599688
research-article2015
FBRXXX10.1177/0894486515599688Family Business ReviewDaspit et al.
Article
Examining Family Firm Succession
From a Social Exchange Perspective: A
Multiphase, Multistakeholder Review
Family Business Review
2016, Vol. 29(1) 44­–64
© The Author(s) 2015
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DOI: 10.1177/0894486515599688
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Joshua J. Daspit1, Daniel T. Holt1, James J. Chrisman1,2, and Rebecca G. Long1
Abstract
We use a social exchange perspective to review family firm succession literature owing to its fit with the multiphase,
multistakeholder nature of the process. We searched the history of 34 journals, finding 88 published or forthcoming
articles that quantitatively examined succession. We consider the primary phases of the management succession
process (ground rules, successor development, and transition) and the relevant stakeholder exchanges occurring
during each phase, including exchanges between incumbents and successors, within family boundaries, and across
family boundaries. We contribute to the family firm succession literature by identifying how a social exchange
perspective can help guide future research.
Keywords
family firm, succession, social exchange, review
Introduction
In January 2006, Kongō Gumi ended a 1,400-year,
40-generation history as a family-owned business. That
same year, over 70% of family-owned firms established
in the previous 10 years were no longer in business (U.S.
Census Bureau, 2015). The reasons for such successes
and failures are many and varied, but repeatedly clearing
the hurdle of succession is fundamental. A family’s
vision and intention for transgenerational sustainability
are among the most important characteristics distinguishing family and nonfamily firms (e.g., Chua,
Chrisman, & Sharma, 1999; Zellweger, Kellermanns,
Chrisman, & Chua, 2012). Conceptually, sustained
transgenerational control of a family firm through management succession is critical for the family to meet its
goals and preserve the financial and nonfinancial wealth
it derives from firm ownership (Gómez-Mejía, Cruz,
Berrone, & De Castro, 2011). Most family firms, however, will not survive beyond the first generation, making succession one of the most critical issues (Ayres,
1990; Handler, 1994; Le Breton-Miller, Miller, & Steier,
2004) and dominant topics in family business (Chua,
Chrisman, & Sharma, 2003).
While prior reviews of succession offered key insights
into this complicated issue (e.g., Cabrera-Suárez, De
Saá-Pérez, & García-Almeida, 2001; Handler, 1994;
Nordqvist, Wennberg, Bau, & Hellerstedt, 2013), Long
and Chrisman (2014, p. 260) described the literature as
“atheoretical” with various “bits of established theories”
used to explain the findings of idiosyncratic samples.
Such a disjointed approach has oftentimes led researchers to ignore the dynamic nature of succession, viewing
it implicitly as a series of stand-alone events. A number
of works, however, clearly acknowledge succession as
“the actions and events that lead to the transition of leadership from one family member to another in family
firms” (Sharma, Chrisman, Pablo, & Chua, 2001, p. 21)
and have proposed sophisticated multiphase models of
the process (e.g., Cabrera-Suárez et al., 2001; Churchill
1
Mississippi State University, Mississippi State, MS, USA
University of Alberta, Edmonton, Alberta, Canada
2
Corresponding Author:
Joshua J. Daspit, College of Business, Mississippi State University,
P.O. Box 9581, Mississippi State, MS 39762, USA.
Email: [email protected]
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45
Daspit et al.
& Hatten, 1987; Le Breton-Miller et al., 2004). More
abstract, but just as insightful, are proposals that family
business succession is a process of transferring knowledge and transitioning roles as well as transferring management control (e.g., Cabrera-Suárez, 2005; Handler,
1994).
Thus, extant literature provides significant insights
into the multiphase succession process but offers little in
the way of a cohesive theoretical structure. The absence
of an overarching explanatory architecture signifies the
scarcity of theoretical approaches comprehensive
enough to adequately explain the motives, actions, and
meanings of multiple stakeholder groups inside or outside the family and/or firm. Following Long and
Chrisman (2014), we argue that a more practical understanding of succession calls for a theoretical framework
capable of absorbing the fragmented findings of existing
research—including the notion that family business succession is a process that includes multiple events over
time (Handler, 1994)—and explaining social structures
built through the repeated social interactions along with
the impact those structures have on behavior (e.g., Blau,
1964; Coleman, 1986).
In this article, we review the literature on management succession in family firms. We primarily deal with
intrafamily succession from parents to offspring, but our
review is also relevant to management succession
involving other stakeholders in family firms. We use a
theoretical framework that addresses the complexities
across multiple phases, as well as multiple stakeholders,
and provides a coherent basis for organizing and reconciling much of the extant literature on family business
succession, particularly insights grounded in theories of
social interaction such as social capital, agency, and network theories. For this task, we draw on social exchange
theory (e.g., Blau, 1964; Coleman, 1986; Ekeh, 1974;
Emerson, 1976; Homans, 1958; Levi-Strauss, 1971;
Mauss, 2000; Simmel, 1972), which is particularly wellsuited as a broad, encompassing perspective of social
relationships and is simultaneously capable of considering multiphase and multistakeholder issues central to the
succession process.
Specifically, the tenants of social exchange relate to
(a) perceptions of the value of the resources being
exchanged, (b) obligations and expectations that emerge
regarding those exchanges, and (c) the development and
maintenance of often-complex social relationships
resulting from recurring exchanges. These tenants map
well onto the (a) the exchange of knowledge and other
resources, (b) the development of commitment and trust,
and (c) the inculcation and appreciation of relational
norms and firm competencies by incumbents, potential
successors, family members, and other stakeholders
who are integral to the succession process. Put more
directly, social exchange theory allows us to discuss the
social structures that define, condition, and constrain
succession processes in family firms while retaining the
ability to fully incorporate individual motives and
agency. Furthermore, as Turner (2003, p. 322) has noted,
“because the actors can be individual people or collective actors such as corporations or nations, the micromacro problem of connecting people to structure is
obviated.”
Thus, using this micro–macro lens, we make two primary contributions to the succession literature. First, by
employing a social exchange perspective, we integrate
current knowledge on succession in a theoretical model
relevant to both family business and general management scholars. Second, a social exchange perspective
offers a conceptual foundation for examining exchange
relationships across various groups of stakeholders during different phases of the succession process. Social
exchanges occur, for example, between incumbents and
stakeholders, among family members, and between
stakeholders across family boundaries. An exchange
perspective provides a ready means to study the mechanics of such relationships and to understand how resources
are transferred among family stakeholders and between
family and nonfamily stakeholders. We extract insights
and offer directions for future research by examining
exchanges between multiple stakeholders across the primary phases of the succession process. We, thereby, provide a platform to develop new approaches and insights
into fundamental succession questions and offer a way
to organize succession knowledge.
Scope of the Review
To understand the multiphase, multistakeholder succession process, we focused on the management succession
literature with quantitative content, using a three-step
approach (Nordqvist et al., 2013). In the first step, we
identified succession-related articles in 34 prominent journals from management (Debicki, Matherne, Kellermanns,
& Chrisman, 2009), finance, and economics.1 The following keywords were used: succession, succession planning,
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Family Business Review 29(1)
continuity, transition, transfer, management transfer, transgenerational, trans-generational, intergenerational, and
inter-generational coupled with family business, family
firm, family enterprise, and family. Searches of titles and
abstracts of articles were conducted using the EBSCOhost
Business Source Complete database and journal websites.
Second, we supplemented the list of journals searched by
examining the references of recent succession reviews (De
Massis, Chua, & Chrisman, 2008; Long & Chrisman,
2014; Nordqvist et al., 2013).
