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Corporate Governance and Management Succession in Family Businesses

Listed author(s):
  • Phillip Phan

    (Rensselaer Polytechnic Institute)

  • John E. Butler

    (Hong Kong Polytechnic University)

  • Soo Hoon Lee

    (Old Dominion University)

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.

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Paper provided by EconWPA in its series Industrial Organization with number 0506002.

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Length: 33 pages
Date of creation: 04 Jun 2005
Handle: RePEc:wpa:wuwpio:0506002
Note: Type of Document - pdf; pages: 33
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