Management succession planning and family-owned manufacturing businesses survival

Abstract

It remains unclear how lack of management succession planning relates to the collapse of 87% of the Tanzanian family-owned manufacturing businesses (FOMBs) after the first generation. Also, the question of whether a firm’s background variables, namely; executive’s education level, business age, and business size, moderate the relationship between management succession planning and the survival of FOMBs remains unanswered. Therefore, this study investigated the relationship between succession planning and the survival of FOMBs, moderated by the firm’s background variables through the lens of resource-based theory as well as agency theory. A sample of 339 executives was randomly drawn from the FOMBs in Dar es Salaam city where the collapse of FOMBs after the first generation was revealed to be significant and surveyed using a structured questionnaire. Multiple linear regression was used as a quantitative data analysis technique with the support of SPSS as an analytical tool. Results revealed that management succession variables, namely; training the successor, successor involvement in business management and successor factors-work fit had a positive and significant relationship with the survival of FOMBs. However, the internal recruitment of the successor had an insignificant relationship with the survival of FOMBs. Therefore, management succession planning sustains the leadership pipeline and survival of the FOMBs through the involvement of the successor in business management, sufficiently training the successor, and handing over power to the successor whose competency and factors fit with the relevant work. The study contributes to an understanding of management succession planning variables and how they relate to the survival of family-owned manufacturing businesses. The study also provides a new conceptual framework on transgenerational management succession planning in the FOMBs.