Third, we reviewed and categorized each article as
quantitative, conceptual, or case study. Overall, we found
191 articles: 88 quantitative articles, 55 conceptual articles, and 48 case studies.2 Because we intended to focus
on the generalizable and verifiable stock of knowledge
about succession, we concentrated on quantitative studies (Chandler & Lyon, 2001; Yu, Lumpkin, Sorenson, &
Brigham, 2012). Manuscripts that reviewed or synthesized the literature, presented theoretically grounded but
untested models and propositions, reviewed books,
reported the transcripts from interviews with practitioners, or offered mathematical models were used where
appropriate, but were not systematically evaluated. We
recognize the value of such studies, but for this review,
we focus on relationships that were quantitatively examined to provide a foundation of accumulated, quantitative
findings rather than conjectures.
Succession Process Framework: Phases and
Stakeholders
To understand the multistakeholder manifestation of
exchange relationships across phases of the succession
process, we began by classifying articles according to the
phase of the succession process examined and the stakeholder interactions considered (see Table 1). Scholars
proposing multiphase models have variously suggested
that the transition consists of three (Cabrera-Suárez et al.,
2001; Dyck, Mauws, Starke, & Mischke, 2002), four
(Cadieux, Lorrain, & Hugron, 2002; Churchill & Hatten,
1987; Nordqvist et al., 2013), or more (Chrisman, Chua,
Sharma, & Yoder, 2009) phases. While the specifics
vary, each model generally aligns with Le Breton-Miller
et al.’s (2004) three-phase model, which we use to organize our review. In Phase 1, ground rules for the process
are established and communicated, potential successors
are identified, and a succession plan is created. In Phase
2, the abilities of potential successors are assessed and
training is provided for development. The power transfer
occurs in Phase 3 with the incumbent stepping down and
the chosen successor assuming the role of top manager.
The classification is also based on the actors involved in
the exchange, which includes (a) exchanges between
incumbents and successors, (b) exchanges involving
family members within or outside the firm, and (c)
exchanges involving family members and nonfamily
employees or other nonfamily stakeholders.
Examining the Succession Process
Using a Social Exchange Perspective
The social exchange perspective is regarded as one of
the most influential paradigms for understanding behaviors within the firm (Cropanzano & Mitchell, 2005).
With origins in anthropology, economics, social psychology, and sociology, social exchange theory examines types, mechanisms, and outcomes of social
interactions. In particular, it addresses interactions
within a social system that involve the exchange of valuable resources, create norms of trust and commitment as
well as other expectations that govern future exchanges
(Coleman, 1986; Emerson, 1976; Granovetter, 1985;
Long & Mathews, 2011; Yoo et al., 2014). Recognizing
the ubiquity of social interaction, social exchange theory
considers market and nonmarket interactions and
focuses on the role that norms of reciprocity, repeated
interactions, and social structures play in conditioning
and constraining social behavior. In other words, social
exchange theory provides an overarching mechanism to
understand the economic and social factors that govern
the allocation and exchange of scarce resources in a
social system.
The resources that are exchanged through social interaction can be either tangible or intangible and can have
either economic or socioemotional value (Cropanzano &
Mitchell, 2005; Ekeh, 1974; Emerson, 1976). Gouldner
(1960) argues that exchanges of resources are governed
by norms of reciprocity, representing universal expectations of mutually agreeable and in-kind behaviors. The
structural outcomes of repeated reciprocal interactions in
turn create overarching systems of obligation, expectations, and shared schemata (Coleman, 1986; Emerson,
1976; Granovetter, 1985; Long & Mathews, 2011) that
lead to two types of self-reinforcing reciprocity: direct/
mutual and indirect/unilateral. These underlie a continuum of exchange systems ranging from restricted to
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Daspit et al.
Table 1. Social Exchange Across Phases of Succession: An Overview of the Literature.
Phases of successiona
Phase 1: Ground rules and first steps
Creation of a vision for the firm’s future and the
process for succession planning to include identifying
the range of candidates to be considered
Social exchange stakeholders
A. Exchange between
incumbent and
successor: Individual
stakeholders (e.g.,
incumbent–successor
exchange)
B. Exchange within
the family boundary:
Among family
members (e.g.,
exchange between
family successor and
family employees)
C. Exchange across
the family boundary:
Between family
member and
nonfamily employees
or other nonfamily
stakeholders (e.g.,
exchange between
family successor and
nonfamily employees)
1A: Chrisman, Chua, and Sharma (1998); Corbetta
and Montemerlo (1999); Dumas, Dupuis, Richer,
and St.-Cyr (1995); File and Prince (1996);
Gallo (1998); Gilding (2000); Handler (1991);
Harveston, Davis, and Lyden (1997); Keating and
Little (1997); Sharma and Rao (2000); Sharma,
Chrisman, and Chua (2003a); Tatoglu, Kula,
and Glaister (2008); Venter, Boshoff, and Mass
(2005); Wright, Thompson, and Robbie (1992)
1B: Bachkaniwala, Wright, and Ram (2001);
Bennedsen, Nielsen, Pérez-González, and
Wolfenzon (2007); Birley (1986, 2002); Birley,
Ng, and Godfrey (1999); Bocatto, Gispert, and
Rialp (2010); Chua et al. (1999); Chung and Luo
(2013); Davis and Harveston (1998); Delmas
and Gergaud (2014); Diwisch, Voithofer, and
Weiss (2009); Eddleston, Kellermanns, Floyd,
Crittenden, and Crittenden (2013); Eklund,
Palmberg, and Wiberg (2013); Fahed-Sreih and
Djoundourian (2006); Huang (1999); Kirby and
Lee (1996); Koropp, Grichnik, and Gygax (2013);
Leon-Guerrero, McCann, and Haley (1998);
Lin and Hu (2007); Litz and Turner (2013);
Malone (1989); Mandelbaum (1994); Marshall
et al. (2006); Moores and Mula (2000); Motwani,
Levenburg, Schwarz, and Blankson (2006); Nam
and Herbert (1999); Neubauer (2003); PérezGonzález (2006); Poza, Alfred, and Maheshwari
(1997); Poza, Hanlon, and Kishida (2004); Royer,
Simons, Boyd, and Rafferty (2008); Schröder,
Schmitt-Rodermund, and Arnaud (2011); Sharma,
Chrisman, and Chua (2003b); Shepherd and
Zacharakis (2000); Sonfield and Lussier (2004);
Stavrou (1999); Vallejo (2008); Vera and Dean
(2005); Westhead (2003); Wiklund, Nordqvist,
Hellerstedt, and Bird (2013); Zellweger et al.
(2012)
1C: Chua et al. (2003); Dawson (2011); Mehrotra,
Morck, Shim, and Wiwattanakantang (2011,
2013); Scholes, Wright, Westhead, Burrows, and
Bruining (2007); Yoo, Schenkel, and Kim (2014)
Phase 2: Nurturing/
development of successor
Phase 3: Handoff/
transition/installation
Transition and timing of
Presentation of formal
the incumbent out of the
education, on-the-job
leadership position as
training, and development
well as the specification
opportunities outside of the
of bridge managers and
family business to groom
leaders
potential successors
3A: Brun de Pontet,
2A: Davis and Tagiuri
Wrosch, and Gagne
(1989); Dumas (1998);
(2007); Gagné,
Fiegener, Brown, Prince,
Wrosch, and Brun de
and File (1996); GarciaPontet (2011); Kim
Alvarez, Lopez-Sintas,
and DeVaney (2003);
and Gonzalvo (2002);
Rosenblatt (1991)
Goldberg (1996); Handler
(1990); Hatak and Roessl
(2015)
2B: Fiegener, Brown, Prince, 3B: Allen and Panian
(1982); Gómez-Mejía,
and File (1994); Handler
Nuñez-Nickel, and
(1992); Lansberg and
Gutierrez (2001); King
Astrachan (1994); Morris,
(2003); Miller, Steier,
Williams, Allen, and Avila
and Le Breton-Miller
(1997); Salvato, Minichilli,
(2003); Molly, Laveren,
and Piccarreta (2012);
and Deloof (2010);
Sardeshmukh and Corbett
Perricone, Earle, and
(2011); Seymour (1993);
Taplin (2001); Stavrou,
Steier (2001); Welsch
Kleanthous, and
(1993)
Anastasiou (2005)
2C: No primary
contributions identified
a
Le Breton-Miller et al.’s (2004, pp. 318-319) conceptualization of the succession process is adopted.
