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ISSUES IN CAREER CHOICES OF SUCCESSORS IN FAMILY
BUSINESSES: PERSPECTIVE FROM LITERATURE REVIEW Rajiv Agarwal, Associate Professor
S.P. Jain Institute of Management and Research, India
Arya Kumar, PhD, Professor
Birla Institute of Technology and Science, India
Keith D'Souza, PhD, Professor
S.P. Jain Institute of Management and Research, India
Introduction
Succession is one of the most important decisions a family managed business
faces, for continuity and growth. The survival of a family firm beyond the founder-
owner depends on succession planning (Christensen, 1953; Dyer, 1986; Handler, 1989;
Lansberg, 1988; Ward, 1987). Christensen (1953) stated that managing succession is a
critical pre-requisite for the continuity of a business; yet research has found that family
firms often do not do succession planning (Christensen, 1953; Handler, 1989;
Lansberg, 1988; Ward, 1987)
Studies show that the successors find it difficult to take over effectively due to
the centrality of the owner-manager, and this has been one of the main causes of firm
failure (Feltham et al., 2005).
We start the review of the research on succession in the family firms by first
stating the definitions used in this study. Then research will be examined on the basis
of 1) Succession as a process, 2) Level of analysis, 3) Role of family or firm-members
involved, and 4) Phases of succession, and 5) Geographic, Economic and Demographic
factors. After this, we will examine the gaps that exist in the current research with
reference to the Indian context.
Family Business
In this study, we regard “Family Business”, “Family Managed Business”,
“Family Owned Business” and “Family Firm” interchangeably to mean the family
firm, without implication about these to mean the ownership, management or control of
the firm.
Amongst the factors influencing family business succession, three dimensions,
viz., ownership/management, family involvement and generational transfer are agreed
on, by most, as being central to any definitions.
Thus, the definition of family business would include the involvement of the
family in ownership, management, imbibe values and culture of the family, vision
setting and direction, and profit distribution to some degree.
"Next-generation family member" is defined as any individual who is a member
of the controlling nuclear or extended family, who has worked in the business in the
past, who is presently working in the business, or who personally believes he (or she)
will in the future, and who perceives himself (or herself) as a potential next-generation
successor to the founder or owner. (Handler, 1989)
Succession
Family business succession has been defined as the passing of the leadership
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baton from the founder/owner to a successor either family member, or a non-family
member; that is, a 'professional manager' (Beckhard and Burke, 1983).
Succession can be of ownership or of management and they may go hand in
hand (Block, 2011) which is the reason most previous studies have not clearly
distinguished between these (Nordqvist et al., 2013). Though most succession research
has concentrated on management transitions (Nordqvist et al., 2013), succession cannot
be said to be complete until the ownership is passed down as well (Handler, 1990;
Wasserman, 2003).
Succession as a Process
The emphasis of this study will be on leadership succession, and not just as the
transfer of leadership. This definition implies that succession is not a static
phenomenon that occurs at a well-defined time in the life of the founder and his
successor, but it is a dynamic process - one that can be mapped and described in detail
from the next-generation family member's perspective.
Level of Analysis Succession research has been considered with the following criteria viz. the
individual level, the group level, the firm level, and the environmental level. (Handler
and Kram, 1988; Sharma, 2004).
The Individual level views the individual perspective through a psychosocial
viewpoint, putting the individual (individual entrepreneur or family firm
managers/CEOs) at the center of the succession process and considers personal
attributes, attitudes, perspectives, behaviors and expectations.
The Group level distinguishes the family business relationship from the family
relationships, looking at relationships, interpersonal dynamics, influences of family
members on the succession process and the reactions of the non-family management to
the succession process.
The Firm level views with respect to cultural and organizational developments,
and considers the interaction of ownership transfer and/or succession and the firm level
dimension.
