Document Type

Student Research Paper

Date

Spring 2020

Academic Department

Business

Faculty Advisor(s)

Dr. Petru Sandu

Abstract

Family businesses are the backbone of the world economy creating two-thirds of the global GDP (Family Firm Institute, 2017). In the U.S. alone over half of GDP is accounted for from family businesses (Vera and Dean, 2005). Although the family business sector has been more thoroughly investigated over the past years (Chalus-Sauvannet, Deschamps & Cisneros, 2016), there are still many areas that require further efforts. Among these topics, succession planning plays a crucial role for the family business continuity and renewal. It is estimated that more than 70 percent of family owned businesses to not survive the transition from founder to second generation (Grassi Jr. & Giarmarco, 2008). Following a qualitative methodology, this research aims to further the understanding of the challenges faces by family business successors in transitioning from the first to the second generation. The research is focused mainly on leadership succession with less emphasis on ownership transfer. Interviews with leadership successors of ten family businesses, who inherited the leadership from the founders of the business, were conducted. The semi-structured interviews lasted for about one hour. Six of the interviews were conducted face to face and the remaining four were conducted over the phone. There were two additional interviews that needed to be discarded because the companies did not fit the criteria needed for the research. The family firms were selected from the members of the High Center for Family Business at Elizabethtown College and other businesses in the area, across a variety of industries. The interviews were then analyzed, and the names of the companies were coded in order to keep companies' anonymity. As a result of the analysis the challenges that the companies faced and their response to each challenge were structured. The main challenges that were identified were: lack of support from employees, lack of knowledge on how to transition, lack of stewardship, different leadership styles, working with siblings, incumbent's inability of letting go, and strategic changes brought by the successor. Not all the successors went through the same challenges and the particular context and industry factors may have influenced some of the challenges. For example, for some families the ownership of other family businesses has help them to gain knowledge on how the succession should take place and when to start the process. Another example is that not all the companies had siblings working in the company. Only four of the companies had siblings currently working in the company and of those four, three stated that their siblings had complimentary skills to their own and this is what allowed them to work so well together and has helped them avoid conflicts. The findings, conclusions, and further research directions are presented in the paper.

a crucial role on a global scale and it has been researched in depth in recent years (Chalus-Sauvannet, Deschamps & Cisneros, 2016). Family businesses make up a large section of the world’s GDP (Van der Merwe, 2011), and in the U.S. alone, over half of GDP is accounted for from family businesses (Vera, Dean, 2005). In 2014, family businesses made up 19% of the global economy, which had increased significantly from 15% in 2005 (Heidrich, Makó & Csizmadia, 2016). Among the important roles that family businesses play are job creation, knowledge transfer, and the stabilization of the economy (Heidrich, Makó & Csizmadia, 2016).

Notes

BA 400 Senior Project in Business

Awarded Best Presentation for the second section at the Annual Student Conference in Business and Economics.

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