Becoming the Boss: Discretion and Postsuccession Success in Family Firms

Abstract

Family firms can enjoy substantial longevity. Ironically, however, they are often imperiled by the very process that is essential to this longevity. Using the concept of managerial discretion as a starting point, we use a human agency lens to introduce the construct of successor discretion as a factor that affects the family business succession process. While important in general, successor discretion is positioned as a particularly relevant factor for productively managing organizational renewal in family businesses. This study represents a foundation for future empirical research investigating the role of agency in entrepreneurial action in the family business context, which consequently can contribute to the larger research literature on succession and change.Shirtsleeves to shirtsleeves in three generations. -Fukuyama, 1995

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

“…28 Finally, the role of succession planning could be considered to better illuminate the concept of innovation during leadership succession. The degree to which the roles of both predecessor and successor are explicitly defined (Lansberg, 1988;Mitchell et al, 2009) seems to impact the perception of this phase as an opportunity rather than a threat. Thus, the degree to which responsibilities and tasks will be clearly divided between both generations is able to provide the successor with room for the needed innovation activities (Mitchell et al, 2009).…”

“…Fourth, while starting with the owner-managers' perspective and perceptions has its own merits, it would be fruitful to investigate the next generation's perspective, skills, abilities, and motivation in the context of innovation (Mitchell et al, 2009). 27 Our supplementary analysis revealed that owner-managers seem to attribute a higher suitability of the succession phase for innovation activities if a family internal successor holds experience from outside the focal industry.…”

“…(3) The perception of the succession phase as an opportunity for innovation is strongly correlated with the respondents' rating of the importance of timely and detailed succession planning 25 (r = 0.509, p < 0.001). Succession planning usually involves defining the roles of both the predecessor and successor (Lansberg, 1988;Mitchell, Hart, Valcea, & Townsend, 2009). By dividing the responsibilities between both generations, it will be more likely that the successor is granted the freedom of discretion to engage in innovation activities (Mitchell et al, 2009).…”

Entrepreneurial orientation of family firms: Family and environmental dimensions

“…When the family firm is managed by the first generation, the founder occupies a central position within the organization, which grants him/her sufficient power to drive a behavior that coincides with his/her own business vision (Gedajlovic et al, 2004). Therefore, firms at the founder stage have a greater freedom of action thanks to the power and legitimacy concentrated in the figure of the founder (Mitchell, Hatt, Valcea, & Towsend, 2009), and this tends to go hand in hand with a centralized organizational structure, in which decisions are taken rapidly and which suits the firm's entrepreneurial behavior (Chrisman, Chua, & Steier, 2003). Schulze, Lubatkin, and Dino (2003) also state that family businesses at the founding stage have a higher propensity for incurring debt.…”

Innovativeness in family firms: a family influence perspective

“…Inertial forces, which help firms to replicate themselves on a daily basis and to follow previously successful strategies (Hannan and Freeman 1984), may limit succeeding generations' ability to exploit their innovations. Because succeeding generations tend to focus on conserving family wealth, they often institutionalize ''best practices,'' and thus innovation becomes less important to their success (Mitchell et al 2009). That is, these firms have been established long enough to have developed a solid customer base and reputation in the industry that can sustain firm performance simply by following tried and true practices and through word-of-mouth.…”