Environmental level perspective is based on the contingency theory and the
organizational ecology model and considers the external environmental contingencies
which influence the firm structure (Ayres, 1998; Diwisch et al., 2009; Scholes et al.,
2007; Wright et al., 1992; Bjuggren and Sund, 2002; File and Prince, 1996; McCollom,
1992). Other research has studied the influence of national cultures on succession
attitudes (Kuratko et al., 1993), tendencies to adopt succession plans (Huang, 1999)
and prevalence of successful successions (Chau, 1991).
The significant contribution of the Handler and Kram (1988) model is that it
clearly identifies the complexities of family succession and how all four levels have
factors that promote and resist change.
Multilevel Studies. Studies under this heading refer to those that are based on
examining a phenomenon that unfolds or is under the influence of different levels of
analysis (i.e. individual, family, firm, region).
Lansberg (1988), Handler and Kram (1988) offer two key theories of succession
from multiple levels of analysis, both of which are shaped by the tenets of general
systems theory (Rice, 1969) which believes that the interconnectedness of related
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subsystems is critical to understanding the overall system functionality. Handler and
Kram (1988) have stated that these factors could offer resistance to succession process.
Resistance to Succession. Davis and Harveston (1998) showed that the individual
level, family level and firm level factors contributed to the extensiveness of the
succession planning process, and resistance from various stakeholders is a key reason
for failure to plan succession. Seymour (1993) focused on the relationship between
intergenerational relationships and succession, finding that a positive, significant
association existed between the reported quality of intergenerational work relationship
and successor training. However, no significant association was found between the
quality of the work relationship and formal succession planning.
Lansberg (1988, p.121) highlighted that succession planning is approached with
ambivalence because of the various changes it imposes on the family firm including
realignment of relationships, redistribution of traditional influence patterns, and older
management and ownership structures being replaced by new ones.
The founder's resistance to succession planning has been studied by various
authors and is discussed below.
One suggestion for dealing with the founder’s insecurities is to develop a
supportive group of founders who have personally done succession planning. The
family needs to understand how painful it is for the founder to let go, and the founder
must also be made aware of the importance of planning, coupled with concrete ideas
about what to do about the problem. (Handler and Kram, 1988).
Managers are also threatened by the change, since it may mean a shift for them,
from a founder’s personal relationship to a successor's more professional relationship
(Lansberg, 1988). Many points made by Lansberg are confirmed by Handler's (1989)
theoretical model of resistance to succession in the family business. Factors at the
individual, interpersonal and group, as well as the organizational and even
environmental levels, are all involved in the failure to plan for succession.
The entrepreneur’s eagerness could see the successors involved too early, and
hence prevent them from pursuing their own interests and developing the capacity to
benefit the family business. This means successors feel that they lack choice and are
tied to their family businesses, and they may offer some resistance to the idea of taking
over. (Handler,1989)
Power imbalances, family conflicts (Levinson, 1971; Stern, 1986), and lack of a
clear choice for their also seem to complicate the succession process.
Role of Founders and Other Members
There have been extensive studies on various aspects of owners' leadership.
(Kets de Vries, 1985; Levinson, 1971, 1983; Zaleznik and Kets de Vries, 1985). The
founders of family firms play the dominant role in shaping the institutions that they
create. Leaders have extraordinary powers to create a vision for their followers and to
instill in them a religious fervor in carrying out their dream (Dyer 1986), but may also
have a deep-seated desire for immortality (Becker, 1973), and a sense of being
indispensable with respect to the business. There are significant similarities noted in
the backgrounds and childhood experiences of the owner-founders. Levinson (1971)
states that the founder derives meaning from the firm in three important ways. First he
starts the business to escape the authority of powerful figures. Second, those working
in the firm are seen as “tools” for shaping the company. Third, succession issues get
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mixed up with the founder’s own personal concern about the monument he will leave
behind, since the founder considers the business to be an extension of himself. It has
been concluded (Dyer, 1986; Kaplan, 1987; Kets de Vries, 1985; Schein, 1985) that it
is in the entrepreneurs’ nature to find it difficult to give up what they have created and
directed. This difficulty can be acted out in many nonproductive ways.
