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

Abstract

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 decision-making 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.