1042-2587-98-223$1.50Copyright 1998 byBaylor University

The Influence ofFamily on the FamilyBusiness SuccessionProcess: a Multi-Generational PerspectivePeter S. DavisPaula D. Harveston

The present study develops a process model of succession involving steps undertaken toprepare the family business for succession. The model examined multiple spheres of influ-ence, including individual, group (family), organizational, and critical resource providers, aswell as investigating the moderating effects of generational differences. Tests of this modelused responses from a nationwide survey of family business owner/managers. The resultssupport research expectations that various factors, especially family influence, positivelyaffect the extent of succession planning. Further evidence is provided indicating that gen-eration moderates revealed relationships.

amily businesses are the dominant fonri of enterprise in the U.S. constitutingapproximately 907c of all business establishments (Beckhard & Dyer. 1983b). Familybusinesses differ from traditional businesses in that they are owned or controlled byfamily members and thus have a great potential for the family to be involved in or toinfluence business matters. Because of the potential for family member influence, familybusinesses face many unique and complex problems not found in more traditionalbusinesses (Davis & Stem, 1980: Handler. 1989). Conventional wisdom holds that themore family members who are employed and the more central their roles, the greater theinfluence these men and women will exert on critical decision processes in familybusinesses (Dyer. 1986; Astrachan, 1988). Allowing family members to influence or-ganizational processes flies in the face of the advice of traditional management dogma,which tends to discourage family involvement in an enterprise, arguing that such in-volvement is antithetical to effective business practices, possibly leading to corruptionand nonrational behavior (Perrow, 1972; Dyer. 1994). However, since the investigationof the connection between family involvement and organizational processes and out-comes is still in its infancy (Bellet. Dunn. Heck. Parady. Powell. & Upton. 1996). manyconflicting claims regarding the purported effects of family member involvement remainunresolved.

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importance of succession to the continuity of the family business, many issues of theo-retical impact have yet to undergo large-scale empirical investigation.

One way to foster a greater understanding of succession is by investigating theprocesses undertaken to prepare for succession (Eischer, Reuber, & Dyke, 1993). In thecontext of family businesses, particular attention should be paid to the influence thatfamily members exert on succession processes. To better illuminate the effects of familyinfluence on processes attendant to succession, the effects of certain other factors si-multaneously would need to be examined. One of the key factors that should be exam-ined in any study on organizational succession is the effect of organizational learning(Senge, 1992). Intuitively, one would expect that experience accumulated across suc-cessive succession events may alter the effects and even the determinants of successionpreparations. In order to properly interpret the effects of the various influence variables,intergroup comparisons should be made to determine whether the generation of thefamily business acts to moderate the previously revealed relationships.

Pursuant to this line of investigation, the present study focused on the influence offamily members on preparations for succession as moderated by whether the focalbusiness was first, second, third, or later generation. That is, the study focused onwhether prior intergenerational succession events moderate the previously revealed ef-fects of certain individual-level (owner-manager) characteristics, group-level (family)influence, organizational-level attributes, and resources (capitalization) on the extensive-ness of the succession planning process.

SUCCESSION PLANNING PROCESSES IN FAMILY BUSINESSESThe Succession Planning Process

In the business panoply, family businesses differ from otherwise similar businessorganizations because of the critical role that family members play in organizationalprocesses at every level. In the context of family organizations, "the intimate connectionbetween family and business is considered natural and compatible" (Davis, 1968, p.405). This connection extends to succession across generations, which, although natural,can be a difficult process (Earquhar, 1989: Vancil, 1987). Although succession is inevi-table, the process of planning for succession is often thought of as a "taboo topic" infamily businesses (Applegate, 1994).

The study of succession often has focused on the event itself, defined by whether ornot a successor has been appointed (e.g., Eischer, Reuber, & Dyke, 1993). Other studiesargue the need to integrate multiple spheres of influence in an effort to further augmentour understanding of succession planning processes (Churchill & Lewis, 1983; Earquhar,1989; Handler. 1990; Longenecker & Schoen, 1978). Difficulty in instituting a structuredsuccession planning process has been attributed to such factors as the reticence ofentrepreneurs and founders to accept their own mortality; reluctance to let go of power;an unwillingness to appear to play favorites among children by choosing one child,among several, to succeed; or to generational envy (Applegate, 1994; Becker, 1973).

By definition, plans for succession usually include an identifiable set of elements, allof which are antecedent to the actual succession event. In his pioneering study, Chris-tensen (1953) proposed some of the elements that would most typically be included insuch a planning process: (1) the identification of the pool of potential successors; (2) theactual designation of the successor; (3) the notification of the successor-designate andother major power figures of the designation by the predecessor or by appropriate higherauthority.

The elements described by Christensen (1953) provide a useful framework for un-derstanding the tasks required for a suitably comprehensive succession planning process.Eor example, giving consideration to multiple possible successors suggests a more

32 ENTREPRENEURSHIP THEORY and PRACTICE

comprehensive succession process than when only one successor is considered (Vancil,1987). Similarly, communicating to the successor that he or she has been chosen pro-vides an important acknowledgment by the incumbent of the passing of responsibilityand leadership to the next generation. Announcing the decision to others represents apublic commitment by the current leadership to implement change and legitimizes theanointed individual in the eyes of peers and subordinates. This announcement may helpavoid power struggles within the organization, as nonsuccessors will be less likely tolater successfully dispute the succession. An awareness of this process can often helpboth family and nonfamily members of the firm place their own situation in context.

