The Enigma of the Family Successor–Firm Performance Relationship

[We’re pleased to welcome authors Jan-Philipp Ahrens of the University of Mannheim, Andrea Calabrò of IPAG Business School, Jolien Huybrechts of Maastricht University, Michael Woywode of the University of Mannheim and the Centre of European Economic Research. They recently published an article in Entrepreneurship Theory and Practice entitled “The Enigma of the Family Successor–Firm Performance Relationship: A Methodological Reflection and Reconciliation Attempt,” which is currently free to read for a limited time. Below, they briefly describe the motivation and impact of their research.]

What motivated you to pursue this research?

The vast majority of firms on the planet are family firms. Often they are the institutionalized ‘Gestalt’ of the family’s or founder’s work, identity, and vision – and are typically managed for the long run so that a unique social constellation wrought by social capital, a vivid culture and a mutual commitment emerges over time. In essence, this includes an aspiration of an intergenerational continuity in family leadership and values, as well as in obligations and in the reciprocity that this entails. Interestingly, this peculiar long run horizon that is very difficult to imitate for non-family firms – as they cannot offer the same continuity in relationships and are more short term oriented – has been found to be a source of competitive advantage. At the same time, quite paradoxically, extant research has frequently documented that choosing a family successor is detrimental to firm performance. Thus – especially because several of us have a family firm background – we thought that there might be more to discover that could help to explain this enigma.

In what ways is your research innovative, and how do you think it will impact the field?

Our article takes a fresh and reconciliatory perspective by re-conceptualizing succession in family firms and, in particular, by making the social individual, i.e. the family successor in his/her social context and the reciprocal human interactions that constitute this group, the unit of analysis. Relying on social exchange theory and its core concepts of generalized exchange, the norm of reciprocity, and extended credit, we develop a new framework that can explain how social capital, values, and identity can be perpetuated across generations which – we argue – is of singular advantage to family successors. And indeed, when we isolate and separate important economic forces on the successor level, we observe that a “family member attribute” of the successor – understood as a CEO attribute – is performance enhancing or put differently: All other attributes equal, the family successor is the superior successor. That in itself has a series of implications for family firm theory. Of course, that is only the cocktail-party-version here, the full arguments are inside the article, which we highly recommend, especially to practitioners. The bottom line is that there is often value in the continuity of family leadership, as garnered social capital, identity, and values are retained.

What is the most important/ influential piece of scholarship you’ve read in the last year?

This would be Marcus Aurelius’ “Meditations” (Roman Emperor 161-180). Not only does it directly and in their core reveal the views on the world of the most powerful person of the time, which is entirely breathtaking and inspiring to read, but it is a towering literary monument to governing and human precepts of service and duty.

We hope that our work encourages future researchers to continue to find ways to examine other factors at the individual level that influences family firm outcomes. Only through the continued pursuit of future research at multiple levels within the family firm can we come to a better understanding of why the family firm is the unique environment that it is.

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