A Theory of Succession in Family Firms
- PDF / 5,070,279 Bytes
- 25 Pages / 595.276 x 790.866 pts Page_size
- 84 Downloads / 217 Views
ORIGINAL PAPER
A Theory of Succession in Family Firms Eduardo L. Giménez1 · José Antonio Novo2
© Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract Succession is one of the most important issues for the most common type of firms. The literature on family firm succession has straggled as a part of different paradigms, setting forth stylized facts, informal arguments and observations. In this paper, we present a theory of family firm succession that unifies and synthesizes scattered and dispersed contributions depicted in family business research; specifically, the key role of the training activity in preparing the potential candidate, the importance of amenity potentials that is inherent to family businesses, the incumbent’s reluctance to step aside, the underperforming succession, the role of trust in the succession process, and the barriers to a “non-family” succession. Within a simple microeconomics framework, we find that these different facts and arguments spelt out in the literature are reflections of the same fundamental economic trade-off between proficiency (skills) and honesty (incentives) when choosing among potential successors. Keywords Family firm · Succession · Professionalisation · Retirement · Amenity Potential JEL Classifications M1 · M5
Introduction Succession is one of the most important issues for the most common type of firms: it plays a key role in determining not only the future performance of the firm, but also its very own survival.1 Succession in family firms has been extensively studied across different fields of research, mainly in management studies but also in psychology, sociology and law (see the reviews by Handler 1994; Baù et al. 2013). Despite its crucial relevance, the literature in economic theory has almost neglected this issue. In this work, we present a theory to understand the process of succession in family firms within the realm of economic analysis. Our theory is developed within a simple
* Eduardo L. Giménez [email protected] José Antonio Novo [email protected] 1
2
Departamento de Fundamentos da Análise Económica, e Historia e Institucións Económicas, Facultade de C.C.Económicas e Empresariais, Universidade de Vigo, E36310 Vigo, Spain Departamento de Economía, Facultade de Economía e Empresa, Universidade da Coruña, 15071 A Coruña, Spain
microeconomics framework, with a family founder (or a small number of owners) choosing between two options concerning succession: she may either stay on in the firm and run it alone, or hire a successor that might be a professional manager or a family member. Our setting comprises key elements that the literature has ascribed to the succession process in family-owned business (see Le Bretton-Miller et al. 2004 for a review): the training activity and the costs of monitoring the successor, the role of trust and communication, the personal features of the founder and potential successors, and the non-monetary benefits that are inherent to family businesses. The main contribution of this paper is to uni
Data Loading...
