there are benefits in such strategies according to their management, their generational status, and their effects on performance. This paper compared first with second and later generation companies through the relevant characteristics. A regression analysis was applied to a sample that was identified by the Spanish Family Business Institute with information on growth strategy, corporate governance, professionalisation, and ownership, that is supported by financial data for the period of 2016–2020. The results showed that, although the differences in terms of profitability were small between generations, there were significant differences in management that affected performance. Growth tended to be lower in the second and subsequent generations, which also h a greater tendency to internationalise, being motivated by the professionalisation of management. Previous works in the literature have analysed differences in profitability between generations, however the analysis in this present work investigated the origin of these differences. The results showed disparities in management that allowed for the obtaining of different profitability indices, and therefore are of practical importance in the management of the internationalisation, growth, and sustainability of the family business in the face of intergenerational succession.
Highlights
We compared the economic profitability of the companies in the sample measured by the relation between profit and total assets (ROA)
It can be observed that family businesses which were run by the first generation tend to obtain higher levels of economic profitability (4.52%) compared to companies that were run by later generations (4.06%)
The lower profitability levels that are associated with later generations has been a common study result in the body of literature [53,61,62], which is justified by the lower quality of relationships between family-member business administrators in later generational stages, that is due to higher levels of conflict [63,64]
Summary
Around 70% of the majority of family businesses last for only one generation. It is estimated that 80% of companies worldwide are family-owned, why the low survival rate has alarming consequences on the sustainability of the productive sector [1]. This paper focused on one of the characteristics of family businesses: their long-term orientation (LTO) to maintain control and transfer it to the following generations [2]. In this way, family businesses intend to achieve their economic sustainability over time [3]. LTO in family businesses includes the development of three dimensions: futures, continuity, and perseverance. Lumpkin et al [2] presupposed LTO as a higher-order heuristic that, in matters of intertemporal choice, provides a dominant logic for decisions and actions
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