Succession in family business

Topics: Business, Management, Gender Pages: 11 (3743 words) Published: February 21, 2014
Is there a significant difference between genders in succession in the family business?

Introduction

The E.U. commission defines a family-owned business as any business in which two or more family members are involved and the majority of ownership or control lies within a family. The family business context is one of the most important components in the world of entrepreneurship, as according to the family firm institute Family businesses create an estimated 70% to 90% of global GDP annually. To support the statement above, it is needed to mention that, for example, in U.S. a big percentage, that in some cases exceeds the 80% of domestic companies, are family businesses. Moreover, in Europe the majority of domestic companies are defined as small-medium sized enterprises. A large percentage of these small-medium sized enterprises are owned and controlled by families so they can be defined as family businesses. One of the main characteristics of family business is the long term investment horizon that implies the involvement of next generation in the company. The role of the younger generation in a family business is very important for the success and the continuity of the firm across the time. The ability of the family firm to engage the new members, so that they evolve to committed owners, is one of the most important steps of success of the family firm. For that reason the commitment, the involvement and the identification of that members in the family business is crucial and, at the same point, is a prerequisite to create meaningful contribution in it. On the one hand, it is well-known that the family business context offers a safe environment for next generation family members, because there are plenty of resources for them to find a good balance in their life between work and family and at the same time exercise their skills under the umbrella of their parents. On the other hand, things are not always going well for the next generation, who is going to run the business as there many problems arise through the way.  One of the most important issues a family business has to face at this point is choosing the right successor to lead the company after the existing owner. Researches have shown that most of the family businesses tend to choose family members to lead the company and not external people as an attempt to keep the control. But what happens in that moment, which factors influence their decision of choosing the right one to be a successor? What happens if they have to choose among their children and does the gender of their offspring plays any role in making the decision?

Background

During the past twenty years the society has reached the point that men and women are treated as equal, whereas thirty years ago that was not the case. This goes as far as the gender of the successor on family businesses. Researches have shown that in most of the cases there is a clear gender bias in successor selection with daughters being less likely to be chosen to continue the business (Vera and Dean, 2005; Wang, Barrett, Walker and Redmond, 2008). According to literature, daughters historically have not been considered for succession into management positions in the family businesses (Kealting & Little, 1997; Stavrou, 1999) and also there were many times that even owners often preferred to sell the business rather than handover leadership to a female heir. (Stavrou, 1999; Vera and Dean, 2005). However there seems to be some progress made in that issue as in 1994 only 2% of CEO’s in family businesses were female including women who replaced their husbands due to death or illness and women who started their own businesses (Overbeke, 2007) and at 2005, this number reached 9.5% (Vera and Dean, 2005). ). Originally daughters were not generally considered seriously as successors in family business especially once they get married; as a married daughter will most probably change her name after her husband and this may disrupt...

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