Consistent with the elements described by Christensen (1953), the focus has shiftedto identifying variables appropriate to capture the formality and completeness of thesuccession planning process. As detailed in the method section, each variable was chosenbecause it was seen as contributing to the extent and fonnality of succession planningand because it captures some of the dynamics unique to family businesses. These vari-ables included the choice or absence of choice of a successor, whether consideration wasgiven to only one successor or several possible successors, whether the chosen person orpersons were informed that they were being considered, and whether the decision hadbeen announced to others.

The following paragraphs outline our approach for achieving integration by devel-oping a multi-level research design in which the phenomena of interest are vested atparticular levels of analysis, for example, individual, group, or organizational (Low &MacMillan, 1988). In the present study, we focused on four levels of analysis includingattributes of the individual owner, the influence of the family group, organizationalcharacteristics, and critical resource providers. In doing so, we developed a processmodel of succession planning as follows.

First, the individual level of the model was formulated by recognizing that certaindemographic characteristics ofthe owner/manager (e.g., age, education) possess predic-tive validity regarding critical organizational processes (Hambrick. 1989; Helmich &Brown, 1972). Obviously, the older the owner/manager, the more proximate successionis likely to be for the organization and hence, the greater the impetus for implementinga comprehensive succession planning process.

Second, at the group level, it was considered axiomatic that certain family memberswould be actively involved in the management ofthe firm. These family members (oftenthose most closely related to the owner/manager) may, by dint of their functional oroccupational roles, be members of their firm's "upper echelon" (Bluedom, Johnson,Cartwright, & Barringer, 1994) and so, would be expected to exercise considerableinfluence over the choice and preparation of successors. Of course, not all relatives whowork in the family business occupy positions of power and influence. Nevertheless, theymay still influence succession via "kinship responsibility" (Price & Mueller, 1981).Kinship responsibility is based on the premise "that it is easier to be involved withrelatives who work at the same organization and live in the same community than thosewho do not" (Iverson & Roy, 1994, p. 25). This kinship responsibility may be extendedeven to family members who do not work in the family business. Top management mayallow this latter group to exercise continued influence over organizational processes asa means to maintain a broadly based kinship network.

Third, the organizational level of the model was articulated by acknowledging thatorganizations have certain attributes (e.g., size, formality) that might have importantconsequences for the organization's planning processes. Indeed, the institutionalizationof rules and procedures that constitute the essence of formalization (as articulated byWeber, 1947) are designed to preprogram responses to a wide variety of contingenciesfaced by the organization, possibly extending to those processes attendant to succession.

Fourth, at a resource level, the potential for the providers of critical resources (e.g.,

Spring, 1998 . 33

capital) to exert substantial influence on organizational processes, particularly on those(e.g., succession) that may affect the organization's prospects for continued survival wasevaluated. Efforts of the firm to ensure survival into succeeding generations may partlystem from the need to gain access to capital. Capital providers may require such plansbe evident as a precondition of extending credit or lending money. Therefore, it seemsreasonable to expect that, as the organization's dependency on particular sources ofcapital rises, so too will the expectations that the family creates structures and processesthat legitimize its organization in the eyes of resource providers (Davis, 1982; Poza,1989).

Finally, the notion of generational effects was used as a moderator because itallowed us to better depict stages that may underlie the basic structure of the successionplanning process presented here. While each succession event may be unique with nopreprogrammed answers, one might expect that, over successive generations, learningwould occur that would make previously unique events become a regular part of theorganization's activities (Senge, 1992).

Individual-Level (Owner/Manager) CharacteristicsOwner/manager age. Several studies have examined the role of the owner/manager

and the organizational impact of entrepreneurial behavior patterns on the work environ-ment. For example, Pfeffer (1983) argued that managerial succession is influenced by thedemographic composition of organizational leaders. With regards to succession, perhapsone of the more important characteristics of the family business owner/manager ishis/her age. Research indicates that older executives tend to be more risk averse thanyounger executives (Carlsson & Karlsson, 1970); additionally, an individual's (owner's)commitment to the organization increases with age (Becker, 1960). To a certain extent,one might expect that as the owner advances in age, he/she might use preparations forsuccession as a mechanism to demonstrate commitment to the organization and its futurewhile simultaneously controlling risk. That is, as the owner ages, the consciousness ofa need to prepare for the inevitable transition of ownership and control will lead to aconcomitant increase in succession planning. Based on the preceding, we propose thefollowing:

HI A: As the owner/manager's age increases, so too will the extensiveness of thesuccession planning process.

Owner/manager education. Relatively little research has examined education andtraining as they relate to the succession process. Some studies of family businesses haveshown a positive relationship between education and innovation (Kimberly & Evanisko,1981), while still others (e.g., Datta & Guthrie, 1994) have linked the owner's level offormal education with an increased propensity to implement change. A recent study bySeymour (1993) found no relationship between successor training and formal successionplanning, but did not investigate the impact that the educational level of the owner hadon either successor training or succession planning. These studies provide no clearconfirmation of a positive relationship between owner education and succession plan-ning. Nevertheless, on the basis of these studies, one could conjecture that to the extentthat planning for organizational succession is innovative and represents a commitmentby the current owner to prepare the organization for its future, then the relationshipbetween the owner's level of education and succession planning would be positive. Thus,the following is proposed.

HIB: As the owner/manager's level of education increases, so too will the exten-siveness of the succession planning process.

