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No Successor, No Success? The Impact of a Little Son on Business Performance

Author

Listed:
  • Naomi KODAMA
  • Yoshiaki MURAKAMI
  • Mari TANAKA

Abstract

The dynasty model, which assumes the presence of intergenerational altruism, implies that business owners will have more incentive to improve the firm performance if they expect their children to take over their firms. This study empirically examines how top managers' expectations about future family succession affect the performance of small businesses. Utilizing the sex of the top manager's first-born child as an instrumental variable for the manager's expectations about business succession by his child, we find that the existence of a potential family successor has a positive effect on profit. We also find that the presence of a potential family successor induces performance-enhancing actions and behaviors on the part of managers, such as improving operational efficiency, selecting better suppliers, and investing in information technology.

Suggested Citation

  • Naomi KODAMA & Yoshiaki MURAKAMI & Mari TANAKA, 2021. "No Successor, No Success? The Impact of a Little Son on Business Performance," Discussion papers 21013, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:21013
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    File URL: https://www.rieti.go.jp/jp/publications/dp/21e013.pdf
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    Cited by:

    1. Marie Mikušová & Václav Friedrich & Muhammad Kamal Subhani, 2025. "Do economic and cultural differences influence family businesses? Comparative study from Czechia and Pakistan," Future Business Journal, Springer, vol. 11(1), pages 1-30, December.
    2. Kumanomido, Hiroshi & Takayasu, Yutaro, 2024. "Elite Persistence in Family: The Role of Adoption in Prewar Japan," OSF Preprints rmdyp, Center for Open Science.
    3. repec:osf:osfxxx:rmdyp_v1 is not listed on IDEAS
    4. Hiroshi Kumanomido & Yutaro Takayasu, 2025. "Elite Persistence in Family: The Role of Adoption in Prewar Japan," Rationality and Competition Discussion Paper Series 537, CRC TRR 190 Rationality and Competition.
    5. Domnisoru, Ciprian & Miller, Robert A., 2025. "Planning for Family Succession," IZA Discussion Papers 17800, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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