Lloyd P. Steier

Toward an Integrative Model of Effective FOB Succession

Given that less than 10% of family owned businesses (FOBs) survive into the third generation, the issue of top executive succession has received a good deal of attention. Unfortunately, the literature on the topic is fragmented, as it deals with different parts of the elephant. This synthetic effort tries to put together the pieces to (1) derive a more encompassing model of what it takes for a succession to succeed, (2) determine the trends, consensus findings, as well as the gaps in our conceptual and empirical knowledge, and (3) suggest areas for further research.

Lost in time: intergenerational succession, change, and failure in family business

Previous research has shown there is a high failure rate (70%) for successions in family owned businesses. Other researchers have suggested that the reasons why such successions fail are: unclear succession plans, incompetent or unprepared successors, and family rivalries. In this paper, poorly performing or failed family enterprises were tracked for several years to determine what happened. Sixteen intergenerational successions, which were followed by poor performance ending either in successor dismissal or bankruptcy, were studied. Findings indicated that intergenerational successions were often hampered by an inappropriate relationship between the past and the future. Specific problems identified include: excessive attachment to the past by an overly dependent and conservative successor, a rejection of the past by a rebellious one, or an incongruous blending of past and present by an unsure and wavering new leader. The fact that these patterns occur with such regularity suggests that they be studied further as syndromes that must be combated by a great many family owned businesses. (SFL)

Sources of Heterogeneity in Family Firms: An Introduction

Family business researchers have devoted substantial attention to comparing family firms with nonfamily firms. Many of these comparisons rely on dichotomous variables, which implicitly treat family firms as homogeneous entities. However, recent studies have started to use moderators and mediators as well as continuous measures of family involvement in recognition of the heterogeneity of family firms. The articles and commentaries in this special issue contribute to a better understanding of that heterogeneity by examining how vision and goals, as well as the discretion engendered by family control, influence the innovation, internationalization, succession, professionalization, and proactive stakeholder engagement of family enterprises.

Sources and Consequences of Distinctive Familiness: An Introduction:

Family firms are unique organizational forms as a result of the interactions between family members, the family, and the business. Distinctive familiness has been used as a notion to encompass these interactions and the consequent systemic synergies that could lead to competitive advantages. This introduction discusses the notion and reviews the papers and commentaries in this special issue within the context of their contributions to our understanding of the possible sources and consequences of distinctive familiness.

Family Firms, Plural Forms of Governance, and the Evolving Role of Trust

Trust plays an important role in the governance of most organizations. For the family firm, trust represents a particularly important source of strategic advantage. For example, in the early stages of firm development, the trust indigenous in most family relationships allows firms to reduce transaction costs substantially. As family firms evolve, so does the optimal role of trust as a governance mechanism. Ironically, in some cases, what was once a very resilient trust is replaced by an atmosphere of fragile trust or even distrust and an important source of strategic advantage is lost. As family firms naturally evolve, a major transitional task for them is optimizing the changing role of trust in firm governance. Using research-based case examples, this paper seeks to further the understanding of the dynamics of trust as a governance mechanism and source of competitive advantage within family firms.

Next‐Generation Entrepreneurs and Succession: An Exploratory Study of Modes and Means of Managing Social Capital

Relationships and connectivity play an enhanced role in most models of the new economy. For many firms, strategic advantage resides in the social capital (or relational wealth) they are able to nourish and maintain. This important asset is accumulated over time and not easily traded or transferred. For family firms with long-term continuity goals, the transfer and management of this largely intangible asset are a most significant activity. This research is based on interviews of next-generation entrepreneurs in 18 different firms. It contributes to the family business and more general management literature by identifying different ways in which relational wealth is transferred, created, and managed. Four different modes of transferring social capital emerged from the data: unplanned, sudden succession; rushed succession; natural immersion; and planned succession and deliberate transfer of social capital. Additionally, seven means of managing social capital emerged: deciphering existing network structures, deciphering the transactional content of network relationships, determining criticalities, attaining legitimacy, clarifying optimal role, managing ties through delegation and division of labor, and striving for optimal network configuration and reconstituting network structure and content. This paper concludes with a series of propositions for further research.

Variants of agency contracts in family-financed ventures as a continuum of familial altruistic and market rationalities

Abstract Funding is a critical dimension of new creation. Although instances of family involvement in new venture financing are common, ironically, their role has been largely ignored in much of the mainstream business and economics literature. When family members invest in the ventures of other family members they must make many choices—either explicitly or implicitly—about organizational form and governance. Consequently, the governance of these exchange relationships tends to be highly variable. This paper explores the primary rationalities governing the exchange relationships in family investment decisions during the early stages of new venture creation. It presents activities as variants of agency contracts occurring within a continuum of familial “altruistic” and business “market” rationalities. Existing venture capital theory is extended through the introduction of rationalities and more comprehensive models of decision-making.

Emerging Paths of Family Entrepreneurship Research

This futuristic commentary reviews family business research since its beginning more than 30 years ago. Prior to 2000, disciplinary roots, professional organizations, and early milestones are identified. More recent books, journals, and special issues are noted, and conceptualizations, theories, and databases are compared and contrasted. Lastly, current and future research paths or directions are identified and discussed, and researchers are challenged to move ahead into new and different research arenas.

Governance and Trust in Family Firms: An Introduction

We provide an overview of the articles and commentaries devoted to theories of family enterprise in this special issue and link them to the concept of trust. Trust is a governance mechanism and theoretical construct of particular relevance for family firms, encapsulating some of their advantages and disadvantages. Trust is also linked to theoretical frameworks such as agency theory, stewardship theory, social capital theory, and transaction cost economics that are often used in family business studies, including those found in this special issue. Consequently, we advance trust as a bridging concept to reconcile and enhance our understanding of family firms as a unique organizational form.

Entrepreneurial Management and Governance in Family Firms: An Introduction

Many organizations, ranging from small entrepreneurial start–ups to large, multi–business and multi–national enterprises, exhibit a family dimension. Although there is much evidence that this familial dimension is pervasive in organizing economic activities, it remains understudied. The articles in this special issue further our understanding of family businesses and how they might be usefully managed and organized at operational and policy levels. They examine important topics—management succession, agency costs in family versus non–family firms, the effects of culture, and family elites in rent–seeking societies—and improve our understanding of the role of family in entrepreneurial wealth creation at both firm and societal levels. Importantly, these papers further our understanding of the contingencies and contexts wherein family based approaches to organizing enterprise might yield advantages or disadvantages.