34 . ENTREPRENEURSHIP THEORY and PRACTICE

Owner/manager financial stake. The owner's financial stake in an organizationconsists of both an absolute component (i.e., income) and a relative component (i.e.,percentage of worth, or ownership concentration). For example, there has been extensivediscussion of the relationship between a manager's ownership in and consequent com-mitment to the organization (e.g., Cyert & March, 1963). Davis (1982) suggested thatfamily business owners have high intentionality in terms of their level of perseveranceand commitment to see the business succeed. More pertinently, a study of computerfirms by Marino and Dollinger (1987) found the manager's financial stake in the orga-nization to be an important infiuence in succession decisions. While past research has notdirectly connected the owner/manager's income with the succession planning process,the possibility of a reciprocal relationship between the owner's resource dependence andinstitutional structures suggests that this income may be infiuential in succession pro-cesses. Logically, one would expect that, to the extent that the owner's financial interestscoincide with an orderly transition in ownership, then, as an owner's income or financialstake increases, so too will his/her willingness to engage in succession planning. Con-sistent with this rationale, the following relationship is proposed.

HlC: As the owner/manager's financial stake increases, so too will the extensive-ness of the succession planning process.

Group-Level (Family) InfluenceOver the years, management theorists have consistently discouraged family involve-

ment in an enterprise and said it is antithetical to effective business practices (Perrow,1972; Dyer, 1994). However, little empirical work has been done to demonstrate aconnection between family involvement and organizational outcomes. Indeed, one mightargue that since family members would likely trust each other more than unrelatedindividuals, family firms may actually have a competitive advantage. Regardless ofwhether family involvement leads to differential outcomes, family business owner/managers have generally chosen to employ family members. This decision can have atremendous impact on the owner/manager, the business, and the family.

Some evidence exists suggesting that having more family members present, either inthe organization or in the social network, increases the family's total infiuence. Recently,Gundry and Welsch (1994, p. 273-286) showed that "Family members can play aninfluential role" in "decision-making processes." They found that an important indi-cator of the infiuence that families have is "their numbers in terms of being engaged asemployees" and as "family investors" (i.e., family members who are not intimatelyinvolved in daily business operations). According to Gundry and Welsch, increasing thenumbers of family employees and family investors was said to make a business more"family intense."

Beyond the infiuence attributed to the sheer number of family members, whether inthe organization or in the social network, the literature suggests there may be a differ-ential effect across family members. As Dyer (1986) and Astrachan (1988) note, toassume that an individual or group will have infiuence regarding succession and otherimportant business issues just because they have high power in the family would benaive.

Managing in the family business environment depends heavily on the manager'sposition and power in the organization. Power exists in both the family and thebusiness and fiows in both directions across the boundaries of the organization. Amanager derives power from his or her position in the business and the family.Business-related power must often depend on one's position in the management

Spring, 1998 . 35

hierarchy (where higher positions confer greater power). . . while . . . family-relatedpower generally comes from family seniority or from one's ability to influencesenior members of the family, as through familial proximity. The manager's strategyfor making decisions must be adjusted by his or her ability to command power bothinternally in the business and externally in the family" (Holland & Boulton, 1984,p. 18-19).

Of course, some decisions made by managers of family businesses have little familysignificance or provoke little family interest while others, such as succession, maytrigger major upheavals. Research on succession in family business has revealed that the''installation" of a new generation as the leader(s) in the family business needs to beconfirmed by various stakeholders, especially by key employees (managers) and byfamily members (Harvey & Evans, 1995). The transformation of the organization, ex-tending to the succession process, is directly influenced by the involvement of thesevarious stakeholders. Insiders, managers who also are family members, have a greatervested interest in ensuring a succession process that maintains the cultural foundation ofthe company than do outside stakeholders (Beckhard & Dyer. 1983; Dyer, 1986).

Because family business managers are at the nexus of two important social net-worksfamily and business (Carroll & Teo, 1996). they are at the forefront of decisionmaking that influences the family-business relationship. According to social networktheory (Burt. 1992). managers participate in a variety of interpersonal groups for themajor domains of life (e.g.. family, work). The .social pressures exerted by members ofeach group can have a major impact on the individual manager regarding a variety oforganizational issues. As Reynolds (1992, p. 47-70) notes. "If two or more of specificgroups overlap, as with a family-run business, the social pressures on the individual(manager) could be quite strong." The implication is that the influence exerted by familymembers due to their membership in one social group (i.e.. family membership) isreinforced by their concurrent membership in the other social group (i.e., work). Ineffect, the closer the relationship of the family member to the owner/manager (i.e.,immediate family versus extended family), and the higher the person's position or levelof responsibility/authority (i.e.. vice president versus line manager), the more influencethat person would be expected to exert on critical decision processes of the familybusiness. The result would be that family members who possess both close familyaffiliation and occupy high managerial positions would be expected to exert a strongpositive influence on the extensiveness of the succession planning process. Consistentwith the preceding arguments, we present the following hypothesis.

H2: Group level (family) influences, derived from a combination of proximity offamilial relationship to the owner/manager and the involved group members'organizational position or level of responsibility/authority, will exert a positiveeffect on the extensiveness of the succession planning process.

