Intergenerational Differences in Family Business Management and Their Influence on Business Profitability

Abstract

The generational change in the family business opens up expectations of strategies such as sustainability, professionalisation and internationalisation. Yet, there are gaps in current literature which fail to explain whether there are benefits in such strategies according to their management, their generational status, and their effects on performance. This paper compared first with second and later generation companies through the relevant characteristics. A regression analysis was applied to a sample that was identified by the Spanish Family Business Institute with information on growth strategy, corporate governance, professionalisation, and ownership, that is supported by financial data for the period of 2016–2020. The results showed that, although the differences in terms of profitability were small between generations, there were significant differences in management that affected performance. Growth tended to be lower in the second and subsequent generations, which also h a greater tendency to internationalise, being motivated by the professionalisation of management. Previous works in the literature have analysed differences in profitability between generations, however the analysis in this present work investigated the origin of these differences. The results showed disparities in management that allowed for the obtaining of different profitability indices, and therefore are of practical importance in the management of the internationalisation, growth, and sustainability of the family business in the face of intergenerational succession.

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