Introduction
Family firms will exist long after the life of the founders (Poza, 2004). However, the management is expected to significantly change given the subsequent change of management. In most cases, the period prior to the stability of the management after the demise of the founders is usually a time bomb with the possible conflict being the major cause of a decrease in the firm’s performance. Areas such as innovation, goal achievement, and the ultimate productivity are usually affected significantly in the face of a feud resulting from an unplanned succession (Stalk & Foley, 2012). Professionalism in the company is usually marred with the varying interests of various family members. However, it is noteworthy that succession planning plays a pivotal role in averting the imminent ruin of the organization in such extreme situations. According to Collins and O’Regan (2010), family businesses and firms are among the most crucial drivers of a region’s socio-economic development since, apart from being the oldest, they are also the most prevalent across the globe. It is due to the economic importance of these companies that they have gained popularity among researchers in the recent past. In the same vein, succession and its impact on various aspects of the firm have been the major research theme.
Family succession and planning are usually a momentous occasion in the lifetime of a firm. In particular, it is regarded despite the strong lifetime orientation of most family businesses, just 30% and 15% outlive the second and third generations respectively (Karanja, 2012). SMEs are the most vulnerable when it comes to succession due to the difficulty in separating control and ownership after the demise of the founders. On that note, they can rarely live past their initial founders without prior and properly planned succession. For instance, in Europe, SMEs account for up to 99% of all enterprises. Situating this into the global context reveals the huge number of SMEs as well as the fact that lack of proper succession planning in these enterprises is a major global economic concern. Correspondingly, innovation, just like succession, determines the survival of a firm amidst stiff competition. Meanwhile, proper succession planning proffers a stable and conducive environment that facilitates innovation despite the change of management. Innovation, in the contemporary knowledge-based economy, is regarded as the primary source of enhanced economic growth. Thus, it has become a major issue with unparalleled vitality in the quest for growth and sustainability of family firms. It is on such grounds that Sharma, Christina and Gersick (2012) purport that the topic has become synonymous with studies revolving around family corporations.
Research Problem
Given that both innovation and succession planning are critical issues for the survival of a family-owned firm, scholars have dealt with them from a strategic perspective (Collins & O’Regan, 2010). For instance, most innovation scholars have always sought to identify and analyze factors that affect a family firm’s innovation intensity. Even then, the existing body of research has always neglected the intersection between these concepts and their impact on the sustainability of family firms. Additionally, while most studies focus on succession, none of them ever bothered to discuss succession planning and its impact on innovation with respect to the survival of a family company (Karanja, 2012; Ramona, Hoy, Poutziouris & Steier, 2008). In fact, there is a need for an explicit expatiation on the issue of succession planning given that it has a wide spectrum of impacts on various spheres and stages of innovation in family firms. Succession planning is affected by a variety of factors which have a cumulative impact on the effectiveness of the planning on innovation. However, it is worth noting that apart from ignoring the microcosmic factors of succession planning, current studies mainly focus on technological innovation. As such, the scope and ultimate findings of the studies are skewed and somewhat unreflective of the actual situation. In the face of these issues, there is a need for the structuring of the interlink between innovation and succession planning as a balance between the tendency of innovation and issues surrounding succession planning. Therefore, this study will approach the scope of the study from a standpoint that not only concentrates on the innovativeness as a means of discovering new applications and unearthing new ideas, but delving deep into the wholesome tendency of innovation of the participating firms vis-à-vis the existence of a planned succession criterion.
Thesis Objectives and Questions
The smooth transition of management, even in the absence of the founders of the firm, is the recipe for improved performance through peaceful co-existence of the employees and healthy relationships with the top management, which ultimately leads to higher productivity (Gomez-Mejia, Cruz, Berrone & De Castro, 2011). The broader aim of this study will be to fill the existing research gap as elaborated in the subsuming section. It is evident that the subject area of this study still lacks focus and relevance given the existing body of literature. Even then, the major objective of the study is to examine the impact of succession planning on family firms’ innovation. While at it, the following questions will inform a build-up to the primary objective:
· What is the impact of business strategy on innovation?
· What is the impact of family businesses on innovation?
· What is the impact of Successor’s Selection criteria on innovation?
· What is the impact of Successor’s training on innovation?