Organizational CharacteristicsSize. Although family business is often thought to be synonymous with small busi-

ness, this is not necessarily true. In fact, some of the world's largest companies (e.g.,Cargill. Ford. M&M Mars) are family-owned or controlled (Litz, 1995). For severalreasons, larger organizations may exhibit a tendency toward more extensive successionplanning than smaller organizations. Larger organizations have a distinct edge in execu-tive development and the potential for executive mobility. For example, larger organi-zations have greater opportunities to train and develop top management, and so wouldhave more training programs and more complex succession plans than do small ones

36 ENTREPRENEURSHIP THEORY and PRACTICE

(Helmich, 1977). Furthermore, larger organizations have the resources to engage exter-nal consultants to give professional advice and facilitate the succession planning process(Chaganti, Chaganti, & Malone, 1991). These factors alone might ensure that largerorganizations would have more qualified, experienced candidates in place for possiblesuccession. Even if smaller organizations have qualified successors, they may lose themto larger firms in which the opportunities for advancement are perceived to be greater.In light of the arguments concerning organizational size, the following hypothesis ispresented.

H3A: The larger the family business, the more extensive will be the successionplanning process.

Formality. There is a long history of research linking structural dimensions oforganizations (e.g., centralization, formalization) to the futurity and formality of plan-ning behaviors (Rue, 1973; Robinson & Pearce, 1983). In contrast to nonfamily busi-nesses, family businesses often lack formalized guidelines for future events in the busi-ness. For instance, a study by Kets de Vries (1977) found one of the key attributes thatmost adversely affects success among family businesses to be the owner's refusal toformalize the organization. Often, external influencers can help to provide structure andformalization within a family business (Barach, 1984). For example, external boards ofdirectors may push for increased formality of the structure of family businesses as ameans to help "'decide on the future direction of their firms" (Barach, 1984, p. 11). Theexpected consequence of an increase in the formality of an organization's structurewould be an increase in the extensiveness of the succession planning process. In con-junction with the preceding, we propose the following.

H3B: The more formalized the family business, the more extensive will be thesuccession planning process.

Resource-Level (Capitalization)In order to examine the relationship of resources, including access to capital and

importance of family funding, to the extensiveness of the succession planning process,variables capturing two essential resource attributes, availability and sourcing, are in-cluded in the model. Within the model of succession planning developed here, resourceavailability and sourcing are proposed to exert a direct, positive effect on the extent ofpreparations for succession. In the first instance, the accessibility of capital has long beenthou^^ht an important component when considering business growth. Kets de Vries(1993) proposed that family businesses will be at a disadvantage in obtaining access toexternal capital. In order to gain access to capital, family businesses must take measuresto make themselves attractive to capital providers. Having a clear process for successionis one way in which family businesses can ensure consistency and coherence in achiev-ing family objectives and the goals of resource providers.

Sources of funds (both external and internal funding) also may be an importantconsideration when family businesses prepare for succession. Family businesses oftenrely to a great extent on internal sources of capital, such as that provided by familymembers.'^Gundry and Welsch (1994) found that family businesses that had familyinvestors and family employees were more concerned with the long-run survival of thefirm. Consequently, as the family assumes a greater role as a provider of capital, then theorganization would exhibit an increased tendency to implement more extensive succes-sion processes as part of a broader effort by family members to ensure the business'slong-run survival and the continuity of family control.

Spring, 1998 37

H4: Resources (i.e., capital access and source) will exert a positive influence on theextensiveness of the succession planning process.

In summary, the previous review of the literature suggests that each of the fourfactors reviewed above (individual, group [family], organizational, and resources) willexert unique, positive effects on preparations for organizational succession in familybusinesses. That is, as individuals rise in age, education, income, and the percentage ofworth invested in the business, so too will the extent of preparations for succession.Likewise, family attributes as evident in both upper echelon and kinship mechanismswill exert a positive influence on succession planning. Similarly, as the organizationbecomes larger and more formalized, these attributes (i.e., size, formality) will positivelyaffect succession planning. Finally, resources, as reflected by both their increased ac-cessibility and source dependency (i.e., family funding), will yield a concomitant in-crease in the extensiveness of an organization's preparations for succession.

The Moderating Effects of Generation on Preparations for SuccessionAs noted earlier, very few family businesses survive past the first generation and

even fewer survive to a third generation or beyond. Research suggests that the morefrequently succession occurs, the less infiuence any individual will have on the process(Miller, 1991). Thus, one would expect that over successive intergenerational transfers,the characteristics of the individual owner/manager will demonstrate a decrease in in-fiuence on the succession planning process. In contrast to effects vested at the individuallevel, group level infiuences would be expected to remain relatively constant oversuccessive generations. This anticipated consistency in effects is inherent in the defini-tion of family business. While individual leaders may come and go, the family presenceremains constant. Distinct from individual and group level infiuences, one would expectthe effect of organizational characteristics (e.g., size, formality) on succession planningto increase over successive generations. This increase occurs as firms grow and asprocesses become institutionalized or formalized within the organization (Miller, 1991).Finally, the impact of resource availability on succession processes is expected to remainconstant across generations, as all organizations need capital to fund growth and ensuresurvival.

Based on the preceding logic, generation is proposed to moderate the relationshipbetween both individual-level characteristics (i.e., the owner/manager's age. education,income, and percent of worth in the family business) and organizational-level charac-teristics (i.e., size and formality) and the extensiveness of the succession planning pro-cess. In contrast, generation is not expected to moderate the relationship between eithergroup level (family) infiuencers (i.e.. family proximity and organizational role) or re-sources (i.e., access to capital and source dependency) and the extensiveness of thesuccession planning process.

Consistent with the foregoing, four hypotheses are proposed below. Two hypotheses(H5 and H7) present those levels of analysis (i.e., individual and organizational levels)where moderation is expected to be evidenced. The two other hypotheses (H6 and H8)concern those levels of analysis (i.e., group [family] and resource levels) where mod-eration is not expected.