Kiets de Vries (1985) found that the entrepreneur’s need to control, backed by
serious issues of dominance and submission, suspicion for authority are some of the
reasons for which entrepreneurs aspire to run their own businesses and are often unable
to consider succession in dynamic terms and provide for the future of the firm.
Sonnenfeld (1988) defined four types of retirement styles of founders or CEOs;
i) monarchs, ii) generals, iii) ambassadors and iv) governors. Monarchs do not leave
until they are forced out or die. Generals also leave office only when forced out, but
plan a return to power often to rescue the company from an inadequate successor.
Ambassadors leave willingly and become advisors to the firm. Governors rule for a
term and then pursue other ventures. Levinson (1974) describes three types of
inadequate successors typically chosen by a founder. The first, loyal servant, is a
conscientious helper but an incompetent leader, and the second, watchful waiter is a
star performer from outside, who must wait, sometimes indefinitely, for power to be
granted. The third, false prophet, is a person whose area of competence is not related to
the role required and, therefore, is an unrealistic choice for successor.
The above studies illustrate that problematic successions are to a large extent,
caused by the leader’s sense of immortality and indispensability.
Another grouping considers the types of agents specifically, incumbent/founder,
successor, parent, offspring, manager/stakeholder, board of directors who would be
involved in the family, business or both. (Barach and Ganitsky, 1995; Miller et al.,
2004; Sharma, 2004; Vera and Dean, 2005). Other studies have focused on specific
next-generation family members - daughters (Barnes, 1988; Dumas, 1989, 1992;
Iannarelli, 1992), younger sons (Barnes, 1988), and siblings (Friedman, 1991). It has
also been shown that a nonfamily manager’s opposition can be a barrier to succession
planning (Lansberg,1988).
Theoretical and exploratory research has studied the role of individuals’ attitudes
to and experience of the different phases of succession and the choice between family
and non-family ownership transition. However, there is a dearth of theory-testing and
of empirical research that investigates the role of family factors and relations on entry
and exit decisions (Churchill and Hatten 1997; Vera and Dean, 2005), indicating a gap
in the literature in relation to the impact of family factors on succession seen as an
entrepreneurial process of entry and exit (Nordqvist et al., 2013).
Other studies have focused on daughters (Barnes, 1988; Dumas, 1989, 1992;
Iannarelli 1992). Dumas (1989) found that many daughters "had not originally been
seen as potential members, managers, or successors in the business" and describes
them as "invisible successors".
Iannarelli (1992) also found that often, during the socialization process, young
girls are treated differently than their brothers. The choices are often pre-decided at an
early age without their knowledge of the options available, which may explain the
existing gap between the number of men and women in leadership roles in family
firms.
Often, a crisis or unforeseen circumstances had forced them to consider the
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family business as a source of employment (Dumas, 1989, p. 39). Ward (2000) has
written on Indian daughters stating that they had arranged marriages, marrying
husbands of equal means into new families, when they left their family of origin.
Daughters did not enter family businesses, and on the rare occasions that they did, it
was in the absence of any sons. Daughters-in-law would, traditionally, manage the
family’s charitable interests like schools or hospitals, which is now changing, with
women leaving their family of origin less often and more often becoming owner-
employees in these businesses.
Qin and Wang (2012) investigated four issues in father-daughter succession in
China - the impact of Confucian ideology, gender conflicts, the role of other family
members and planning and training – and found that the second generation had to be
involved in the family succession at an early stage and orient their education and career
in this direction.
Phases of succession considers four phases: pre-succession, planning succession,
managing succession, and post-succession.
Table 1. Phases of Succession Pre-succession Planning
succession
Managing
succession
Post-succession
Attributes a) Attitudes and
willingness towards
succession
a) General Studies
of Succession as a
process
a) Family
Relations
a) Success of
succession
b) Roles of
Daughters
b) Effect of
planning upon
relations
b) Internal and
external
succession
c) Relations
between incumbent
owner manager and
successor
c) Effect of
contingencies
upon planning
c) Perspective
of the next
generation
d) Career
Choice Options
Source: Modified version from Nordqvist et al. (2013)
Pre-succession
Attitudes and willingness towards succession
The studies related to attitude and willingness towards succession consider the
personality and psychological dimensions, specifically the attitudes towards the family
business and the willingness to transfer ownership to the successors. The successor's
emotions, intentions, (Birley, 2002; Stravou, 1998; Zellweger et al., 2011) and options
(Birley, 2002; Shepherd and Zacharakis, 2000) are explored.
