The Enigma of the Family Successor–Firm Performance Relationship: A Methodological Reflection and Reconciliation Attempt

Abstract

Empirical studies examining firm performance following CEO succession in family firms predominantly document inferior performance of family successors. This evidence is at odds with general theoretical literature that attests a positive effect of family involvement inside the firm. To explore this enigma, we theoretically and empirically disentangle the influence of the CEO attribute family member (i.e., the CEO is affiliated to the family) on post-succession firm performance, from other, distinct CEO attributes (e.g., CEO-related human capital). Our analysis on the individual CEO level shows that after respective controls, the family member attribute is significantly positively related to post-succession firm performance.

The Psychological Foundations of Management in Family Firms: Values, Biases, and Heuristics

“…Therefore, we propose that comparative research studying narcissistic leadership may counter alternative theories of successful succession in family business (e.g., servant leadership). Such research might benefit from Ahrens et al’s (2019) suggestion to consider multiple data sources, such as direct interviews, bibliographical information on CEOs, family members’ statements in newspapers, and linguistic software to analyze them.…”

Entrepreneurial Orientation and Family Firm Performance: The Moderating Role of TMT Identity-Based and Knowledge-Based Faultlines

“…Family firms (FFs) are a specific context to analyze EO, where the focus on the search for balance between economic and non-economic goals (Chrisman et al, 2012; Kotlar & De Massis, 2013), the intention to transfer the firm to the next generation (Calabrò et al, 2018; Chua et al, 1999), and the presence of a transgenerational entrepreneurial spirit (Ahrens et al, 2019; Basco et al, 2019; Clinton et al, 2018) are some of the main features shaping the EO–FF performance relationship. As in other firms, in FFs, EO needs to be properly managed to reap its potential (Hughes, Filser, et al, 2018; Hughes, Hodgkinson, et al, 2018).…”

The what and how of Family business paradox: Literature-inspired distillations and directions

“…In line with its paradoxical nature, however, familiness could be expected also to increase successor discretion by magnifying the positive effect of a successor's political acumen. We could test both Mitchell's propositions and the 4Ls model by investigating whether a successor who had developed confidence, self-efficacy, and legitimacy as a result of going outside the firm (L1) and/or previous senior-level involvement in it (Ahrens et al 2019), has higher successor discretion, evidenced in their undertaking more adventurous strategic change (Zhao et al 2018) following succession.…”

“…Ahrens et al (2019) touch on successor learning via an investigation of the impact of human capital on post-succession firm performance. They examined the apparent contradiction between empirical findings that predominantly document inferior performance of post-succession of family CEOs, and the theoretical literature that predicts positive effects of family involvement.…”