H5: Generation moderates the effects of individual-level characteristics (i.e., theowner/manager's age, education, income, and percent of worth in the familybusiness) on the extensiveness of the succession planning process.

H6: Generation does not moderate the effects of group-level (family) influences(i.e., family proximity and organizational role) on the extensiveness of thesuccession planning process.

38 ENTREPRENEURSHIP THEORY and PRACTICE

H7: Generation moderates the effects of organizational-level characteristics (i.e.,size and formality) on the extensiveness of the succession planning process.

H8: Generation does not moderate the effects of resource level (i.e., access andsource) on the extensiveness of the succession planning process.

HYPOTHESIZED MODELThe relationships between individual-level characteristics (i.e., owner/manager age,

education, income, and percentage of worth in the family business), group-level (family)variables (i.e.. family proximity and organizational role), organizational-level character-istics (i.e., size and formality), and resources (i.e.. access and source of capital) on theextensiveness of the succession planning process are represented in the model shown inFigure 1.

Initially, the model is examined according to relationships of the variables on theextensiveness of the succession planning process for all respondents. Subsequently, thesample is divided into three generation levelsfirst, second, and third or later, and themodel is tested separately for each generational group.

METHODThe data used to test the hypotheses were collected as part of two national telephone

surveys conducted in 1993 and 1994 by the Gallup Company for Massachusetts Mutual

Figure 1.A Multi-level Model of the Relationship of Individual, Group(Family), Organizational, and Resource Level Variables to theExtensiveness of Succession Planning

Individual LevelAgeEducateIncomeWrthpct

(Family^ LevelFaminopsFamout

Organizational LevelFormalSize

Resource LevelFamfundsCapacc

Extensiveness ofSuccessionPlanning

Generation

Spring, 1998 39

Insurance Company to investigate the operations of family-owned businesses.' Thesamples of potential businesses were randomly drawn from a comprehensive database offamily-owned businesses maintained by Dun & Bradstreet and Survey Sampling andhave previously been used in studies of family business. Since t-tests on all pertinentvariables revealed no significant differences across the two survey periods, the data fromthe 1993 and 1994 surveys were combined to create a single sample consisting ofresponses from 1,616 family businesses.

The sample included a wide range of family-owned businesses competing in mostmajor U.S. industries. The firms surveyed had to meet the following criteria: the com-pany had at least ten employees, the company had annual revenues of at least two milliondollars, and the company had been founded at least ten years prior to the survey. To beincluded, respondents were required to be primary owners of businesses as identified bythe title they held (e.g., owner, president, CEO) and had to self-identify their business asa family business.

VariablesSuccession planning process. The dependent variable, the extensiveness of the suc-

cession planning process, was defined on the basis of owner/managers' responses to aseries of questions in the survey. Questions included the following; "has a successorbeen chosen who will assume operating control of your business"; "has a successor notbeen considered"; "has just one possible successor been considered"; "have severalpotential successors been considered"; "have you informed the successor of yourchoice"; and "have you informed others"? Responses to each of the six items werescored as either zero or one, based on whether the individual activity was or was notpresent. The sole exception was the question of whether a possible successor had beenidentified and, if so, whether consideration was given to only one successor or severalpossible successors. In the latter case, responses were scored zero if no one had beenidentified, one if only one possible successor was considered, and two if more than onesuccessor was considered. Responses were then summed to create a single measurewhich ranged from " 0 " (low) to " 7 " (high). Higher scores indicated that a moreextensive succession planning process was in place in the focal business.

Individual-level (owner/manager) characteristics. All respondents were asked toprovide information about their education, age, income, and percentage of worth in-vested in the business. Age (AGE) was computed using the respondents' self-reporteddate of birth. Owner/manager education (EDUCATE) was rated using a six-point scaleranging from " 1 " (less than high school graduate) to " 6 " (postgraduate degree). Theowner/manager's current annual income (INCOME) was rated using a four-point scaleranging from " 1 " (less than $50,000) to " 4 " ($250,000 and above). The percentage ofthe owner's wealth invested in the business (WRTHPCT) was derived by asking re-spondents, "what percentage of your family's net worth is tied up in the business?"Answers were rated using a four-point scale ranging from " 1 " for (under 25%) to " 4 "(75% or more).

Group-level (family) influence. Despite widespread acknowledgment of its potentialimportance, family infiuence has remained a construct without a clear measurementdomain within a family business context. Because there are no widely accepted scales tomeasure its effects, we had to develop measures to tap into the underlying concept offamily infiuence. The first of these, dubbed FAMINOPS, captures the infiuence exerted

1. The survey was designed with the input of a research advisory group comprising seven leading research-ers in the area of family business: Craig E. Aronoff, Joseph H. Astrachan, Bonnie Brown, Randel S. Carlock,Francois M. de Visscher, Paul I. Karofsky, and Max S. Wortman, Jr.

40 , ENTREPRENEURSHIP THEORY a n d PRACTICE

by family members who are actively employed by the firm in day-to-day operations. Ofcourse, family business owners may be subject to influence attempts by family memberswho do not work in day-to-day operations. To capture the influence of this latter group,a second variable, called FAMOUT, was created.