By not delegating authority and by being involved in decisions better handled at
lower organizational levels, founders make themselves indispensable (Lansberg and
Perrow, 1991). Similarly, most founders do not retire; they die in office (Navin, 1991),
and successors faced with their parent’s inability to hand over control of the family
business, may lose interest in joining. Lansberg and Perrow (1991) hypothesizes that
owners fear that retiring is seen as a demotion from their central role in the family, and
hence they procrastinate over succession planning. Furthermore, many owner-
managers may associate their retirement from the business with their own mortality
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(Lansberg and Perrow, 1991; Jacobs, 1986; Seymour, 1993) since they identify closely
with their businesses. Hence, the tenure of a founder's leadership usually lasts for an
average of 32.4 years, greatly exceeding that of any subsequent leader (Navin, 1991).
Dumas et al. (1995) state that succession decisions should start from a very early
stage and be firmly grounded in the family roots. Furthermore, succession is favoured
by the quality of communication and climate of trust amongst the family members
(Cadieux et al., 2002). Strong positive impressions of the founder-manager fathers in
the successors’ minds, could retard the development of the successor’s own identity
and executive skills (Galiano and Vinturella, 1995). It is very helpful for the successors
to explore and understand their capabilities, interests and goals before joining the
family business.. (Stavrou and Swiercz, 1998; Stavrou, 1999)
Relations between incumbent owner manager and successor
Handler (1992) showed that the quality of the personal relationship between the
incumbent and the successor is a critical determinant of the succession process. Davis
(1982) found that age plays a role in the relationship between the father and son.
Planning succession
There is a lot of research to support the probability of successions being
successful in the presence of a well-structured succession plan (Sharma et al., 2001).
Effective successors need to have important characteristics like managerial autonomy
and self-confidence and predecessors need to create the right environment for the
successor's development (Goldberg and Wooldridge, 1993).
The basic tasks involved in succession planning include the following:
Formulating and sharing a viable vision of the future in which the founder is no longer
in charge of the family firm; Selecting and training the founder's successor as well as
the future top management team; Designing a process through which power will be
transferred from the current generation of management to the next; Developing an
estate plan specifying how the family assets and enterprise ownership will be allocated
among the founder's heirs; Designing and staffing the structures appropriate for
managing the change, including a family council, a management task force, and a
board of directors; Educating the family to understand the rights and responsibilities
that come with various roles that they may assume in the future (Lansberg, 1988).
Handler (1989) and Lansberg (1988) have proposed ways of helping the family
overcome resistance.
General Studies of Succession as a process
Succession planning and management has been explained by several models in
previous studies. It has been shown that executive succession can be viewed as a
process (Farquhar, 1989). Longnecker and Schoen (1978) have considered the
complexity of the succession process by their seven-stage model. Churchill and Haten
(1997) have described the succession process between the father and son in a family
firm by developing a life-cycle approach.
Subsequent studies (Sharma et al., 2003) have shown that the satisfaction with
the succession process in family firms is enhanced by the willingness of the
predecessor to step aside, the willingness of the successor to take over, an active
planning phase and the agreement among the family members to accept their individual
roles and remain involved in the business. It has been suggested that planning may
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enhance the self-efficacy of both predecessors and successors and active planning is
related to the eventual effectiveness of the ownership successions (De Noble et al.,
2007).
Effect of planning on relations
Research on the relationship aspects of succession planning shows the
importance of family relations for the organization of a succession plan (Handler,
1992), and that these relationships may moderate other succession planning factors
(Lansberg and Astrachan, 1994). It has been shown that the intergenerational working
relationship between the predecessor and successors is positively related to active
training of the successors and does not significantly enhance formal succession
planning (Seymour, 1993). Stempler (1988) has shown that respect, understanding and
complementary behavior between the successor and predecessor is critical for an
effective succession.