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3C: No primary
contributions identified
48
Family Business Review 29(1)
generalized exchanges, respectively (Ekeh, 1974; LeviStrauss, 1971).
In restricted exchanges, individuals are motivated by
direct reciprocity from which short-term, quid pro quo
returns are expected. In its extreme form, restricted
exchange may represent reciprocity expectations based
on market valuations, which are determined free of context and subject to contractually standardized monitoring and sanctions. Restricted exchanges may facilitate
formal processes, reduce uncertainty via contractual
arrangements, and offer role clarity to those involved.
However, inherent in restricted exchange is a notably
instrumental aspect that may simplify interactions but,
given the individual, competitive, and impersonal nature
of such exchanges, tends to reduce or eliminate cohesion
among actors (Long & Chrisman, 2014; Long &
Mathews, 2011). This form of exchange is implicit in
the agency (Jensen & Meckling, 1976) and transaction
cost theories (Williamson, 1981) and, while possible in
family exchanges, occurs more clearly in exchanges
between family and nonfamily stakeholders.
Conversely, a generalized exchange system is based
on indirect reciprocity wherein individuals may expect
no immediate or equal return. In fact, generalized
exchanges are grounded in the notion of long-term
obligations or covenants in which the relationship
between actors and the maintenance of the group (e.g.,
family) is valued more than the reciprocity itself, making immediate or direct reciprocity less consequential
(Long & Mathews, 2011). The value of exchange under
this type of expectation of reciprocity varies across
time, place, and the participants involved, depending
on such factors as frequency of contact, emotional
investment, and socioemotional support. Generalized
exchanges are thus more likely to build social capital
with an underlying set of collectively defined motives
similar to those theorized to occur under conditions of
altruism (Schulze, Lubatkin, Dino, & Buchholtz, 2001)
and stewardship (Davis, Allen, & Hayes, 2010).
However, despite its benefits, generalized exchange
can also inhibit interactions with individuals from outside the system, reduce access to knowledge resources,
and foster downward leveling norms of behavior (cf.
Portes, 1998). Put differently, when taken to an
extreme, generalized exchange may lead to interactions where the resources being exchanged become
less important than the context (e.g., trust, collective
beliefs) of the exchange.
Although social exchange has been frequently
viewed from a dyadic perspective, we concur with
Biggart and Delbridge (2004) who suggest that actors
exist at various levels in an exchange system.
Interpersonal ties leading to the development of social
capital, social networks, and shared identities among
group members begin one interaction at a time, one individual to another. With repeated exchange among group
members comes the accumulated store of trust, obligations, and expectations that constitute the exchange patterns identified as social networks. In addition to
observable network structures, repeated interactions
also influence the types and extent of shared schemata
characterized by common vision, common language,
common knowledge, and group solidarity. These shared
schemas serve as a frame of reference for future
exchanges within and across the family boundary
(between family members and individuals outside the
family). Over time, these schemas may be passed on to
new group members as accurate, even dogmatic, expressions of the group’s reality. Thus, it is the ability of a
social exchange perspective to address the full picture of
networks of social interactions, market and nonmarket,
over time and across levels, that leads us to argue for its
utility as a unifying architecture, connecting extant and
future research in family firm succession. Further highlighting the suitability of social exchange to offer
insights into family firm succession, we outline the
tenets of the perspective and demonstrate their applicability to succession in Table 2.
Other family business scholars note the value of an
exchange perspective within a family firm context.
Gagné, Sharma, and De Massis (2014) use an exchange
perspective to highlight micro-level research avenues
within the family business domain, and Pearson and
Marler (2010) suggest that leaders in family firms generate higher quality reciprocal relationships when compared with nonfamily firm leaders. Long (2011)
recognizes the unique resources of family firms, suggesting that they develop social capital through continuous
iterations of individual and group exchange. Similarly,
Long and Mathews (2011) use a social exchange perspective in describing how ethical frames of reference
and family-related goals are developed through generalized and restricted exchanges. Such reciprocal relationships are also implicit in Sharma and Irving’s (2005)
work examining successor commitment. Finally, Barnett,
Long, and Marler (2012) note the effects of shared
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Daspit et al.
Table 2. Applying Social Exchange Tenets to Family Firm Succession.
Social exchange tenet
Description of social exchange tenet
Applicability to family firm succession
Obligation and
expectation of
exchange
Perceptions of potential resources
(economic and socioemotional) gained
via the exchange relationship are equal
to or greater than costs of engaging in
exchange.
Direct and indirect exchanges create
reciprocal obligations and expectations
between parties involved in exchange.
Development and
maintenance
of exchange
relationships
Patterns of exchange create social
networks, reciprocity norms, and
shared schemata that guide future
exchange.
Intrafamily succession depends on the extent to which
the incumbent, successor, family stakeholders, and
other stakeholders perceive the succession process
is beneficial for the current and future exchange of
resources among them.
The extent and types of exchange relationships that
develop among incumbents, successors, family
stakeholders, and other stakeholders influence
perceived obligations (commitment) and expectations
(trust), affecting the allocation of resource inputs and
outputs during and after succession, which, in turn,
influences future exchange relationships.
Successors benefit from understanding the schematic
norms of the family and firm. Such understanding
emerges from the development and maintenance
of exchange relationships with multiple family and
nonfamily stakeholders.
Perception of
resource value
exchanged
family vision and systems of exchange on the procedural
justice climate for nonfamily managers during family
firm succession. These contributions highlight how relationships in family firms act as value-creating mechanisms. We extend this reasoning by examining how
family and nonfamily relationships unfold and how they
influence resource exchanges between incumbents and
successors, among the network of members within a
family, and among members of networks that cross family boundaries in the succession process.
In the sections below, we review and analyze the succession literature using a social exchange framework
that considers phases and stakeholders. Table 3 summarizes the most important insights and opportunities discussed in these sections. Each section discussed below is
labeled according to the phase (1, 2, 3) and stakeholder
group (A, B, C), which corresponds to the respective
quadrant of Table 1.
Phase 1: Ground Rules and First Steps
1A. Insights From Incumbent/Successor Exchanges.
Two perspectives emerge in the literature regarding
incumbent–successor exchanges in the planning
phase: incumbent-centric and successor-centric. Studies that take an incumbent-centric perspective indicate
that the incumbent leads the planning and selection
process with little input from others (Gallo, 1998;
Gilding, 2000; Tatoglu et al., 2008). Nevertheless,
based on these studies, it appears that incumbents are
more willing to involve successors when the successor
is deemed to have the necessary human capital to be
successful, emphasizing instrumental or restricted elements of exchange. Conversely, successor-centric
studies indicate that potential successors’ willingness
to take over the firm is critical (Venter et al., 2005)
and that integrity and commitment to the firm are their
most important attributes (Chrisman et al., 1998),
reflecting the bonded, obligatory nature of generalized
exchange. Thus, these studies suggest that although
short-term evaluations of successors’ ability to take
over are preconditions, it is long-term trust born of
generalized exchange that is key to the satisfactory
completion of the process.
This conclusion is reinforced by studies investigating
the mutual influence of the incumbent and successor.
