The courage to choose! Primogeniture and leadership succession in family firms

Abstract

Research Summary: Building on a unique data set with information on the nuclear structure of entrepreneurial families, we integrate leadership succession into a socioemotional wealth (SEW) logic to test the antecedents and consequences of primogeniture vis‐à‐vis second‐ or subsequent‐born selection in family firm succession. Our findings suggest that appointing a family firstborn sibling is more likely when there is a high degree of SEW endowment and the family firm has pre‐succession performance below aspiration levels. Next, we find that appointing a second‐ or subsequent‐born sibling has a positive and significant effect on post‐succession firm profitability, particularly when the firm is in its second generation or later. Managerial Summary: What drives succession choices in family firms? What are the performance implications of each succession choice? These are questions of vital relevance for every business owner. Focusing on the pool of potential family heirs at the time of succession, our study adds to the debate on the drivers of succession choices by suggesting that having a family intensive governance structure fosters primogeniture as the main succession logic, even when the family firm is experiencing lower profitability. Our study informs business owners on the implications of different succession policies, suggesting that family firms that have the courage to disregard primogeniture and choose more wisely the family successor are also the ones experiencing higher post‐succession performance.