Is exposure to the family firm always good for the next CEO? How successor pre-succession firm experience affects post-succession performance in family firms

The benefits of pre-succession family firm experience have frequently been emphasized. However, empirical research on the impact of such experience on firm performance is dichotomy-driven and offers contradictory results. Further, there are also unresolved theoretical fault-lines. While psychology-inspired managerial decisionmaking literature highlights negative aspects of such experience, stewardship-inspired arguments highlight positive effects. In this study, we integrated arguments from both perspectives to investigate how pre-succession firm experience affects firm performance. Based on a sample of 405 German firms, our regression analyses show that although the main performance impact of pre-succession family firm experience is negative, this effect has important boundary conditions. In particular, our results show that this relationship takes an inverse u-shaped form for non-family successors. Further, our study reveals that the main negative relationship is stronger when the successors do not have academic education or if the innovation impetus of the firm and industry is high.

Automated summary

This study investigates the impact of pre-succession family firm experience on firm performance by integrating arguments from psychology and managerial decision-making. The results show that although the main effect is negative, this relationship has important boundary conditions. Specifically, for non-family successors, the relationship between pre-succession family firm experience and firm performance follows an inverse U-shaped curve. Furthermore, the main negative relationship is stronger when the successors lack academic education or when the innovation impetus of the firm and industry is high.