Respondents were asked to name up to four family members who worked in day-to-day operations and up to four family members who did not work in day-to-dayoperations but who had an influence on business decisions. For those family membersidentified by the respondents, his/her relationship to the owner/manager was ascertainedalong with his/her role or position in the organization. Those individuals who had a closefamily relationship to the owner/manager (i.e., spouse, mother, father, brother, sister, sonor daughter) were coded " 2 . " Those individuals with a more distant family relationshipto the owner/manager (e.g., grandparents, aunts, uncles, cousins, and in-laws) werecoded " 1 . " Similarly, individuals occupying positions in the top management team, andso were more likely to be involved in the decision-making process (e.g.. president,vice-president, general manager) were coded " 2 , " whereas those occupying positionsthat were deemed less likely to influence decision making (e.g., secretary, mechanic,waitress, custodian), were coded " 1 . "

To create the FAMINOPS variable, we first multiplied the scores for each familymember's role and position to create a single sealer whose value ranged from "T" to" 4 . " The scores for these family members, up to four for each organization, were thensummed to yield a value on the FAMINOPS variable for each family business thatranged from ' T ' to "16 ." Of course, this assumes that Gundry and Welsch (1994) areright in supposing that having more family members (up to 4) involved in the businessequates to the presence of more family influence. However, we cannot rule out thepossibility that one very influential person may have as much influence as four lessinfluential people. A similar process was followed to create the variable FAMOUT,which represented the influence from family members who are not in day-to-day op-erations.

Organizational characteristics. Organizational characteristics included two vari-ables: size and formality. The size of the organization (SIZE) was represented bycombining the number of part-time employees and full-time employees. The resultingnumber ranged from 10 to 36,000, with most having 50 or fewer employees. Consistentwith the recommendations of Blau and Schoenherr (1971) for minimizing the effect ofskewness in the distribution of the size variable across organizations, the natural log ofsize was used in all analyses.

Organizational structure was assessed using four items: "written job descriptions,""fixed compensation plans," "formal employee performance review processes," and"holding regular board meetings." Responses to these items were collapsed and re-corded to form a single interval variable called FORMAL, with values ranging from" 0 " (low degree of formality) to " 4 " (high degree of formality).

Resources (capitalization). The fourth block of variables considered representedresources, in particular, capitalization. Two separate aspects of capital resources, in-cluding its availabihty, were assessed on the basis of the businesses access to capital(CAPACC) and its source, seen here as the reliance by the firm on internal or familyfunding (FAMFUNDS). Access to capital was an interval variable, ranging from " 1 " to" 4 " , according to the owner's perception of the businesses current access to capitalpoor, only fair, good, or excellent. Reliance on family as a source of capital funding wasrepresented by the answer to how important family f'unds were as a source of capitalnot important ("1") to most important ("4") .

Generation. Respondents were asked to self-identify how many generations backtheir business had been founded. Based on their responses, three generational groupingswere devised. The majority of the responding businesses (1047 or 64.8%) were first-Spring, 1998 41

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0 0O

r***o

r

tr

- tor

0 0

O

r

oo

**n

generation firms, where the current owner/manager also was the founder. The second-generation group consisted of 277 firms (17.1%), where the parents of the currentowner/manager had founded the business. The last group of 292 firms (18.1%) wascomprised of firms founded by the current/owner manager's grandparents or previousgeneration.

Descriptive statistics and correlations for all involved variables for the total sampleare shown in Table 1.

DATA ANALYSESTotal Sample

Beginning with the total sample, we tested our first set of hypotheses (H1-H4) bysequentially regressing four separate blocks of variables on the scale capturing theextensiveness of the succession planning process. Using stepwise regression, we sequen-tially entered blocks of variables beginning with the block of individual-level (owner/manager) characteristics: age (AGE), education (EDUCATE), income (INCOME), andpercentage of worth invested in the family business (WRTHPCT). The second blockconsisted of group-level (family) variables, and included indicators of the influenceattributed to family members involved in day-to-day operations (FAMINOPS) as wellas those not involved in day-to-day operations (EAMOUT). The third block consisted ofthe two organizational-level attributes, the natural log of total employment (SIZE) andformality (FORMAL). The fourth and final block to be entered into the equation cap-tured the effects of resources (capitalization), including access to capital (CAPACC) andthe importance of family as a source of capital (FAMFUNDS).

Generational Sub-groupsThe moderating effects of generational differences among family businesses were

tested by subgroup analysis (Arnold, 1982). The total sample first was sorted in ascend-ing order of generation (i.e., first, second, and third or later). We then tested the mod-erating effects of generational differences (i.e., H5-H8) by repeating the analyses per-formed previously on the total sample for each of the three generational subgroups.Within each generational subgroup, the extensiveness of the succession planning processwas regressed against successive blocks of variables beginning with the individual-levelcharacteristics, followed by the group-level (family) influence variables, the organiza-tional-level variables, and the resource variables, respectively.

Regression results for the total sample are shown in Table 2A, while the regressionresults for each of the generational subgroups are shown in Table 2B.

