Succession and Nonsuccession Concerns of Family Firms and Agency Relationship with Nonfamily Managers

TLDR

The article is divided into two parts. The article uses Agency Theory to explain why relationships with nonfamily managers are important. The first part reports survey findings on issues facing top executives in 272 Canadian family firms. Succession is the primary concern of family firm executives, while relationships with nonfamily managers are the second most important issue, and empirical evidence shows that a firm's dependence on nonfamily managers significantly determines this importance, highlighting a neglected research area.

Abstract

This article consists of two parts. The first part reports findings from a survey of the issues facing top executives in 272 Canadian family firms. Results show that succession is their No. 1 concern, thus supporting the predominant focus of family business researchers on succession issues. Results also show that concern about relationships with nonfamily managers is a close second in importance. The second part of the article uses Agency Theory to explain why relationships with nonfamily managers are so important. Empirical results show that both the extent and the criticality of a firm's dependence on nonfamily managers are statistically significant determinants of the importance. This study implies that relationships with nonfamily managers is a neglected research topic and points to a new direction for research in family business management.