It has been determined that the succession is highly related to the pro-activeness
of a trusted successor in pushing the ownership succession process (Sharma et al.,
2003). The successor’s skills and overall ability to do the job are also important
(Lansberg, 1986). The individual should be assessed by a performance review and
appraisal (Danco, 1982), which should be a part of the formal career development
process. Research comparing successor attributes amongst Indian and Canadian
families found that integrity and commitment to the business were important, and
while the relationship was rated higher in Indian families, Canadian families rated
interpersonal skills, performance and experience more highly (Sharma and Rao, 2000).
Barach and Ganitsky (1995) stated that external experience would be helpful to
the successor before joining the family business, and that working in the family
business at an early stage, a summer job for example, would give the successor a better
probability of success by increasing their understanding of the business.
Effect of contingencies upon planning
Factors considered here include the gender of the successor or the predecessor,
firm size, level of professionalization and the cultural context. Both similarities and
differences between the genders have been found in terms of determinants of
succession planning (Harveston et al., 1997). On the other hand, the successors’
identity and the providing of training /mentoring, regardless of firm size, are shown as
important steps in succession planning (Motwani et al., 2006).
Cultural contexts too are shown to be a discriminating element in the planning
process. A study of Lebanese family firms (Fahed-Sreih and Djoundourian, 2006), and
another study of Turkish firms (Tatoglu et al., 2008) show varying results, but
conclude that planning is strongly linked to succession success, and planning depends
on the intra-family relationships within the ownership family and other more tangible
factors.
Dyer (1986) defines three cultural patterns in terms of the family, patriarchal (or
matriarchal) families, where the father (or mother) is the dominant authority figure;
collaborative families where the power is shared among the family members; and
conflicted families, which are characterized by an absence of shared goals and the
existence of counter dependent relationships. In terms of family patterns, he found
patriarchal families to be most common in the first generation firms, while
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collaborative family cultures were most often found in second generation family firms
and conflicted families were most common once the family firm had turned to
professional management and also gone public.
Based on the above, it is shown that the lack of professionalization of the
management, and absence of proper planning are widely believed to be factors for non-
survival of firms. Hence it is important for family businesses to develop a formal
succession plan, regardless of the firm size (Motwani et al., 2006). It has also been
shown that the successor must have the ability to delegate as a crucial skill to be able to
manage and guide the environment left by the incumbent and in turn, the incumbent
must have a succession plan that ensures the creation of a suitable business
environment for authority delegation (Tatoglu et al., 2008).
Managing succession
Dunn (1999) highlights the importance of mitigating the anxieties of the family
members. Differences in perspectives on the progress of succession between the
incumbent and the successor, would contribute to the successor’s dissatisfaction (Brun
de Pontet et al., 2007). Harvey and Evans (1994) have examined inter-generational
conflicts and disagreements.
Royer et al. (2008) pointed out family members would be preferred as successors
where the family business-specific experiential knowledge is highly relevant. De
Massis et al. (2008) investigated the factors that prevented inter-family succession and
suggested that lack of able successors, lack of motivation among potential successors,
predecessors’ personal attachment to the business, and conflicts between parent
predecessors and their children rank the highest amongst reasons causing the family to
choose an external successor. Further investigations on these issues have been reported
by Cater and Justis (2009), Handler (1992), and Wennberg et al. (2011).
Although Entrepreneurship career choice intentions and founder entrepreneur’s
motives have been extensively investigated in the literature (Kolvereid, 1996a; Baron,
1998; etc., few studies have focused on the career choice intentions of young
successors who are still studying, with a family business background (Eckrich and
Loughead, 1996).
Stravou (1999) stated that socialization influences are factors in the developing
process of succession in a family business, and this process starts in the early stages of
adolescence.