RESULTSIn general, the results support the first set of research expectations (i.e., H1-H4)

regarding individual-level (owner-manager) characteristics (i.e., AGE), group-level(family) influence (i.e., FAMINOPS), organizational-level attributes (i.e., FORMAL),and resources (capitalization) (i.e., CAPACC) as drivers of the extensiveness of suc-cession planning processes among family businesses. At the individual-level of analysis,HI A was supported. Increases in the age of the owner/manager were found to signifi-cantly (P < .01) impact the extensiveness of the succession planning processes beingevidenced. Hypothesis IB was rejected. Although increases in the owner/manager'seducation also was significant (P < .05), contrary to expectations, it was found to exerta negative effect. Owner/manager education was the only variable to display a significant

Spring, 1998 43

Table 2A

Regression Results for Entire SampleEntire Sample

N = 1349

Variabies Beta

Age .175 6.458***Educate -.060 -2.158**Income .022 .715Wrthpct .031 1.162Faminops .111 4.122***Famout -.012 -.453Size .014 .497Formal .089 3.264***Famtunds .045 1.7f>4*Capacc .049 1.760*

Adj. R- .06

* p < .10, '*p < .05. ***p < .01

negative effect. Hypothesis lC also was rejected. No significant effect was observed foreither the individual owner/manager's income or percentage of worth invested in thefamily business.

Findings at the group-level were consistent with expectations, supporting hypothesis2. Here, it was found that having more family members work in day-to-day operationsin top management positions significantly affected (P < .01) the succession planningprocess. No significance was attached to increases in family members who were not inday-to-day operations.

At the organizational-level, no significance was found to result from increases inorganizational size, thus hypothesis 3A is rejected. However, an increase in formalitywas found to have a significant (P < .01) positive effect on the extensiveness of thesuccession planning process, supporting H3B.

Consistent with expectations regarding the positive effects of resources on succes-sion planning, both access to capital and source effects (i.e., family funding), were foundto be significant (P < .10) in determining the extensiveness of the succession planningprocess. Thus, hypothesis 4 was supported.

The results reported demonstrate that each level of analysis studied here (i.e., indi-vidual, group [family], organizational, and resources) directly impacts the extensivenessof succession planning processes. However, theory suggested that these relationshipsmay be more complex, involving potential moderators such as the generation of theinvolved family business. The results of separate multiple regression analyses indicatedthat the relationships between preparations for succession and individual-level, group-level, organizational-level, and resource factors differ according to the generation(whether first, second, third or later) of the focal family business.

The results support three of the hypotheses concerning generational moderation, orthe lack thereof As shown in Table 2B, the significance of factors at the individual-level(e.g., the owner/manager's age), the organizational-level (e.g., formality), were found to

44 ENTREPRENEURSHIP THEORY a n d PRACTICE

Table 2B

Regression Results by Generation

AgeEducationIncomeWrthpctFamoutFaminopsSizeFormalFamfundCapacc

First-Generation-led

Family Businesses

B

.055-.048-.022

.042

.035

.128

.039

.326

.045217

T

6.52***-1.50

-.621.341.11433***1.223.55***1.42

.09

Second-Generation-led

Famib

B

.045

.027

.055

.012-.044

.101

.060

.084-.051

.380

V Busine.sses

T

2.74***.42.83.84

-.721.94*-.961.35-.82

.06

tThird-Generation-led

Family Businesses

B

.019-.074

.061

.008-.091

.112

.029

.075

.419

.019

T

.31-1.16

.99

.13-1.46

2.15**.47

1.202.33**

.133

.04

*p *p < .05. ***p < .01

vary across generations. These findings support hypotheses 5 and 7 that effects ofindividual-level and organizational-level factors on the extensiveness of succession plan-ning processes would be moderated by generation. In contrast to the variability thatindividual and organizational factors display across generations, the group-level (family)effects were found to be positive and significant across all generations of family busi-nesses. The fmding that generation does not moderate family influence supports hypoth-esis 6.

The only results that conflicted with our a priori expectations concerned the mod-erating effect of generation on resources as drivers of the extensiveness of the successionplanning process. We had hypothesized (H8) that generation would not moderate thisrelationship. However, the results revealed that, while resources do exert a significanteffect across all generations, the locus of the effect, whether vested in access to capitalor in the source of the capital (the family as a provider of funds), shifts across successivegenerations. Among first- and second-generation family businesses, access to capital wassignificant (P < .01), while among third-generation (or later) firms, source effects, vestedin the role of family as provider of capital, eclipsed access to capital in significance (P< .05).

DISCUSSION AND IMPLICATIONSIn order to satisfy a perceived need for better preparation and planning for succession

in family businesses, the present study proposed a multi-level approach for the study ofthe succession planning process. Reviewed theory supported contentions that certainindividual-level (owner-manager) characteristics, group-level (family) influence, orga-nizational-level attributes, and resources (capitalization) will affect the extensiveness ofthe succession planning process among family businesses. Further, it was proposed that

Spring, 1998 45

the relationships between these variables and succession planning will differ accordingto the generation of the involved firm (i.e., whether first, second, or third or later). Thestudy's results largely supported these expectations.

Of the four individual-level characteristics investigated here (age, education, in-come, and percentage of net worth) vested in the owner/manager, only age was found topossess predictive validity regarding critical organizational processes (Hambrick, 1989;Helmich & Brown, 1972), particularly succession (Pfeffer, 1983). Building on the find-ings of Rue (1973) and Robinson and Pearce (1983) in public corporations, our resultsprovided evidence linking particular structural dimensions of organizations (e.g., for-malization) to the futurity and formality of specific planning behaviors (i.e., succession)among family businesses. The findings regarding resources support the argumentsvoiced by Kets de Vries (1993) concerning access to capital and by Gundry and Welsch(1994) concerning the importance of capital provided by family members as consider-ations when family businesses prepare for succession. While certainly these fmdings areimportant, possibly the most important findings of this study concern the influence offamily and the moderating role of generation.

