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

When the Former CEO Stays on Board: The Role of the Predecessor’s Board Retention for Product Innovation in Family Firms

“…In other words, the predecessor’s board retention constrains the ability of the successor to introduce new products or services. This result further supports prior research that has shown that predecessors tend to be committed to preserve the status quo and lose their open‐mindedness over time (Quigley and Hambrick, ), resulting in less willingness to innovate (Hauck and Prügl, ; Salvato, ). However, this result stands in contrast to the theoretical arguments of a positive line of inquiry in the literature that emphasizes the mentoring and coaching benefits of predecessors for product innovation in case they remain involved in the firm (e.g., Cabrera‐Suárez et al, ).…”

“…Recently, scholars have started to devote their attention to the role of CEO succession in family firms for (product) innovation (Cabrera‐Suárez, García‐Almeida, and De Saá‐Pérez, ; Hauck and Prügl, ; Kraiczy et al, ; Woodfield and Husted, ). These studies indicate that CEO succession provides a “catalyst for change” (Kotlar and De Massis, , p. 29) and thus stimulates product innovation as successors tend to be more open toward new ideas and bring new knowledge to the family firm (Handler, ; Kraiczy et al, ; Salvato, ; Woodfield and Husted, ).…”

“…In the family firm domain, prior research has also argued that the postsuccession involvement of former CEOs negatively influences successor discretion, emphasizing the often observed lack of willingness of predecessors to “let go” (Sharma et al, , p. 231) and to transfer control to the successor to allow for strategic adjustments (Mitchell et al, ). Initial empirical findings show that the high authority of senior generations during succession constrains the successor’s decision‐making and thus negatively affects innovation activities (Hauck and Prügl, ). Similarly, a qualitative study by Kammerlander, Dessì, Bird, Floris, and Murru () shows that family firms with a dominant predecessor were resistant to change and thus negatively associated with innovation.…”

“…Predecessors have been found to be less willing to foster product innovation compared to their successors (Hauck and Prügl, ; Le Breton‐Miller et al, ; Salvato, ). In the following section, we draw on stakeholder salience theory (Mitchell et al, ) to argue that predecessors’ board retention will enhance their ability to influence decision‐making in family firms and thus lead to generally decreased levels of product innovation in the respective family firm.…”

“…In particular, we argue that the board retention increases the predecessor’s salience to influence the decision‐making processes regarding product innovation. Given that prior research on family firm innovation (e.g., Chrisman et al, ; Kraiczy et al, ) and succession (e.g., Daspit, Holt, Chrisman, and Long, ; Kotlar, De Massis, Frattini, and Kammerlander, ) has shown that predecessors tend to preserve the status quo (Mitchell et al, ) and thus generally show less willingness to innovate compared to their successors (Cruz and Nordqvist, ; Hauck and Prügl, ; Salvato, ), we argue that predecessors who remain on the board of the firm have increased salience to negatively influence product innovation postsuccession in family firms. Furthermore, we examine two contingency factors which affect the predecessor’s salience and thus her/his influence on product innovation.…”