Longitudinal studies (Caspi et al., 1988; Kokko and Pulkkinen, 2000) have
demonstrated that an individual’s childhood and adolescence characteristics can be
used to predict developmental outcomes such as career success. A study of successors
in the USA (Birley, 1986) found that the elder offspring were more inclined to join the
family firm than their younger siblings. Birley (1986) explored the extent of influence
of the firm’s size, the individual's birth order and gender on the intentions of young
adults to join their parents’ business.
However, other research has contradicted some of Birley’s findings, especially
studies that show a link between successors getting involved in the family business and
their gender or birth-order in the family (Goldberg and Wooldridge, 1993; Lansberg
and Perrow, 1991). Dumas (1989, 1992) has indicated the active adherence of
primogeniture in many family firms with the assumptions that the family business
would be passed on to the sons, an attitude which has not yet changed even though
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numbers have rapidly changed (Redding, 1990; Weidenbaum, 1996; Birley and
Godfrey, 2000; Ward, 2000). Asian families, regardless of geographic boundaries are
influenced by the Confucian norms, where usually the father is required to handover
the business to his son, and the son is obliged to accept, even if it is not in the best
interest of the business (Kao, 1990; Qin and Wang, 2012). On the other hand, in long-
established family firms, the successor’s birth order and gender are not as important as
the successor’s integrity and commitment (Chrisman et al., 1998). This contradicts the
widely held belief that the first-born males are the model successor for the family
firms.
The successor’s birth order has also been studied by Goldberg and Wooldridge
(1993), Sulloway (1996), and Hoy and Sharma (2010). It is proposed that the first-
borns are not competing for parental attention, and they learn that the best way to get
parental attention is to meet the parent’s expectations and desires, thus making himself
more conservative in his approach, hence being less entrepreneurial or innovative. In
turn, the parents follow the principle of primogeniture, grooming him for the leadership
of the family and its business.
Gersick et al. (1997) also mentions the other systems existing in the world, like
coparcenary systems (as in Chinese traditions, where the estate is divided equally
among the heirs and the Swiss Benjamin rule, where the youngest son inherits the
farm) helped stabilize ownership transitions and maintain order within families and
societies where they were dominant.
Katz (1992) defined the term "employment status choice'" as "the vocational
decision process in terms of the individual's decision to enter an occupation as a wage-
or-salaried individual or a self-employed one."
Dyer (1986) developed an integrative model of entrepreneurial careers
describing four essential core dimensions of a theory of entrepreneurial careers.
According to Dyer, career choice is determined by three factors: individual factors
(demographic as well as psychographic factors), social factors (e.g. role models, family
support, and culture), and economic factors (e.g. lack of employment opportunities and
resource networks).
The relationship of career choice and succession has been noted. Zellweger et al.
(2011) state that “For those firms that view the family as the wealth creation vehicle
and strive to create new businesses over time, they may be able to move beyond the
succession model which is based on identifying the single most competent heir to
become the CEO.”
A large number of studies in the field of Entrepreneurship research (Kolvereid
1996b; Carr and Sequeira, 2007; Madden et al., 1992) have relied on the theory of
planned behavior (Ajzen, 1991), which seeks to explain entrepreneurship by focusing
extensively on entrepreneurial intentions. The theory states that when, an individual’s
attitudes are favorable towards that behavior, he experiences strong subjective norms
towards that behavior, and expects to be successful in the performance of that
behavior, then the positive intentions towards that behavior will be evident. It has been
shown that intentions are the single best predictor of planned behavior, including of
Entrepreneurship (Krueger and Carsrud, 1993). Krueger and Carsrud (1993) stated that
intentions offer insights into planned behavior even without observing the actual
behaviors. Therefore, if the successor shows strong intentions to join and take over the
family business, this can serve as a strong indication of their future behavior of actually
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joining the family business.
In another study (Karima and Habib, 2012), succession planning was embedded
in the Theory of Planned Behaviour to understand the determinants of succession in
Tunisian FMBs. It was found that managerial succession presents as an intentional
behavior; its planning is determined in Tunisian family firms by the desirability of
succession (an incumbent's desire to keep the business in the family), its feasibility (the
affective commitment of a trusted and capable successor to take over) and its
conformity with social norms (the family's commitment to retain the business).
