Examining the Impact of Inherited Succession Identity on Family Firm Performance

Abstract

The vast majority of research on family firm performance following intergenerational succession draws on either agency or stewardship theory, resulting in conflicting findings and conclusions. In this study, we depart from the mainstream by focusing on how inherited successor identity and its combined influence with successors’ broader socioeconomic context exert impact on intergenerational post‐succession performance. Drawing on social embeddedness perspective, we hypothesize that a non‐first‐son‐based succession identity disproportionately better positions successors to take advantage of the informational exchange relationships and entrepreneurial opportunities, particularly when succession identity interacts with independent outside board members, as well as large blocks of outside shareholders, while simultaneously avoiding the pressures and constraints associated with “family tradition” aspects of the family business system. Data collected from a sample of Korean family firms showed support for this moderation hypothesis. These results suggest the need for more theoretically grounded research on the inherited identity of successors to help draw a more realistic and balanced picture of social dynamics in family firm performance.

Women Entrepreneurship in Family Business

“…In result, the authors claim that this practice enhances the drive for self-employment. Based on a sample of Korean family firms, Yoo et al (2014) find support for the hypothesis that a non-first-son-based succession identity disproportionately better positions successors to take advantage of the informational exchange relationships and entrepreneurial opportunities, while simultaneously avoiding the pressures and constraints associated with 'family tradition' aspects of the family business system. Different types of father-son relationships are studied by Joshi and Srivastava (2014), Spraggon et al (2012), Afghan (2012) and Laakkonen et al (2011).…”

Not All Created Equal

“…Sharma (2004) observes that despite widespread acceptance remaining elusive, most definitions revolve around the important role of the family in terms of establishing a vision, control mechanisms, and the creation of unique resources and capabilities. Consistent with these notions, we conservatively 1 define a family firm as a firm whose largest shareholder is a member of its founding family (Yoo, Schenkel, & Kim, 2014).…”

The hybrid identity of micro enterprises

“…If we follow the neo-institutional (Heugens and Lander, 2009) view of organizational performance as comprised of at least two dimensions, a symbolic one, focused on the extent to which organizations enjoy positive social assessments, and a substantive one, which describes the extent to which organizations generate valuable results for stockholders, we can state that stewardship values will stimulate special attention to symbolic performance while agency values will engender a major concern with substantive performance. In some contexts, different performance criteria supported by plural stakeholders can lead to increased tensions and become performing paradoxes (Smith and Lewis, 2011), a situation that requires particular skills (Lewis et al, 2014) in order to guarantee sustainability as an ultimate goal of most organizations, best achieved when organizations develop multiple performance indicators valued differently by distinct stakeholders (Smith et al, 2012a) Literature on the agency and stewardship dichotomy, as applied to family businesses (Le Breton-Miller and Miller, 2009;Yoo et al, 2014), can also inform about foreseeable differences between owner pharmacists and employees. According to agency theory, a family business will invest less in the development of core competencies required for proper operation of the business, create more centralized organizations, more detached or crony relations with stakeholders and, ultimately, inferior results.…”