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Transgenerational Succession and R&D Investment: A Myopic Loss Aversion Perspective

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  • Weiwen Li
  • Garry D. Bruton
  • Xinchun Li
  • Shuang Wang

Abstract

A transgenerational leadership transition is one of the most critical events in the life cycle of family firms. Drawing upon the myopic loss aversion (MLA) perspective, we argue that outgoing leaders and other company stakeholders tend to closely watch the later-generation successors immediately after a transgenerational succession, and thus the successors will focus on short-term developments and invest less in R&D activities. Employing the difference-in-differences approach, we find empirical support for our argument that transgenerational succession decreases R&D intensity. The negative effect of transgenerational succession is more pronounced when the later-generation successors suffer from a higher level of MLA.

Suggested Citation

  • Weiwen Li & Garry D. Bruton & Xinchun Li & Shuang Wang, 2022. "Transgenerational Succession and R&D Investment: A Myopic Loss Aversion Perspective," Entrepreneurship Theory and Practice, , vol. 46(1), pages 193-222, January.
    • Handle: RePEc:sae:entthe:v:46:y:2022:i:1:p:193-222
    DOI: 10.1177/10422587211038479
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