The black box: Unraveling family business succession

Abstract

Abstract:Using the family business succession, resource-based view of firms, familiness, and organizational clan literatures, this article develops a model based on the ability of the family business to use familiness, a specific bundle of attributes deriving from a family's culture, as a competitive advantage for the family firm. In particular, this resource-based framework of family business shows how familiness can distinguish between family firms that succeed beyond the second generation and those that do not. Implications for future research are discussed. Article:Recent research on family firms suggest that they outperform nonfamily firms (Anderson, Mansi, and Reeb 2003;Miller and Le Breton-Miller 2005;Villalonga and Amit 2004). Despite this, family business succession remains a black box and among the most critical research questions facing family business researchers. Despite a plethora of research in this area, succession rates among family businesses remain low. While the explanations for this have been widely debated [see for example, Handler (1992) and Sonnenfeld (1988)], no clear consensus has emerged. We propose an alternative approach to the question of family business succession that synthesizes the resource-based theory of the firm, family culture, and organizational clans. We attempt to answer the call by Chrisman, Chua, and Steier (2005), in part, for research to better understand the issues surrounding the concept of familiness.

Educating Succeeding Generation Entrepreneurs in Family Businesses – The Case of Slovenia

“…As a result, 60% of successors have no working experience in other firms, and most of the others have completed only short internships or obligatory training in other firms. All founders and successors (100%) found familiness to be highly important for sustainability of a family firm and agreed that familiness is a competitive advantage of the family firm [8].…”

“…Successful family firms are those which share family culture thereby remaining competitive also after transition between generations. This "effective family culture" is characterized by joined view of the world and a wish to succeed [8]. Family members (e.g., successors) who are socialized at home bring this shared culture in the family business.…”

“…According to [60], familiness is a resource that is unique to family firms; it is a specific bundle of attributes derived from a family's culture [8] and a unique form of family culture [35]. It is an imperfectly substitutable/exchangeable resource in the manner described by [1].…”

“…Family members (e.g., successors) who are socialized at home bring this shared culture in the family business. According to [8], this "effective family culture", provides foundation for familiness in the family firm. Since family culture's mechanisms are tacit, they are difficult to transfer to outsiders or to persist over family generations.…”

“…Familiness of the business depends on whether a family succeed to transfer the tacit family culture to the family business. Since a business with more familiness will gain a competitive advantage, such owning family should be more likely to retain the family business within the founding family [8].…”