Succession In Family Firms Research Articles

Managing Succession and Knowledge Transfer in Family Businesses: Lessons from a Comparative Research

The most natural mode of family firm succession is the intergenerational ownership transfer. Statistical evidence, however, suggests that in most cases the succession process fails. There can be several reasons as a lot of personal, emotional and structural factors can act as an inhibitor to succession. The effectiveness of the implementation of any succession strategy is strongly dependent on the efficiency of intergenerational knowledge transfer, which is related to the parties’ absorptive capacity and willingness to learn. The paper is based on the experiences learned from the INSIST project. In the framework of the project different aspects of family business succession have been investigated in three participating countries (Hungary, Poland and the United Kingdom). The aim of the paper is to identify the patterns of management, succession, knowledge transfer and learning in family businesses. Issues will be examined in detail such as the succession strategies of companies investigated and the efforts family businesses and their managers make in order to harmonize family goals (such as emotional stability, harmony, and reputation) with business- related objectives (e.g. survival, growth or profitability).

Assessing Readiness to Family Firm Succession: Lessons from Insist Project

Poland, as other post-communist transforming economies from Central and Eastern Europe, has a relatively short experience with family firm’s development. The historical discontinuity in private sector is due to communist rule in 1945-1989: in that period most of the private (including family) businesses were closed and private entrepreneurial activity was banned. After the fall of the Iron Curtain, the principles of a free-market economy were re-established in the region. Consequently, the expansion of the private sector in the early 1990s was the main driving force in the economic development of Poland and an entire CEE region. In the development of the private sector, one of the crucial players were and still are the family firms. Now, almost 30 years after the start of the economic system transition, many founders of such enterprise face the challenge of a first successful succession within the family business. One of the still under-explored areas in the studies on family firms and on the research on family business succession in particular, is the level of the preparedness and the readiness of the new generation to take the lead over the family business. In our explorative study, we investigate the willingness of the potential successors to take over the family firm in the population of students. We find a relative reluctance to family firm succession among female respondents, while the average size of the firm is associated with a greater attractiveness of the succession.

Effects of sibling competition on family firm succession: A game theory approach

Strong interconnections between family and business which are innate to family firms can prove to be the source of conflict. Of all conflicts, those between family members and especially between siblings erode the family’s harmony and can risk the firm’s continuity. The passing of the family firm’s control from the founders to the next generation is a critical stage for the family firm and can be a catalyst for conflict. This article extends the use of game theory in family firm succession to explicitly include the noneconomic factors related to the family dimension, focusing on the emotional cost of conflict resulting from sibling competition. The results show that this cost is fundamental in terms of successor selection. The article shows that the collaborative family outcome, which results from family members cooperating and acting as a unit, is better in promoting firm intergenerational succession and ensuring that the founder’s preferred child is appointed successor.

Bank screening technologies and the founder effect: Evidence from European lending relationships

This article provides evidence on the existence of a founder-effect in the bank screening process for a sample of European family firms. Firstly, we find that firms’ founders are significantly associated with a larger request for information during the screening stage. Secondly, founders are more likely to be required for both hard and soft information, whereas nonfamily CEOs are required to provide mostly hard data. Finally, the probability of being subject to deeper and more intense screening procedure is found to increase as founders get close to their retirement age, confirming banks’ concerns for founders’ succession in family firms.

For Money or Love? Financial and Socioemotional Considerations in Family Firm Succession

In mid–2012, Charles Gilman, the founder and sole owner of the custom fixture manufacturer/installation company CustomFittings, was approached by a local competitor, Jack Miller, with an offer to buy his company for $9.5 million. This tangible offer forced Charles to decide what to do with CustomFittings, as he and his wife, Christine Gilman, were approaching retirement age. Although their son, Bill Gilman, was keen on taking over the company, Charles and Christine were depending on the firm to fund their retirement—but Bill did not have enough capital to buy the firm and thus provide them with a suitable retirement sum. While accepting the offer from Jack would put the couple in a comfortable position financially, the move might jeopardize their son's career, their employees’ jobs, and the family's legacy and reputation.

In Search of Legal Foundation for Indonesian Family Firms

One of the factors that affect Indonesia's economic growth is the existence of business firms. It cannot be ignored that most business firms in Indonesia is family owned firms, and which are considered to constitute as the backbone of the economic development. Family firms represent the most enduring business model in the world. The continuing success of family firms through the generations relies on ensuring the next generation. However, the issue of family firms is rarely discussed in particular from the perspective of corporate law. In fact, from legal perspectives, there is some issues deal with this type of firms, amongst other, the lack of an overall definition of the term “family business”. It is because family businesses and small medium enterprises (SMEs) are widely understood synonymously in spite of the fact that they exist in every size class. Other issue is the questions of its legal basis or legal framework in terms of its corporate governance. Many Indonesian business players lack the basic understanding of corporation's law. It is partly because these obligations are incompatible with the values and cultures in Indonesia where “kinship principle” is deeply rooted. This article aims to describe the characteristics and the legal frameworks for the family firms in Indonesia. It also recommends the government to take progressive measure by providing clear regulations on the family firms in Indonesia. This will reinforce family firms contribution in economic development of Indonesia in the future.

