Succession is a crucial moment in the life cycle of a family business. An effective succession requires taking a step-by-step approach, including structured planning, selection, and integration of the successor. Family firms behave differently than non-family firms due to risk aversity and the mixture of family and business logics. The overall purpose of this dissertation is to gain a deeper understanding of the role of information exchange in business succession. The succession process is examined from different angles, focusing on the broad individual perspectives of the predecessor and the successor.
In family firms, potential successors enter the pool of candidates at birth. Various observable criteria are important when making the final selection. Despite the long time frame of the succession process, information asymmetries can arise because it is not always fully clear if the chosen candidate is willing to succeed the incumbent. This variable also influences the choice of selection criteria, which differ in nature. For example, existing social capital, which can influence the sustainability of succession, can be a selection criterion. An unstructured social capital transfer can, for instance, undermine the sustainability of success due to the ineffective usage of long-term network contacts. This situation is an example of how information asymmetries affect the overall business succession process and what types of information are exchanged during the process.
The empirical studies in this dissertation shed light on the role of information in the succession process and the behavior of family business members who deal with the information. The empirical results of the first study show that information asymmetries in family firms change over time as firms develop their own processes to promote information exchange and handle the challenges resulting from information asymmetries. In the second empirical study, signaling is offered as an explanation. Successors send signals, for example, through choosing an education which fits to the family business. This behavior is evaluated as a signal. In family firms, signaling takes place to identify the candidate who best fits the firm. This research also shows that family firms develop their own processes to identify potential candidates, organize educational programs and integrate candidates in a step-by-step approach to ensure sustainable success. These two empirical studies highlight the long-term orientation of family firms, the opportunity for potential candidates to implement new ideas, and the importance of knowledge about successors’ attributes, particularly their risk level and innovativeness. These studies show that family firms which develop their own processes are more professional than previously thought. They identify and screen candidates according to business needs and optimize the process of information exchange. The third empirical study focuses specifically on information about network contacts. The transfer of social capital during the business succession process is analyzed from the perspective of social capital theory. This study shows that network contacts are transferred during the succession process, and the successor adds personal social capital to the network, including various opportunities to use the succession situation to renew the existing network.
The understanding of business succession as a time for renewal and of succession as an entrepreneurial process localizes this dissertation in the fields of family business and business succession in family firms from a principal agent perspective. Additionally, signaling theory and social capital theory are used to analyze how family businesses handle the principal agent situation between the incumbent and successor(s). Thus, this dissertation improves understanding of business succession from the principal agent perspective and synthesizes research and practice to emphasize the importance of every step of succession. A discussion of the findings and the implications for research and practice conclude this dissertation. This research raises family business owners’ awareness of information asymmetries and blind spots among family members. Information exchange and clearly structured transfers of knowledge and network contacts offer successors scope for decision-making and development, which help family firms making business succession a time for renewal instead of a time of struggle.