Handler (1989, 1992) studied the factors causing a positive succession
experience. She identified the factors which lead to a positive succession experience.
Iannarelli’s (1992) study found that the successor’s career experience starts with
early socialization process into the family firm during the preteen years. More factors
critical to developing leadership interest in the family firm were identified.
Other studies have focused on specific next-generation family members -
daughters (Barnes, 1988; Dumas, 1989, 1990; Iannarelli, 1992), younger sons (Barnes,
1988), and siblings (Friedman, 1991). Alcorn (1982) asserts that the younger sibling
would usually feel guilty if they were to replace an older family member in the firm's
power structure.
Swogger (1991) and Friedman (1991) have also examined sibling relationships
in the succession process.
Sharma and Irving (2005) has established that a successor’s commitment towards
the family business is a key desirable attribute, and takes four forms – affective (a
perceived desire arising from the self), normative (a perceived sense of obligation
towards the family), calculative (a perceived sense of opportunity costs involved), and
imperative (a perceived need due to a lack of alternative career choices).
Zellweger et al. (2011) found that students who intended to become employees
outside the family firm shared a lower independence motive, for example, the
importance of being your own boss, compared to students who assumed a leadership
role in the parental firm.
A study of 106 German family firms (Schroeder and others, 2011) found that
personality traits (i.e., openness and agreeableness), gender, adolescent identification
with the family business, perceived parental job rewards, and parental succession
preference and preparation significantly differentiated their career choice intentions.
Rastogi and Agrawal (2010) studied the perception and mindset of the children
from family businesses in north India. It was shown that demographic variables like
level of education and gender influenced the decision to join the FMBs. Additionally,
the pressure from the family members and their own self-interest in joining were major
factors influencing the decision to join the FMBs.
When the entrepreneurial intentions of college students in China and Pakistan
(Shujahat et al., 2012) were studied for perceived desirability, feasibility or intentions,
similarities were found in perceived desirability and perceived feasibility, but work
experience was found to have no impact in either country. The study also found that
while family business background had a positive impact on intent through perceived
desirability, family income had no positive impact. In addition, Chinese entrepreneur
parents acted as a role model to provide support to the next of kin or children in their
entrepreneurial start-ups.
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Post-succession studies
Post succession studies focus on the post-succession phase and on the impact of
success on the firm.
The success of succession is directly impacted by four dimensions;
communication, timing, agreement, and sequence between the incumbent and
successor (Dyck et al., 2002), and further by the willingness of the successor to take
over the business, preparation level of the successor, and the relationship between the
successor and the owner-manager (Venter et al., 2005).
Further, the presence of a strong organizational culture would increase the
organization’s chances for survival (Haveman and Khaire, 2004). Successors in
organizations with a strong culture should not shun these firms, but instead should
consider i) the degree of shared values between the older generations and successor; ii)
the successor’s age and experience; and iii) the level of older generation involvement
in the family business after succession (Harvey and Evans, 1995).
Handler (1989) found that a positive succession experience depends on
fulfillment of individual needs, such as individual influences (including career
interests, psychological needs and life stage needs) and conversely on relational
influences (including sibling accommodation and boundary issues).
Geographic, Economic and Demographic Factors
A vast majority of the published work on firm succession are single-region or
single-industry studies. (Bau et al., 2013). Other work investigates succession in
mostly Anglo Saxon countries with over 50 percent of studies reviewed from the USA
and 10 percent from Canada or UK.
Morck and Yeung (2003) propose that family firms in the formerly planned
economies of Central and Eastern Europe may be different from American and
Western European family businesses. Bau et al. (2013) states that succession research
could benefit from the increased attention to context.
It has been shown that country context is important for the evolution of
ownership succession (Berenbeim, 1990; Chau, 1991; Corbetta and Montemerlo, 1999;
Scholes et al., 2007; Stravou, 1998). Venter et al. (2005) studied 332 family firms in
South Africa showing the initial willingness of the successor to take over from the
incumbent and the relationship between the two, as an explanatory cause for their
satisfaction with the succession process and firm profitability.
