Who is next? Consumer reaction to CEO succession in family firms

Abstract

PurposeThis paper studies the impact of different chief executive officer (CEO) succession strategies on consumer evaluation of family firms. CEO succession is critical for family firms as improper succession planning has been shown to be the primary reason for high mortality rates of such firms. Furthermore, the choice of CEO (internal vs external) by family firms can send different signals to stakeholders and thereby impact their appraisal of such firms.Design/methodology/approachIn this paper, the authors use an experiment-based approach to test how the type of CEO succession (internal vs external) influences the consumer's evaluation of family firms.FindingsThe authors find that appointing an internal CEO leads to higher perception of firm capability, trust towards the firm and more favorable consumer attitudes. All these factors, in turn, lead to higher purchase intentions. External CEOs in family firms do not seem to have any de facto advantage regarding perceptions of higher capability.Originality/valueThus, the authors contribute to the literature of family firms by showing how family firm's strategic decisions during succession can affect consumer behavior.