Handler (1991) suggests that a successful succession
process depends on the level of mutual respect and
understanding between incumbent and successor,
grounded in trust, support, communication, and mutual
learning. Perceptions of competence and mutual obligation often begin in the home prior to the next-generation
family member entering the firm (Dumas et al., 1995;
Handler, 1991; Keating & Little, 1997), highlighting the
temporal nature of generalized exchange relationships.
Indeed, Brockhaus (2004) has noted that the quality of
the incumbent–successor relationship is critical to an
effective succession.
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Family Business Review 29(1)
Table 3. Overview of Current Insights and Proposed Extensions to Family Firm Succession Literature.a
Phases of succession
Exchange within the family boundary
Exchange across the family
boundary
Social exchange stakeholders
Exchange between incumbent and successor
Phase 1: Ground rules and first steps
Successor characteristics: The incumbent is
likely to select a successor who displays
integrity, commitment to the firm, and a
willingness to takeover.
•• What are the best predictors of future
successor success?
Phase 2: Nurturing/development of
successor
Phase 3: Handoff/transition/
installation
Incumbent–successor relationships:
Open relationships built on
trust are optimal for transferring
knowledge from the incumbent
to successor during the training
phase of succession.
•• If an incumbent is unwilling
to engage in developing the
successor (e.g., resists need to
transfer power), what are suitable
alternatives for gaining valuable
tacit knowledge?
Incumbent adaptability: The
incumbent’s ability to transition
into a new role and alter his or her
goals (when leaving the leadership
position) largely affects the nature
of the transition of power.
•• From a micro-level perspective,
what can be done in advance to
enhance the adaptability of the
incumbent and prepare him or her
for transitioning away from the
leadership position into a new role
within or external to the firm?
•• What firm- and family-related
factors affect the incumbent’s
willingness to relinquish power?
•• When will relational factors outweigh objective
qualifications in selecting a successor?
•• What is the optimal balance of incumbent
and family influence in selecting a future
successor?
Development of succession plan: Second- and
third-generation firms are more likely to
have a succession plan than first-generation
family firms.
•• What constraints prohibit first-generation
firms from developing a succession plan?
•• What mechanisms can be employed to
maximize transgenerational sustainability,
legacy, and socioemotional wealth in firstgeneration firms?
•• How can first-generation owners
professionalize without sacrificing
socioemotional wealth?
•• How can HR theory inform the discussion on
the role of succession planning?
Nonfamily manager benefits and liabilities:
Nonfamily manager involvement enhances
diversity of knowledge resources beneficial
to succession planning, yet poses agencyrelated threats (e.g., opportunism,
misalignment of goals).
•• What mechanisms can be employed by
the family firm to extract the full value of
nonfamily member knowledge resources while
reducing the risk of exposing the family firm to
opportunism?
•• How can resource dependence
theory inform the transfer of
knowledge resources from
incumbent to successor?
Successor–family relationship:
Family relationships are integral
in developing the successor and
are largely influenced by the social
capital between the successor and
family.
•• Extending absorptive capacity
theory (e.g., Zahra & George,
2002), how does the use of social
integration mechanisms affect
knowledge transfer from the
family to the incumbent during the
training phase?
Family climate: The climate of the
family affects how the transfer of
power occurs. Conflict-ridden
families are likely to experience
more turbulent transfers of power.
•• How can the family climate be
developed early in the successionplanning process (or prior to the first
steps of the process) to enhance
cohesiveness, goal alignment, and
trust?
•• To what extent do socioemotional
wealth objectives influence how and
when the family firm engages the
transfer of power?
Nonfamily stakeholder knowledge:
Knowledge resources gained
from nonfamily stakeholders are
valuable to the successor’s training
and development.
Nonfamily stakeholder relationships:
Healthy relationships between the
incoming successor and nonfamily
stakeholders ease the transition of
power.
•• How do successors overcome
restricted exchanges with nonfamily
members to extract maximum
knowledge and value from
exchange relationships?
•• How can generalized exchanges be
created among family and nonfamily
managers during and after the
transfer of power from incumbent to
successor?
a
An example of what we know (insight) is listed followed by an italicized, bulleted list of questions highlighting what we need to know
(extensions). This is a nonexhaustive list of succession-related insights and extensions for each stakeholder group across each phase.
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Daspit et al.
Sharma, Chrisman, and Chua (2003a), however,
imply that maintaining generalized exchange relationships between the successor and incumbent may be challenging because of fundamental misalignments in their
organizational roles. This potential lack of fit suggests
that it is essential for researchers to move beyond examining the mere existence of an exchange relationship and
instead focus on how trust, loyalty, and commitment
might be cultivated early in the succession process to
reduce misalignment and increase the likelihood of successful transfer of control. Moreover, other contextual
elements, such as differences in cultural background and
relative emphasis on hierarchical relations, are likely to
influence the generalized or restricted nature of the
exchange (Corbetta & Montemerlo, 1999; Long &
Mathews, 2011; Sharma & Rao, 2000). For example,
Tatoglu et al.’s (2008) study of Turkish family firms suggests that the incumbent’s dominance of the succession
process may be a result of cultural influences that, while
certainly part of a generalized familial exchange, also
incorporate the more formal power/authority components common to the restricted exchanges that routinely
govern subordinate employment situations.
Gender-related factors may also be influential in the
early phase of the succession process. Female leaders
tend to develop more contractual exchange interactions in
the family firm (Harveston et al., 1997). These findings
imply that the value of indirect reciprocity under generalized exchange is diluted when an incumbent’s ability to
draw on the sources of relational authority that are needed
to manage is constrained by cultural influences.
Extensions of incumbent–successor exchanges. The literature indicates the importance of a potential successor
being perceived as having integrity, commitment, and
willingness to take over (e.g., Chrisman et al., 1998;
Handler, 1991). These qualities, and the necessary skills
and experience, are more likely to be associated with
an ongoing generalized exchange between the incumbent and potential successor, thereby increasing the
likelihood that succession will occur. Future research is
needed, however, to understand how the successor signals the possession of desired behavioral attributes and
managerial potential, and which signals are more likely
to be successful when ethnicity, culture, and gender
vary. Likewise, we know little about how incumbents
attempt to communicate to successors the need for relational and professional reliability in the early phases of
the succession process. Given the importance of these
exchanges to the way the succession process unfolds,
a better understanding of these issues appears critical.
1B. Insights From Within-Family-Boundary Exchanges.
The family plays a vital role in guiding the initial planning phases of the succession process. Accordingly, most
of research identified focuses on exchanges within family boundaries and falls into this first succession phase.
Although the importance of early succession planning is
widely acknowledged (e.g., Eddleston et al., 2013;
Koropp et al., 2013; Neubauer, 2003), few firms have
succession plans in place (Nam & Herbert, 1999; Westhead, 2003). Interestingly, second- and third-generation
family firms are more likely than first-generation family
firms to have succession plans (Sonfield & Lussier,
2004). The formality of succession planning also tends to
increase as family firms evolve, an outcome in keeping
with the reduced emphasis on socioemotional wealth and
increase in restricted exchanges that are likely as family
involvement expands from a nuclear to an extended family (Gómez-Mejía et al., 2011) and as firms become more
professionalized. In each phase, norms of reciprocity are
established, but the types of exchanges that emerge
depend on the family’s shared values and beliefs (LeonGuerrero et al., 1998; Moores & Mula, 2000). Indeed,
either type of exchange, when excessive, may discourage
family members from confronting difficult issues inherent in succession planning.
Family members may be more motivated to plan for
succession if a trusted successor is identified early in
the process (Sharma et al., 2003b). Whether it is possible to agree on a potential candidate and move on to
the next step in the process may depend on the kinds
of exchange relationships that exist or develop.