Other research has considered different attributes across specific geographical
regions and shown that geography affects behaviors. For example, Zellweger et al.
(2011) shows that in Hungary, the founder option is preferred to any other career
options; in Germany, the employment option is preferred to succession option; and in
New Zealand, the career path is strongly preferred.
Issues in Career Choices of Successors in Family Business
There has been a lot of research done in the subject of family business and more
specifically, on the critically issue of succession. However, there still remain certain
issues unaddressed, which warrant attention.
Firstly is the lack of studies relating to family businesses in India. There have
been few articles in various journals (Ward, 2000; Sharma and Rao, 2000; Rastogi and
Agarwal, 2010), including an issue of Family Business Review devoted to India
Page 12
12
(December 2000). Given the emphasis on studies from the US and Europe, it would
help family firms understand issues relevant to their environment.
This brings us to the second issue of relevance of the factors. While there are
numerous studies on factors influencing succession, the factors important in the Indian
family businesses India are not yet known. The limited studies have shown some
factors as significant (Sharma and Rao, 2000), these in comparison to the other factors
(eg. parental influence, self-efficacy, education, presence of other family members,
etc.) are still not investigated. These factors have been shown to be important
determinants in career decisions in the developed countries, (Zellweger et al., 2011)
but these are still not adequately researched in India
The third issue is the importance and impact of the family and socio-cultural
factors on the successor’s decisions, which still has a gap. Given the prevalent joint
family system, the presence of the patriarchal structure in families and businesses, and
primogeniture still being followed (Ward, 2000; Sharma and Rao, 2000), the
implications of these factors on successors’ decisions is still an under researched area.
It has been shown that these external factors do play an important role, but the
individual aspirations with the expectations of family interests being paramount is an
area which future researchers can consider. This becomes even more important, given
the fact that the family structures would encourage family successors to take over, but
increasingly we still do not see any significant number of family businesses which go
beyond the third generation, as first stated by Ward (2000).
Lastly, the combination of the individual aspirations coupled with self-efficacy
needs to be researched. Zellweger et al. (2011) has shown that the presence of a high
degree of self-efficacy is a strong indicator of entrepreneurial intentions, as compared
to successors joining the family business. However, then this would suggest that those
joining the family business would have lower self-efficacy than the intended
entrepreneurs. There is a gap in research which could study successors in family
businesses for their self-efficacy, especially in the developing countries as the joining
of family businesses may be more challenging and fulfilling.
Conclusion
A significant amount of research has been done in the area of succession in
family businesses.
Increasingly, we can see more publications devoted to this field, focusing on
various critical areas including succession. We find that there are still areas of potential
research like contextual studies for India, understanding of the relevant factors
influencing career choices, impact of socio-cultural factors, impact of societal
influence on individual preferences, and even primogeniture with the increased
influence of women in family businesses. While there are other issues which may come
up in the near future, we feel that the traditional cultural families will find it
increasingly challenging to face and address these various issues. We hope that future
research in this area will help answer the questions that these challenges will bring.
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ISSUES IN CAREER CHOICES OF SUCCESSORS IN FAMILY
BUSINESSES: PERSPECTIVE FROM LITERATURE REVIEW
Rajiv Agarwal
S.P. Jain Institute of Management and Research, India
Arya Kumar
Birla Institute of Technology and Science, India
Keith D'Souza
S.P. Jain Institute of Management and Research, India
Abstract
Successors play a critical role in the future of family businesses, to either grow,
maintain or sometimes even wind them up. Succession depends upon multiple factors
including intent of the successor and the reasons for the successor to join the family
business. This paper attempts to undertake a detailed literature review on succession in
family managed businesses. The rationale for joining family businesses is examined
around succession as a process, analysis at multiple unit levels, the role of the founders
and other members, the phases of succession, geographic, economic and demographic
factors. The objective is to identify the issues in career choices and the gaps that exist
in research particularly with reference to Indian economy.
Keywords: family firm, succession, career, ownership, incumbent