CEO succession in family firms: Stewardship perspective in the pre-succession context

CEO succession is a key theoretical and empirical issue in the fields of organizations and strategic management. Previous studies investigating the influences and effects of CEO succession mostly focus on post-succession contexts. This study focuses on the pre-succession context and offers a comprehensive theoretical framework based on agency theory and stewardship theory. Specifically, this study empirically tests the influence of several pre-succession factors on the founding CEO's decision to either sell the family firm or hire a professional manager as a successor. The results show that executive compensation schemes and industry dynamism separately influence the degree of stewardship through perceived pay premium and industrial growth potential. The findings help explain CEO succession decision-making in family firms, and provide empirical evidence for the incentive mechanisms between executive compensation schemes, industry dynamism, and professional managers' stewardship behaviors. This study broadens agency theory, stewardship theory, and upper echelons theory's explanation of CEO succession decision-making in family firms.

Family firm succession and performance

ABSTRACTWe analyse more than half a million businesses from the Census Bureau’s 2007 Survey of Business Owners with less survivorship and size biases. After controlling for firm- and owner-specific characteristics, we find family businesses generate fewer receipts and less employment and payroll. Family businesses involving a second-generation owner-manager show better performance. On the other hand, those managed by founder-owners show worse performance. These results of all firms, mostly small businesses, are contrary to the previous studies of large public firms. However, for a subsample of 2064 businesses large enough to be listed on a US stock exchange, the results become consistent with the previous large-firm studies.

Succession in Family Firms – From Planning to Successor Selection

Succession is a complex process. It touches issues related to transfer of ownership, management and knowledge in family firms. It is a process that requires adequate preparation stage and needs to be planned in time. It starts much before successor involvement in business matters, and ends up with incumbent retirement. In relation to the aforementioned argumentation the aim of the paper is evaluation and synthesis of the most crucial achievements in the field of research on succession in family firms. The paper is a review of scientific works discussing the process of conducting succession in family firms, from planning stage to the successor selection. The paper is based on articles published in well‑known foreign journals and covers the period of the past 40 years. Conducted research proved that different scholars involved in family entrepreneurship research show their unabated interest in succession problems. Transferring the business to the next generation is still a controversial issue and there is no way to avoid many personal or business conflicts.

"Preservation, Succession, and the Culture of Farming in Lancaster County, PA"

This exploratory study contributes to research on socioemotional wealth (SEW) and succession in family firms. We argue that a desire to preserve SEW motivates owners of Lancaster County family farms to legally preserve them, but that this SEW moves beyond the nonfinancial aspects of family owners. Rather, we show that this select group of owners of family farms exhibit motivation and commitment to the preservation of the cultural tradition of farming in the region and, thereby, the preservation strategy acts as a proxy to ensure the emotional attachment of successors to the agricultural land. Moreover, this study contributes to the SEW and family firm literature by theorizing that an owner’s SEW should be studied in the cultural (systemic) context in which the family firm is embedded.

Changing Multiplex Ties: Intergenerational Leadership Succession in Family Firms

Actors connected via multiplex ties often have particularly stable relationships, but this also suggests that multiplex ties may be difficult to change. Since prior research has inadequately examin...

The shadow of the prince: Incumbents' coercive control over successors in family organizations

During family firm succession, parent-incumbents are often caught up in a paradox of empowering and dominating their child-successors. To explain this recurring phenomenon, we develop a psychoanaly...

Breaking out or Breaking In? Exploring family dynamics in planning for succession.

The aim of this paper is to explore family dynamics in planning for succession and continuity in Punjabi-Indian ethnic family firms in the UK. The research objectives are to analyse how household d...

Examining Family Firm Succession From a Social Exchange Perspective

We use a social exchange perspective to review family firm succession literature owing to its fit with the multiphase, multistakeholder nature of the process. We searched the history of 34 journals, finding 88 published or forthcoming articles that quantitatively examined succession. We consider the primary phases of the management succession process (ground rules, successor development, and transition) and the relevant stakeholder exchanges occurring during each phase, including exchanges between incumbents and successors, within family boundaries, and across family boundaries. We contribute to the family firm succession literature by identifying how a social exchange perspective can help guide future research.