Nonetheless, the consistency between successor selection processes and prevailing exchange relationships
may be the most important factor. For example, some
in the firm may fear the consequences of delaying succession planning while others may fear that making
plans too early casts a “shadow of succession” on the
firm. Interestingly, Diwisch et al. (2009) find no significant difference in performance between firms that
plan for succession within the next 10 years and those
that do not, consequently nullifying the negative or
positive implications of early succession planning.
This suggests that timing may be less important than
how the final decision is reached.
Within the internal boundary of the family, consideration of the future of the children (potential successors)
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occurs during this initial planning phase. Schröder et al.
(2011) indicate that factors such as personality, gender,
identification with the family firm, and parental succession preference influence career choices among potential
successors. CEO-parents are integral in shaping perceptions and leading the succession-planning process (Poza
et al., 1997). In the presence of generalized exchanges,
trust-based relationships with their children may emerge
through two-way communication of goals, which lead to
opportunities. Generalized exchange relationships with
family members (and other employees) are also likely to
allow the child to develop a well-rounded perception of
the firm and ultimately make an informed decision on the
desirability of succession. The need for two-way communication is especially important for potential female successors who, at a young age, may benefit from generalized
exchange relationships with others when the exchanges
serve to minimize cultural or tradition-based opposition
to their ascendancy (Fahed-Sreih & Djoundourian, 2006;
Vera & Dean, 2005). Children, however, are not always
interested in taking over the family firm (Stavrou, 1999).
It is suggested that they be allowed to select their level of
involvement without parental pressure (Birley, 1986,
2002; Birley et al., 1999).
Although Bennedsen et al. (2007) and PérezGonzález (2006) find that the appointment of a family
CEO is negatively correlated with firm performance,
intrafamily succession may be preferred when familyspecific experiential knowledge is more highly valued
(Royer et al., 2008) or when multiple generations are
involved in the firm (Wiklund et al., 2013). In determining when a nonfamily successor is desirable, some studies suggest that context and size matter (Huang, 1999).
Outsiders are generally thought to have greater value in
high-technology industries where specialized knowledge is critical to success (Chung & Luo, 2013; Lin &
Hu, 2007) and in large, public firms where experience
and knowledge are valued more than family membership (Bocatto et al., 2010). When knowledge and experience trump relationships, systems of restricted exchange
may work as well as, or better than, systems of generalized exchange.
On the other hand, given that family relationships
generally provide the time, proximity, and frequency of
interaction necessary for effectively monitoring behavior, family successors are often preferable in industries
where the relationship between effort and performance
is difficult to judge (Pollak, 1985). Likewise, in environments where legal protections are weak, generalized
exchanges among family members are critical in part
because such exchanges provide trust and stability
within a potentially uncertain context (cf. Verbeke &
Kano, 2012). Thus, value lies in understanding that generalized family exchanges vary and are not necessarily
transferrable to other contexts.
Exchange relationships among family members can
be crucial in creating harmony within the firm and
achieving a successful transition (Bachkaniwala et al.,
2001; Malone, 1989). Poza et al. (1997) highlight the
importance of an open family culture wherein the presence of such preconditions enhances the exchange system and reinforces individual contributions to the
system (recursively). Furthermore, family members
who are more closely related to the owner and are more
involved in the firm may have a large influence over
the succession-planning process. Given their proximity
and involvement, family members are likely to influence the extent to which the succession process is
based on trust and loyalty (Davis & Harveston, 1998;
Vallejo, 2008), but for better or worse, the incumbent
often decides how the process will be managed
(Marshall et al., 2006).
Extensions of within-family-boundary exchanges. The
essence of the family firm is embedded in a vision of
the firm held by a family or families with the intention to shape that vision, potentially across generations (Chua et al., 1999). While the unique, embedded
exchange relationships among family members create
idiosyncratic value, the closed network of members
limits the variety of knowledge resources available.
Thus, researchers are encouraged to investigate how
family firms capture the value of generalized exchange
relationships while building external relationships for
acquiring resources. Furthermore, while generalized
exchange relationships support the emergence and
growth of the unique bundle of resources known as
“familiness” (Habbershon & Williams, 1999), studies that investigate the circumstances in which such
relationships are valuable or potentially harmful to the
succession-planning process are needed. Finally, much
of the succession literature at this phase of the process
refers to formalized succession plans. However, family
firms tend to avoid formalized procedures and decisions in favor of “intuitive” processes (Kirby & Lee,
1996). The role that generalized exchange plays within
the family’s use of intuitive processes (perhaps giving
the appearance that succession planning is overlooked
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or ignored) is, thus, an important avenue of inquiry.
Future research is needed to investigate how and when
“intuitive” forms of planning, based on generalized
exchange, provide the same value as more structured
processes.
1C. Insights From Across-Family-Boundary Exchanges.
During the succession-planning phase, both family and
nonfamily members may work together to create a succession plan; however, as noted by Bruce and Picard
(2006), conflict with nonfamily managers may hinder the
process. Chua et al. (2003) suggest that involving nonfamily managers in the planning process as the family firm
grows is important because it allows them to understand
expectations and have a clearer vision of how their future
is tied to the family firm. Although dictated by firm-level
culture (Scholes et al., 2007), generalized exchange relationships with nonfamily managers are expected to
reduce agency costs. Of course, how to develop such
relationships without exposing family owners to the risk
of opportunism by nonfamily managers in the meantime
is another question worth answering.
In some instances, family firms may elect to consider
nonfamily successors (Dawson, 2011). An extreme
example, investigated by Mehrotra et al. (2011, 2013),
involves the formal adoption of adult nonfamily heirs by
Japanese family enterprises. Those authors suggest such
an approach allows Japanese family firms the ability to
transcend the typical effort and ability trade-off associated with choosing, respectively, between a family and
nonfamily CEO. However, in some contexts, generalized exchanges between family and nonfamily members
may be unlikely owing to real or perceived goal conflict
and asymmetric information (e.g., Verbeke & Kano,
2012). That is why contractual processes using restricted
exchanges that set clear expectations for the roles of
nonfamily managers may sometimes be necessary to
guard against expropriation (cf. Lee, Lim, & Lim, 2003).
Extensions of across-family-boundary exchanges. The
literature details the costs and benefits associated with
nonfamily involvement in family firms. Nonfamily
involvement can be beneficial to succession planning
given the diversity of available knowledge resources.
However, monitoring mechanisms may be needed to
mitigate associated liabilities. Additional research is
needed to understand which mechanisms are most useful and how they may be employed to avoid diluting
trust and loyalty. Daspit and Long (2014), for exam-
ple, suggest that specific strategies may be employed
(manipulation, defiance, or accommodation) to minimize the likelihood of resource expropriation. Although
their insights were developed for family firms in an
African context, the extent to which similar strategies
may be employed in a Western context warrants investigation. Similarly, it would be useful to know if it is possible to involve nonfamily managers in the succession
process to build generalized exchange relationships, or
whether the presence of such relationships is a precondition to their effective involvement.
Phase 2: Nurturing/Development of
Successor
2A. Insights From Incumbent–Successor Exchanges. An
overarching theme in the literature is the importance of
the incumbent’s role in developing the successor (GarciaAlvarez et al., 2002). As the incumbent ages, more attention needs to be given to succession planning and
executive development (Davis & Tagiuri, 1989). Fiegener
et al. (1996) suggest that compared with CEOs in nonfamily firms, family firm CEOs place a premium on their
relationships with successors. Incumbents who foster
positive interactions enhance the preparedness of the successor. One way this can be done is to assign potential
heirs a mentor as soon as they become involved in the
business (Goldberg, 1996). Findings suggest that succession is enhanced by a positive, shared vision (Dumas,
1998), which encourages buy-in and emotional investment in the future of the firm. Shepherd and Zacharakis
(2000) find that potential heirs who incur both financial
and behavioral sunk costs during the development process tend to value the firm, and their involvement in it,
more highly. Furthermore, an exchange system based on
indirect reciprocity between the incumbent and successor
is vital to the successor’s development as it supports tacit
knowledge transfer (Cabrera-Suárez et al., 2001; Hatak &
Roessl, 2015).
