Academic journal article American Journal of Entrepreneurship

The Relationship between Managerial Characteristics and Succession Planning in Family Businesses: A Multinational Analysis

Academic journal article American Journal of Entrepreneurship

The Relationship between Managerial Characteristics and Succession Planning in Family Businesses: A Multinational Analysis

Article excerpt

Introduction

Family control is the dominant ownership structure globally, and family businesses account for a significant portion of all publicly traded firms. For example, in the United States, one-third of Fortune 500 companies are at least partially controlled by a single family which maintains substantial ownership in the firm (Combs et al., 2010). The succession of top management is critical to any type of organization, and familyowned business succession is critical to ensure that competent family leadership continues across generations. Research has shown that failure to provide for successful succession is the primary cause for the demise of family businesses (Bocatto et al., 2010).

Succession in family businesses has been identified as a primary issue in the study and practice of family business management. Over a decade ago, analyzing the first ten years of the publication of Family Business Review, Dyer and Sánchez (1998) developed a listing of the most frequent topics of that journal's articles, and succession was the second-most researched subject (after interpersonal family dynamics). Subsequent to that listing, other studies have ranked succession as the most important issue facing family business top managers (Chua et al,2003; Handler, 1994), the most important area of assistance requested of consultants to family firms (Upton et al., 1993), and the topic most frequently studied by family business researchers (Brockhaus, 2004; Handler, 1992; Montemerlo, 2000; Ward, 2004). And currently, managerial and generational succession and succession planning have continued to be one of the most important family business research focuses (DeMassis et ö/.,2008; Heck et al, 2008; Menzies & Lococo, 2011; Steier et al., 2009).

The practitioner-oriented literature also stresses the importance of planning for succession. A search at Amazon.com will identify more than 800 trade books with a specific focus on family business succession, and virtually all books more broadly covering family business management include substantial discussions of the importance of planning for successful succession (Poza, 2007).

The need for effective and successful planning for family business managerial succession has been identified by many researchers in the field, who have concluded that too often such planning does not take place or is insufficient, resulting in unsuccessful or less-than-fiilly-successful succession (Astrachan et al., 2003; Fox et al., 1996; Stavrou, 2003).

The major contribution of this research study is that it investigates family business succession, in a multinational context, with a focus on planning for succession rather than on the process of the actual succession, which has been the focus of most prior research (Handler, 1994). This specific focus has been largely ignored in the literature. Specifically, this is the first research study investigating a number of managerial characteristics of the family business and their relationship with succession planning. Specifically, this study works to begin to answer the question: Do certain factors increase the likelihood of planning for family business managerial succession? Since there is general agreement on the importance of successful succession in family businesses, then it follows that planning for succession is a desirable component of family business management. Thus an appropriate research objective is to develop a better understanding of those factors which lead to such planning. Such an understanding would allow family business owner/managers, and those who consult to them, to increase the likelihood of succession planning and successful succession implementation. This investigation can lead to taking family business research on succession planning in a new and valuable direction.

This study is not intended to compare succession planning in one country versus another. A comparative study would certainly be an appropriate objective for future research by these authors or by others. …

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