Business succession and Intellectual Capital Management in family firms

Family businesses are institutions in which two seemingly disparate social units (i.e., families and businesses) are highly integrated. This connection extends to succession across generations and while natural, this can be a difficult process. The founder, thanks to his long stay in the family business, has a substantial amount of tacit knowledge related to the firm which can often determine business success. In the succession process it is important to diffuse and manage overall knowledge, or intellectual capital, to the successor. This study attempts to contribute to the literature casting some light on the business succession in a family firm informed by an intellectual capital perspective. Starting from these theoretical principles, through a case study analysis approach, the research investigates how human and relational resources are managed in the business succession process and how the process is communicated to the external environment and therefore how small family firms can maintain and increase their competitive advantage thus reducing the risk of failure during the succession process.

Knowledge transfer in family business successions

Purpose– Knowledge often is the fundament for strategic competitive advantage. Thus, it is highly relevant to understand better how knowledge is transferred from one generation to the next in family businesses. The purpose of this paper is to link the competitive advantage realisation in family businesses to the success of transferring strategically valuable knowledge in different business environments to the next generation.Design/methodology/approach– Building on the contingency model of family business succession (Royeret al., 2008) knowledge transfer in family businesses from different cultures is investigated in this paper. From a resource-oriented and transaction cost inspired perspective two family businesses with a similar industry background from China and Europe are compared regarding knowledge transfer in the context of family firm succession taking into account the respective transaction atmosphere.Findings– Different successions for two long-lived family firms are illustrated in a systematic fashion: based on the theoretical elements suggested both cases are described to get insights into the usefulness of the theoretical reasoning developed. On the basis of these, the cases are compared with each other and conclusions for both cases are drawn. Implications for theory and practice as well as avenues for future research are sketched.Originality/value– The focus of the current study is to gain more insight into long-lived family businesses by comparing two cases over a period of more than 200 years with regard to strategically relevant resources as well as the underlying transaction atmospheres. Implications for family firms depending on the resource types and transaction atmosphere are discussed.

A Tale of Two Families: Generational Succession in Filipino and American Family Firms

AbstractThrough comparison of two families, Filipino and American, this essay finds that the axiomatic three-generational cycle of rise and decline, articulated famously by Andrew Carnegie, proved predictive for an American family firm but not for its Filipino counterpart. Over the span of a century, both families followed a surprisingly similar move from agriculture to food processing and then publishing. Thereafter, however, divergent state policies shaped different destinies for these two families. In the United States, impersonal enforcement of state security and economic regulation allowed the unchecked rise of finance capital that consolidated some 2000 US breweries, most of them family owned, into two transnational corporate conglomerates. In the Philippines, by contrast, persistent rent seeking by elite families, combined with personalised, partisan state economic enforcement, has allowed the continuing dominance of family-controlled corporations. Through comparison of two societies with close relations for over a century, we can see how state economic regulation can encourage the eclipse of major family firms in one society and the perpetuation of a political-economic oligarchy in another.

Innovation activities during intra-family leadership succession in family firms: An empirical study from a socioemotional wealth perspective

We reason that the intra-family leadership succession phase has distinct characteristics that render it a peculiar time frame for innovation. However, the incumbent owner-manager's willingness to support innovation during that phase is of decisive importance. Building on this argument, the article provides an investigation of how socioemotional factors are related to the owner-manager's perception of the intra-family leadership succession phase as an opportunity for innovation activities in family firms. We use quantitative data from a unique research setting in which family influence in terms of ownership and management, and thus the ability to innovate, as well as major contextual variables were held constant. Overall, the results of our study show that socioemotional factors have both dark and bright sides in the context of innovation. In particular, we find that family adaptability and a family member's closeness to the firm are positively associated with perceiving the succession phase as an opportunity for innovation. On the contrary, intergenerational authority and the history of family bonds are negatively related with the perception of the succession phase as a suitable time frame for innovation. Our findings primarily contribute to the literature on innovation and succession in family firms and emphasize the inherent heterogeneity of family firm behavior.

The family business map: Framework, selective survey, and evidence from Chinese family firm succession

This paper analyzes the causes and consequences of founding family engagement in firm ownership and management. We hypothesize that families manage their firms because they are able to make contributions that non-family managers cannot provide. However, roadblocks arising from within the family, from markets, and from surrounding institutions challenge family ownership. We propose a new framework for organizing these assets and roadblocks, called the family business map; this framework is useful for categorizing the papers presented in this Special Issue. We support the predictions of the framework with evidence from Chinese family firm succession, and conclude that family firm organization is an adaptation to environmental opportunities and constraints. We end the paper with suggestions for future research.

"Configurations of human, social, and financial capital as predictors of new family firm success"

Existing theory of entrepreneurial success lacks consensus regarding how combinations of human capital, social capital, and financial capital affect new venture performance. One reason for this confusion may be the overwhelming use of linear methods to test the causal relationships of independent variables that are highly interrelated. Focusing on family firms, a set-theoretic approach is used to determine which combinations of human capital, social capital, and financial capital are necessary and/or sufficient for new venture success. Only marginal support is found for the proposition that social capital is the predominant driver of family firm success. Rather, specific human capital appears to be most important, in conjunction with either social capital or financial capital.