The suitability of internal versus external successors: relevant knowledge types in family business succession

Abstract

Understanding knowledge transfer in family firm succession is important for the survival of family firms. Previous research has begun to explore the suitability of internal versus external successor in family firms with regard to relevant knowledge types. This paper builds on the contingency model of family business succession in order to understand when family successors are preferred because of their family–specific experiential knowledge. A case study analysis from the German–Danish border region explores how a family firm has used internal successors for the last 12 successions. We argue that in industries where tacit knowledge forms the basis for competitive advantage, the use of internal successors can help family firms excel after a transition of power has occurred. Theoretical and practical implications are discussed to enhance the long–term perspective for family businesses.