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Corporate Governance and Management Succession in Family Businesses

Author

Listed:
  • Phillip Phan

    (Rensselaer Polytechnic Institute)

  • John E. Butler

    (Hong Kong Polytechnic University)

  • Soo Hoon Lee

    (Old Dominion University)

Abstract

Family businesses carry the weight of economic wealth creation in most economies. In the U.S. alone, family businesses account for 80 to 90 percent of the 18-million business enterprises in the United States, and 50 percent of the employment and GNP. In many ways, the family business is synonymous with the entrepreneurial organization as many were started as a means to provide for the financial well being of the founder's family. Founders who went on to build family empires started many of today's large corporations (e.g., Anheuser-Busch, Dupont, and Seagrams). Still, we know relatively little about the issues peculiar to a family business, such as the process and impact of succession planning. Yet, no recurring event in the life of the family firm is more critical to survival than the transfer of power from the incumbent to the successor. Organizations are especially susceptible to loss of vision and purpose during periods of CEO transition, as the leaders who helped shape the vision are replaced by others who may not share the same values and abilities. This study addresses the importance of understanding business succession planning by proposing and empirically verifying a model of succession planning and firm effectiveness in the family business. It links aspects of succession planning and successor preparation to the effectiveness of transition and from performance. The model depicts multiple interactive relationships, with emphasis placed not only on the planning and process-specific but also on successor-specific factors that lead to effectiveness.

Suggested Citation

  • Phillip Phan & John E. Butler & Soo Hoon Lee, 2005. "Corporate Governance and Management Succession in Family Businesses," Industrial Organization 0506002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpio:0506002
    Note: Type of Document - pdf; pages: 33
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0506/0506002.pdf
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    References listed on IDEAS

    as
    1. Vasudevan Ramanujam & N. Venkatraman, 1987. "Planning system characteristics and planning effectiveness," Strategic Management Journal, Wiley Blackwell, vol. 8(5), pages 453-468, September.
    2. David Norburn & Sue Birley, 1988. "The top management team and corporate performance," Strategic Management Journal, Wiley Blackwell, vol. 9(3), pages 225-237, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Binz Astrachan, Claudia & Astrachan, Joseph H. & Kotlar, Josip & Michiels, Anneleen, 2021. "Addressing the theory-practice divide in family business research: The case of shareholder agreements," Journal of Family Business Strategy, Elsevier, vol. 12(1).

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    More about this item

    Keywords

    corporate governance; family businesses; management succession; firm performance; successor characteristics;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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