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A Transaction Cost Rationale for Transition of the Firm within the Family

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  • Bjuggren, Per-Olof
  • Sund, Lars-Goran

Abstract

This paper is about the transition of ownership of shares in small and medium-sized enterprises (SMEs) within the family (i.e. from parents to children). In spite of the fact that such successions are rather prevalent among SMEs, there are no explanations in the literature as to why transitions are preferred to outright sale. In this paper we assume that the decisive factor in the choice of succession mode is the desire for efficiency expressed as the highest possible firm value. A firm should stay in the family if this is the most profitable transition alternative. One reason for intergenerational succession to be the most profitable alternative is knowledge idiosyncrasy. However, the benefits of knowledge idiosyncrasy cannot be reaped without an institutional framework that constrains human activities in a proper way. A part of an institutional framework are the laws that act as constraints in successions. Do these laws foster or prevent efficient transition of family firms? This question is addressed in a study of the Swedish inheritance and inheritance tax laws in the light of the policy recommendations on succession made by the European Commission. Copyright 2002 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Small Business Economics.

Volume (Year): 19 (2002)
Issue (Month): 2 (September)
Pages: 123-33

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Handle: RePEc:kap:sbusec:v:19:y:2002:i:2:p:123-33

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Web page: http://www.springerlink.com/link.asp?id=100338

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Cited by:
  1. Johan Eklund & Johanna Palmberg & Daniel Wiberg, 2013. "Inherited corporate control and returns on investment," Small Business Economics, Springer, vol. 41(2), pages 419-431, August.
  2. Bird, Miriam & Wennberg, Karl, 2014. "Regional influences on the prevalence of family versus non-family start-ups," Journal of Business Venturing, Elsevier, vol. 29(3), pages 421-436.
  3. Lars-Göran Sund & Per-Olof Bjuggren, 2007. "Family-owned, limited close corporations and protection of ownership," European Journal of Law and Economics, Springer, vol. 23(3), pages 273-283, June.
  4. Enrico Santarelli & Francesca Lotti, 2005. "The Survival of Family Firms: The Importance of Control and Family Ties," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(2), pages 183-192.
  5. Leroy, H. & Manigart, S. & Meuleman, M., 2009. "The planned decision to transfer an entrepreneurial company," Vlerick Leuven Gent Management School Working Paper Series 2009-13, Vlerick Leuven Gent Management School.
  6. Christian Koropp & Dietmar Grichnik & André Gygax, 2013. "Succession financing in family firms," Small Business Economics, Springer, vol. 41(2), pages 315-334, August.
  7. Mattias Nordqvist & Karl Wennberg & Massimo Bau’ & Karin Hellerstedt, 2013. "An entrepreneurial process perspective on succession in family firms," Small Business Economics, Springer, vol. 40(4), pages 1087-1122, May.
  8. Geraldine Ryan & Bernadette Power & Noreen McCarthy & Paul Braidford, 2011. "Regional Influences oBusiness Transfers within the British Isles," ERSA conference papers ersa10p1094, European Regional Science Association.
  9. Mann, Stefan, 2003. "Theorie und Empirie agrarstrukturellen Wandels?," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 52(3).

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