Academic journal article American Journal of Entrepreneurship

The Diversity of Legacy Motivation: Succession Planning of African-American, Mexican-American, and Korean-American Business Owners

Academic journal article American Journal of Entrepreneurship

The Diversity of Legacy Motivation: Succession Planning of African-American, Mexican-American, and Korean-American Business Owners

Article excerpt

Introduction

Succession planning for family business owners has been widely examined in the literature (Bocatto, Gispert, & Rialp, 2010; Bradley & Burroughs, 2010; Hersch, 2004; Williams, Zorn, Crook, & Combs, 2013). Business succession is one of the inevitable events in the family business owner's life, and transferring ownership to the next generation can involve conflicts among children and family members, and create challenges for many small business owners (Bracci & Vagnoni, 2011; Lee, Jasper, & Goebel, 2003; Lee, Lim, & Lim, 2003; Royer, Simons, Boyd, & Rafferty, 2008; Solomon, Breunlin, Panattoni, Gustafson, Ransburg, Ryan, Hammerman, & Terrien, 2011). The family business succession issue is important to the sustainability and continuation of the entrepreneur's legacy (Chua, Chrisman, & Sharma, 2003). Succession planning helps preserve a legacy for family business owners and early planning is critical for business owners to implement their plans (Sundaramurthy, 2008).

In the U.S. economic system, an increase in the number of existing firms is considered essential for economic growth (Kellermanns, Eddleston, Barnett, & Pearson, 2008). For example, family-owned firms in the U.S. are responsible for the creation of approximately 75 percent of all new jobs and contribute 57 percent of the GDP (Astrachan & Shanker, 2003; FEUSA, 2013; Williams et al., 2013). Minority-owned family firms are becoming an important component of the small-business community throughout the U.S. (Fairlie, 2006; Lowrey, 2007). Extant research in minority entrepreneurship has focused on national statistics and trends with respect to self-employment and business; however, little knowledge exists about factors influencing the founding, ownership, and management of minority-owned businesses (Puryear, Rogoff, Lee, Heck, Grossman, Haynes, & Onochie, 2008).

Within family business literature, few studies address succession planning in minority-owned family firms. Researchers have examined concerns about the issue of business succession, including factors influencing the choice of a successor and the need to promote business succession in family-owned firms (Bocatto et al., 2010; Chua et al., 2003; Hersch, 2004). However, researchers have not examined to what extent minority-owned family firms have succession plans and little is known regarding how business and owner characteristics in these firms affect succession planning in minority-owned family firms. Since entrepreneurial behavior by the business leader is essential for business growth (Kellermanns et al., 2008), business succession advisors or professional consultants play an important role in educating minority business owners on the value and process of business succession (Hussain, Scott, & Matlay, 2010; Mishra, El-Osta, & Shaik, 2010).

Using data from the 2003 and 2005 National Minority Business Owners Surveys (NMBOS), the main purpose of this study was to explore the effect of ethnicity on the development of succession planning in small family firms. Specifically, the first objective of the current study was to profile what owners of minority-owned family firms plan to do with their businesses upon retirement (e.g., pass the firm on to the next generation, sell the firm, or close the firm). The second objective was to analyze the relationship of characteristics of the firm and firm owners (e.g., ethnicity and other demographic variables, the number of generations of family ownership of the firm) with the decision to engage or not to engage in succession planning. While comparing four ethnic groups -African-American, Mexican-American, KoreanAmerican, and White-Americans, the findings of this study will fill the gap in the body of knowledge in succession planning and retirement issues in small family-owned firms in the United States.

Literature Review

Succession Planning in Family Firms

Business succession is the transition of family business leadership and ownership from one generation to the next. …

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