Extensions of incumbent–successor exchanges. While
we understand that the exchange of knowledge between
incumbents and successors increases the odds of a successful succession, the factors that affect knowledge
exchange are not fully understood. Are generalized
relationships ideal for transferring all types of knowledge? Specifically, is explicit as well as tacit knowledge
best transferred via generalized exchange relationships?
Assuming a successor’s development occurs over time,
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are exchanges emphasizing transactional interactions
useful for learning certain skills?
2B. Insights From Within-Family-Boundary Exchanges.
Steier (2001) notes that social capital transfers during
succession occur in one of four modes (i.e., unplanned,
sudden, rushed, and natural), highlighting the significance of exchanges with family members. Family relationships play a critical role in how the successor is
developed. A cohesive family structure fosters generalized exchanges based on trust and respect (Lansberg &
Astrachan, 1994; Seymour, 1993) and is considered
vital to successful succession (Handler, 1992). It is especially useful if intrinsic rewards are aligned with personal needs, career aspirations, and identity.
Not surprisingly, family firm successions seem to be
more successful when heirs are better prepared (Morris
et al., 1997) and trusted (Chrisman et al., 2009). The
presence of such preconditions enhances the exchange
system, which recursively reinforces individual contributions (Poza et al., 1997). Furthermore, successors who
cultivate generalized exchange relationships with mentors and upper level family managers are more likely to
behave entrepreneurially (Sardeshmukh & Corbett,
2011). While developing social capital within the family
is important for the successor, developing skills and
character is also critical (Salvato et al., 2012). Simply
working in a family firm is necessary, but not sufficient,
for success; relationships with managers and family
mentors that expose the successor to rich, developmental experiences are also needed (Sardeshmukh &
Corbett, 2011).
Extensions of within-family-boundary exchanges. The
family has a critical influence on the preparation of
successors, but numerous questions remain regarding how resource exchanges within the family affect
successor development. For example, to what extent
is the exchange of relational assets among family
members, discussed by Steier (2001), accompanied
by knowledge exchange, and what factors govern exchanges between the family and successor?
Insights may be gained by examining literature on
absorptive capacity (Zahra & George, 2002), which
suggests that social integration mechanisms enhance
the knowledge acquisition and exploitation process.
Extending this point, we are left to inquire which
type(s) of social mechanisms are most appropriate
to enhance exchange relationships and transfer experiential resources among family members (Fiegener
et al., 1994; Welsch, 1993).
2C. Insights From Across-Family-Boundary Exchanges.
To acquire knowledge, successors might need to establish a repertoire of exchanges with nonfamily stakeholders, in addition to family members, to fulfill both
transactional and relational needs. How this is accomplished influences the skills developed by the successor
and ultimately the performance of the firm. While some
studies examine individual and within-family exchanges,
no studies were found that primarily examine how
exchanges across family boundaries influence the successor’s development. This is surprising given that many
suggest potential successors need to obtain experience
outside the family firm (Chrisman et al., 2009). However, a study that offers an indirect contribution indicates that potential female successors believe they need
to establish exchange relationships with nonfamily
members to gain credibility (Vera & Dean, 2005).
Whether females—who are sometimes overlooked as
potential successors—are unique in this regard, remains
to be investigated.
Extensions of across-family-boundary exchanges. Given
the dearth of prior research, studies examining the effect
of nonfamily stakeholders on the development of potential successors are clearly needed. Likewise, there is
much to be gained by understanding how relationships
and resource exchanges with key nonfamily stakeholders (e.g., employees, customers, suppliers, distributors,
advisors) influence successor development. The initial
relationships between successors and nonfamily stakeholders are likely to begin as restricted exchanges. How,
then, can successors create generalized exchange relationships with potentially recalcitrant nonfamily managers to obtain the knowledge they need to take over the
family firm? Conversely, can potential successors leverage restricted exchange relationships with nonfamily
stakeholders to gain needed experience, and if so, how?
Seeking to understand this relationship, Salvato and
Corbetta (2013) find that nonfamily advisors may take
a transitional leadership role in the family firm, while
serving as role models for potential successors who
may need additional training. Although their qualitative
study was beyond the scope of this review, their recommendations highlight the potentially beneficial role of
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Daspit et al.
family firm advisors within the succession process. By
developing a generalized exchange relationship with the
advisor, the potential successor is likely to benefit from
the exchange of valuable knowledge resources.
Phase 3: Handoff/Transition/Installation
3A. Insights From Incumbent–Successor Exchanges.
Transitions of power are influenced by exchanges that
occur between incumbents and successors. Brun de Pontet et al. (2007) identify two types of intrafamily transitions. In the first type, the incumbent and successor share
power, but because incumbents usually dominate such
teams, the successor’s voice can be muted. Brun de Pontet et al. (2007) label the second type, in which the
incumbent relinquishes control commensurate with the
successor’s experience, “optimal succession.”3 The
authors suggest that “optimal successions” are facilitated
by trust between the incumbent and successor. Indeed,
without trust, the incumbent is likely to resist the transfer
of power (Gagné et al., 2011) or even engage in subterfuge to sabotage the successor’s efforts to establish an
identity as a leader (Chrisman et al., 2009). Because the
satisfaction of each actor is often dependent on the
actions and perceived satisfaction of the other (Sharma
et al., 2003a), if restricted exchanges lead to information
asymmetries and reduce altruism (Schulze et al., 2001),
neither the incumbent nor successor is likely to end up
better off. Thus, generalized exchange relationships
seem more conducive to “optimal successions.”
The context in which exchanges occur is also important. Rosenblatt (1991) finds that transgenerational
obligations present unique challenges that may jeopardize the future of the firm. Direct reciprocal agreements
often exist across generations (e.g., in the form of contractual payments during ownership transfer). In generalized systems, the expectation is for both parties to act
altruistically for the good of the family and the firm.
Rosenblatt (1991) finds, however, that such generalized
agreements can put firms at risk if they are maintained
without regard to changing environmental conditions.
Extensions of incumbent–successor exchanges. Although
exchanges between successors and incumbents are vital
to the successful transition of power, it is not clear
whether generalized exchanges influence the preparedness of the incumbent, or if, in some situations, restricted
exchanges are superior for creating a timetable for the
incumbent to step down. Understanding the type of
exchange, and the boundary conditions associated with
the exchange, might offer further insight into the optimal type of exchange to employ given the context of the
firm and the goals of the family.
Research suggests that goal adjustment capacities
influence incumbent retirement planning (Gagné et al.,
2011) and that relationships with family members
(including the spouse), who are not employed in the
firm, influence whether the incumbent will seek partial
or full retirement (Kim & DeVaney, 2003). Understanding
the exchange-related drivers of an incumbent’s willingness and ability to transition out of the firm and pursue
alternative goals could shed light on processes leading
to a successful transition.
3B. Insights From Within-Family-Boundary Exchanges.
Incumbent CEOs who are family members are less
likely to be replaced during periods of poor performance
than CEOs who are not part of the controlling family,
implying that generalized exchange relationships may
lead to entrenchment (Allen & Panian, 1982; GómezMejía et al., 2001). The potential for generalized
exchange systems to tolerate poor, short-term economic
performance may also help explain why successions
from first- to second-generation family members are
found to decrease performance more than successions
during later generations (Molly et al., 2010). Since generalized exchange is more likely to occur among nuclear
families found in first-generation firms than the extended
families found in later generations (cf. Gómez-Mejía
et al., 2011), there may be instances where generalized
exchanges can be taken too far. Rather, a balance
between generalized exchanges and quid pro quo mechanisms for developing and implementing succession
plans may be necessary.
