The paradox between monitoring and entrenchment in a two-tier family business: The contribution of the external commitment theory

Abstract

The literature on family business governance has increased greatly over the past 20 years but few studies on management entrenchment mechanisms have been published. The objective of this paper is to analyze the mechanisms of entrenchment of a successor in a family business and the influence the leadership structure has on it. Using an in-depth longitudinal case-study approach, we look at the entrenchment process in seven longitudinal family business case studies through a processual approach. We find strong evidence that the entrenchment process is different in family firms and is based on the paradoxical use of managerial control. We extend the theory of family business by identifying managerial succession bifurcation bias as a determinant of the choice of the two-tier system and we build a model representing this theory.