Researchers further note that the firm’s climate may
influence succession success (Stavrou et al., 2005). For
example, problems have been observed in firms that are
tradition-bound, bureaucratic, conflict-ridden, and chaotic (Miller et al., 2003). How climate, conflict, and risk
aversion influence the transfer of power, however,
remains to be clearly articulated. What seems evident is
that exchange systems at either end of the generalized–
restricted continuum are likely to be flawed in some way.
Studies also demonstrate that culture affects the ability
of the firm to navigate the transfer of power. Perricone
et al. (2001) find that in some instances, firms operated by
ethnic minorities adapt well to change. Given the turbulence associated with transgenerational power transfers,
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Family Business Review 29(1)
the collective identity associated with a common cultural
background may enhance the quality of intrafamily
exchange and mitigate the disruptive effects of change.
Extensions of within-family-boundary exchanges. The
decision to transfer power in a family firm is affected by
relational factors not common to nonfamily firms. For
example, because of relational factors, family firms may
suffer from entrenchment and not proceed with transitions of power at an ideal time (e.g., Gómez-Mejía et al.,
2001). Delayed transitions of power are likely to have a
detrimental impact on firm performance; yet the family
may perceive that leadership continuity preserves existing exchange relationships among family members. The
desire to preserve family relationships and other aspects
of the family’s socioemotional wealth can thus affect the
how and when transfers of power will occur. We suggest
that such considerations might also explain the extent to
which incumbent leaders are willing to step aside.
3C. Insights From Across-Family-Boundary Exchanges.
We found no studies that primarily examine exchange
relationships during the transition phase across family
boundaries, although some mention relationships
between family and external groups as a secondary contribution. Brun de Pontet et al. (2007), for example,
highlight the influence of nonfamily stakeholders on the
control of the incoming successor. Such insights suggest
that successors may benefit from generalized exchanges
with external stakeholders to solidify support during and
after the transition, especially when the successor is not
a family member (Royer et al., 2008).
Extensions of across-family-boundary exchanges. Given
the paucity of studies on exchanges that occur across
family boundaries during the final phase of succession,
much work is needed. Cabrera-Suárez (2005) observes
that nonfamily manager empowerment and inclusion
during the succession process is valuable. On the other
hand, she also observes that nonfamily managers sometimes hinder the transition. Therefore, we need to better
understand the sources of harmony and conflict among
family and nonfamily managers, and how generalized
exchange relationships can be created to enhance trust,
loyalty, and commitment. Since nonfamily stakeholders
are often beholden to the incumbent, how the value of
that relationship influences the exchange between nonfamily stakeholders and the successor needs to be better
understood.
Discussion and Conclusions
As reflected in our review and summarized below, the
literature supports the view that generalized exchange
is often more desirable than restricted exchange; yet
both forms have benefits and limitations (see Table 4).
However, while these inferences are helpful in understanding the management succession process from a
social exchange perspective, they need to be tested.
Thus, in addition to the need to test the research questions discussed in Table 3 and the extensions we note in
our review, the proposed conjectures on the impact of
generalized and restricted exchanges are also worth
studying.
Generalized exchange between the successor and
incumbent is broadly considered beneficial (e.g., Davis
& Tagiuri, 1989; Fiegener et al., 1996). Such relationships—based on trust, loyalty, and respect—support an
open exchange, reduce information asymmetry, and
allow successors to obtain the knowledge and skills necessary to lead the firm. Generalized exchange relationships also support knowledge transfers among family
members, which aid in the training and development of
the successor. Generalized exchange relationships based
on trust can also facilitate goal alignment between family and nonfamily members, which can improve succession planning. The development of generalized
relationships between family and nonfamily members,
however, is likely to be more difficult to achieve than
among family members.
Nevertheless, although beneficial, the development
of a generalized exchange relationship at the individual
level is limited by personal, contextual, and related factors. Furthermore, if taken to an extreme, generalized
relationships among family members may create impermeable boundaries and bifurcation biases (Verbeke &
Kano, 2012) that exclude employees and other stakeholders from outside of the family. Generalized exchange
that leads to informal relationships among actors can
also potentially frustrate efforts to formulate a formal
succession plan. Finally, in some cases, the choice of a
successor might disrupt the fragile fabric of relationships that exist among family members as well as
between the family and nonfamily stakeholders, thereby
hindering the exchange of resources necessary for the
succession process.
Conversely, while sometimes viewed as purely negative, our review suggests that restricted exchange can also
be appropriate for the succession process, within
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Daspit et al.
Table 4. Conjectures Using a Social Exchange Perspective of Family Firm Succession.a
Restricted exchange
A. Exchange between
incumbent and
successor
B. Exchange within
family boundary
C. Exchange across
family boundary
Generalized exchange
Benefit: Facilitates formal planning and
potential successor’s introduction
to the firm to reduce uncertainty via
contractual arrangement
Limit: Hinders, if sustained, the training
and development of the successor
Benefit: Reduces information asymmetry;
facilitates power transfer given the presence
of altruism, mutual trust, and cohesiveness
Limit: Impedes formal succession planning
because of personal and contextual factors
Benefit: Enhances understanding of
family member roles throughout the
succession process; minimizes resource
expropriation by family members
Limit: Presents challenges when
monitoring family member behavior and
sanctioning misbehavior are necessary
Benefit: Supports knowledge exchange and
development of successor
Benefit: Assists in formalizing relationships
and reducing information asymmetry
between family and nonfamily members
Limit: Increases costs associated with
managing conflicts that may occur during
the succession process
Benefit: Creates steward-like goal alignment
between family and nonfamily members
Limit: Enhances entrenchment (impermeable
boundaries developed over time among
family group); limits interest from external
investors; creates “bifurcation bias”
Limit: Requires the costly and time-consuming
development of relationships with any but
a select group of nonfamily managers and
stakeholders in larger family firms
a
Adapted from Long and Mathews (2011).
carefully defined boundaries. Put differently, carried to
excess, succession attempted under an extreme form of
restricted exchange can create enormous problems with
few offsetting benefits, since it might prevent or destroy
trust. Barring that, however, it seems that contractualbased exchange can be employed to facilitate formal succession planning and reduce uncertainty when a potential
successor first enters a firm. Restricted exchanges may
also limit the threat of expropriation owing to asymmetric
altruism within the family or a lack of self-control on the
part of the incumbent or successor (cf. Schulze et al.,
2001). Given that succession planning is not typical in
family firms, restricted relationships can also be useful
for formalizing the roles and responsibilities of family
members throughout the process. The utility of restricted
exchanges are likely to be limited, though, because family
owners are notoriously weak in their willingness to monitor and sanction opportunistic family members (GómezMejía et al., 2001; Pollak, 1985). Last, restricted exchange
may help decrease information asymmetry with nonfamily members and thereby provide access to knowledge
resources held by nonfamily agents that can be used in
the planning and development phases of succession.
However, since such exchanges are instrumental in
nature, they must be carefully managed; if bifurcation
bias develops, information advantages may be lost and
monitoring costs after the transition may become
excessive.
Limitations and Future Directions
Although this review makes valuable contributions to
the literature on management succession, it is not without limitations. First, while all articles related to succession published in the top journals noted were retrieved,
only quantitative studies were used for our review. This
approach allowed us to offer insights based on empirically verified findings using one consistent theoretical
perspective. Nevertheless, we acknowledge that considerable value also lies in the previous theoretical and
qualitative work on succession.
Second, we examine succession using Le BretonMiller et al.’s (2004) three-phase model. While this
model covers all aspects of the succession process, we
were unable to fully capture the dynamic nature of the
process. Much value remains in efforts to understand
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how the succession process unfolds across phases. From
the perspective of social exchange, research on how
exchange relationships develop and resource transfers
occur among stakeholders across succession phases is
needed.
Third, our succession framework includes exchanges
among three types of stakeholders. Unfortunately, we
were unable to identify any contributions that offer primary insights into exchanges across family boundaries
during Phases 2 and 3. The absence of research in these
areas is concerning, yet also suggests that many opportunities remain for work on how nonfamily stakeholders
can be cultivated to facilitate the succession process.
Nonfamily employees and stakeholders, for instance,
are sources of knowledge, which is valuable for successor development. However, research is needed to determine if generalized exchanges with external stakeholders
enhance successor development, or if more formalized,
restricted exchanges are better suited to foster development of the successor’s human capital. Similarly, while
we focus on exchanges that occur during the power
transfer from a single incumbent to a single successor,
future succession studies might usefully consider alternative configurations. Such investigations may include,
for example, power transfer to coleaders, sibling partnerships, family leadership teams, mixed family–nonfamily teams, or teams composed exclusively of nonfamily
members.
Fourth, this review of succession is conducted
through the lens of social exchange. We are, thus, able
to provide only limited attention to methods for examining the succession process, even though close examination of such methods remains an essential ingredient
for the field’s progress. Since succession occurs over an
extended period in the life of each firm, collecting data
is often difficult. Potential data sources might include
organizations devoted to family firms such as the
Canadian Association of Family Enterprise or organizations whose members tend to be small and medium-size
firms in general.
Approximately 75% of the studies examined used
data from primary sources. Of these studies, many relied
on a single respondent. While family business research
often relies on a key informant, Kotlar and De Massis
(2013) demonstrate that individual family members do
not necessarily perceive succession goals in a uniform
manner. Similarly, in their study of the satisfaction process, Sharma et al. (2003a) underscore the importance of
considering multiple stakeholder groups in family firm
research. Thus, it would be important to test how the
variance among family members’ assessments, using,
for example, dispersion models (Chan, 1998), shape the
succession process and are influenced by compositional
elements (e.g., multigenerational involvement), structural elements (e.g., role differentiation as family members act as owners, managers, or both), and interactional
processes (e.g., family communication).
Regression analyses emerge as the most prominent
method used to examine data. While suitable for
answering many research questions, advanced tools are
likely to provide additional insights as we move toward
examining more complex relationships. Marshall et al.
(2006), for example, use structural equation model
techniques to examine the relationship among antecedents of succession importance and formal succession
planning. Furthermore, given that we advocate an
exchange perspective to study succession, network
analysis seems particularly well-suited to examine the
relationships that occur between incumbents, successors, family members, and nonfamily stakeholders
within and outside the firm. As these are explored,
methods that allow researchers to model cross-level,
nested relationships (i.e., random coefficients modeling
or within-and-between-entity analysis) may be applied.
Implications for Practice and Family Business
Education
This review contributes to practice by illustrating the
importance of developing relational and knowledge
resources during the succession process to ensure that a
smooth transition occurs and that the firm is effective
after the succession. Successful succession is a function
of stakeholder satisfaction and organizational performance (Sharma et al., 2001). Our conclusion, based on
an analysis of the literature, is that both generalized and
restricted exchanges offer the possibility of achieving
those desired ends. Restricted exchanges, in many ways,
appear more straightforward and conducive to the formulation of a succession plan that will select the most
qualified successor. On the other hand, generalized
exchanges seem better suited for leveraging the resources
embedded in exchange relationships and, therefore,
enhance the likelihood that the successor selected will be
acceptable to the firm’s stakeholders. Furthermore, generalized exchanges are more conducive to marshaling
additional resources embedded in exchange relationships
when things go wrong.
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Daspit et al.
Our review also offers implications for the education
of future successors. As De Massis and Kotlar (2015)
suggest in their review of family business courses, over
50% of books used in such courses reference succession.
Given the insights garnered from this review, we suggest
that curricula continue to focus on core concepts related
to succession (importance of succession planning, steps
to the succession process, developing successors, etc.)
as well as the value and methods of developing proper
exchange relationships. For example, Barbera, Bernhard,
Nacht, and McCann (2015) suggest a whole-person
learning approach—designed to train the next generation (“next-gen”) of family business leaders—that incorporates the development of cognitive, emotional, and
social skills. They also explain how early-stage successor development is important for building such skills.
By using a broader approach that focuses on the “whole
person,” educators and advisors will ensure potential
successors have the relational and knowledge resources
they need to navigate succession events and lead the
firm.
Conclusions
In this article, we argue that social exchange provides a
theoretical framework that can be used to integrate and
enhance studies of family firm succession. A social
exchange lens offers an umbrella concept that provides
the ability to develop a multistakeholder perspective of
the succession process that can be applied across different phases and contexts, while simultaneously incorporating other relevant theoretical approaches. Our review
also underscores how social exchange supports a focus
on two key elements of succession: the exchange of
social capital (relationships) and knowledge capital
(resources). Overall, there appear to be many opportunities for future theory-based research on the succession
process using a social exchange perspective, and we are
hopeful that this review will pave the way for such work.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with
respect to the research, authorship, and/or publication of this
article.
Funding
The author(s) received no financial support for the research,
authorship, and/or publication of this article.
Notes
1. The comprehensive search list included the following
journals: Academy of Management Journal, Academy
of Management Review, Administrative Science
Quarterly, American Economic Review, Business Ethics
Quarterly, California Management Review, Corporate
Governance, Entrepreneurship & Regional Development,
Entrepreneurship Theory and Practice, Family Business
Review, Harvard Business Review, Human Relations,
International Small Business Journal, Journal of Applied
Psychology, Journal of Business Ethics, Journal of
Business Research, Journal of Business Venturing,
Journal of Finance, Journal of Financial Economics,
Journal of Management, Journal of Management Studies,
Journal of Organizational Behavior, Journal of Small
Business Management, Leadership Quarterly, Long
Range Planning, Management Science, Organization
Science, Organization Studies, Organizational Dynamics,
Quarterly Journal of Economics, Sloan Management
Review, Small Business Economics, Strategic Management
Journal, and Strategic Organization.
2. A majority of the studies identified (112 of the 191) were
published in Family Business Review.
3. Lee et al. (2003) identify a third type of transition, the
“seat-warmer” strategy where a nonfamily CEO assumes
power temporarily until the family successor is ready to
take over.
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Author Biographies
Joshua J. Daspit is an Assistant Professor of Management at
Mississippi State University. His research interests include
examining firm capabilities and innovation with a primary
focus on absorptive capacity and family business. Prior to joining academia, he worked as a senior consultant for an international consulting firm and served as Director of Community
Affairs for a member of Congress.
Daniel T. Holt is an Associate Professor of Management in
the College of Business at Mississippi State University. He
received his PhD in Management from Auburn University.
Prior to joining the faculty at Mississippi State University, he
served in the U.S. Air Force, serving as an engineer in Central
America, Asia, and Middle East. Daniel’s research interests
include family business, entrepreneurship, measurement methods, and organizational change.
James J. Chrisman is the Julia Bennett Rouse Professor of
Management, Head of the Department of Management and
Information Systems, and Director of the Center of Family
Enterprise Research at Mississippi State University. He also
holds a joint appointment as Senior Research Fellow with the
Centre for Entrepreneurship and Family Enterprise at the
University of Alberta, School of Business.
Rebecca G. Long (PhD, Louisiana State University) is a
Professor of Management and Associate Dean of the Graduate
School at Mississippi State University. She serves on the editorial review board of Family Business Review and her research
has appeared in academic journals such as Organizational
Research Methods, Journal of Management, Human Relations,
Academy of Management Journal, Business Ethics Quarterly
and Entrepreneurship Theory & Practice. Her research interests
revolve around social exchange and the development of social
capital within entrepreneurial and family firms.
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