The Influence of FamilyAmong the most interesting of our findings regarding the four levels examined here,

was that only group-level influences, or more specifically, the influence of familymembers in day-to-day operations, demonstrated an influence extending across multiplegenerations. In particular, the significance found for the variable FAMINOPS suggeststhat the more closely related family members are to the owner/manager, and the higherthe role or position they occupy, the greater will be their collective influence over theextensiveness of the succession planning process. It is important to note, however, thatthe number of family members involved in day-to-day operations may not be the criticalfactor. Post hoc analysis revealed that second and third (or later) generations havesignificantly fewer family members in day-to-day operations than first-generation familybusinesses (P < .05). The results obtained here suggest that distinctions between familymembers as to the likelihood of their being actively involved in preparations for suc-cession may be vested primarily in their organizational roles. In this event, bein*? in-cluded among the firm's "upper echelon" may act as an important contingency inassessing influence based on family relationships.

In addition, results obtained here cast doubt over theories that would vest power andinfluence in family business hierarchies merely on the basis of ''kinship responsibility"(Price & Mueller, 1981). Evidence for this conclusion is provided by the lack of sig-nificant influence attributable to family members who are nor involved in day-to-dayoperations (i.e., FAMOUT). Of course, it could be that the influences exerted by thislatter group are too subtle to be detected or perhaps they are more indirect, felt in themaintenance of social interactions outside of the workplace, which may provide theprimary mechanism for maintaining the kinship network. On the other hand, it may bethat these family members do exert substantial influence over organizational processesbut the effects of such influence simply are not evident in planning for successionManagerially, these flndings suggest that developing an extensive organizational suc-cession planning process rests mostly in the hands of those family members who areinvolved in the day-to-day operations of the family business.

The Moderating Effect of GenerationSurprisingly, the effects of generation appeared somewhat constrained as one

46 . ENTREPRENEURSHIP THEORY and PRACTICE

moves from first generation to second. In fact, three of the four variables (i.e., AGE,FAMINOPS, CAPACC) that were significant drivers of succession planning amongfirst-generation family businesses continued to be significant among second-generationfirms. Interestingly, change in the drivers of succession planning appeared to acceleratebetween the second- and third- (or later) generation firms. Between the second and thethird generation, the owner's age (AGE) ceased to be important and the natureof important resources shifted from access to external capital to internal sources(FAMFUNDS).

Although the cumulative differences between the first and the third (or later) gen-erations are substantial, these differences can not be attributed to variations in theemphasis each generation placed on preparations for succession. Post hoc analysis in-dicated that the extensiveness of the succession planning process did not differ acrossgenerations. However, while all generations emphasize succession planning to a similarextent, with but one exception (i.e., the influence of family), the determinants of theprocess differed across generations.

Although not the focus of investigation in this study, perhaps the continuing pres-ence or "shadow" of the founder or his/her spouse may help explain why second-generation firms are more like first-generation firms than third-generation firms. Posthoc analysis revealed that over 10% of all second-generation firms surveyed here remain,at least partly, under the influence of the founder or his/her spouse. In 30% of thesesecond-generation firms, the founder or his/her spouse continues to work in day-to-dayoperations of the business. Another 407c of second-generation firms reported that, evenwhen they no longer have day-to-day responsibilities, the founder or his/her spouse stillexerted an influence over decision making. It is not until the third generation assumescontrol that the "shadow" cast by the original founder virtually disappears.

Evidence of a generational effect on the succession planning process also is providedin the decline of the influence of certain variables. In particular, the decline of influencevested at the individual-level appears noteworthy. The regression coefficient for themost significant of the individual-level variablesageshowed incremental declinesover generations, until, by the third generation, increases in an owner/manager's age nolonger had a significant impact on the extensiveness of a family firm's successionplanning processes. From this, it would appear that the attributes of the owner/manager,such as age. cease to affect succession planning after a sufficient number of suchtransitions (apparently two) have occurred.

These results would seem to suggest that individual-level effects are unimportant innonfounder-led family businesses. Many explanations that might account for this findinghave been proposed. For example, Harvey and Evans (1995. p. 8) point out that thedegree of change to the planning culture of the family business after succession wouldbe contingent upon a number of factors including: (1) the degree of shared beliefsbetween the older generation and the successors; (2) the age and experience base of thesuccessor; (3) the condition and health of the company after succession; and (4) the levelof older generation involvement in the family business after succession. Unfortunately,an assessment of these factors fell beyond the scope of the current research. Anotherexplanation could be the gradual transition to more professional and more highly trainedmanagers. Many family business authorities and consultants advise family businesses toincrease the professionalism of managers and employees (Aronoff & Ward, 1991). Someevidence suggestive of an increase in managerial professionalism across generations isprovided by a post hoc examination of differences in the education levels of involvedowner/managers. A post hoc Scheffe' test revealed that both the second- and third- (orlater) generation managers were significantly more educated (P < .001) than were first-generation owner/managers. Finally, the decline in importance may be to due to matu-ration effects across generations. Evidence of such effects is seen in the age differences

Spring, 1998 47

among first-generation or founder-led firms and those led by second- and third-generation or later family members. A post hoc Scheffe test showed that the first-generation owner/managers were significantly older (P < .001), with mean age of 54(S.D. 11.50), than were their counterparts among the second generation, with a mean ageof 48 (S.D. 11.35), or the third generation (or later) with a mean age of 47 (S.D. 11.28).

Additional evidence for the moderating role of generation on drivers of the succes-sion planning process is provided by the findings regarding organizational-level effects.For example, the regression coefflcient for FORMAL, an organizational-level attribute,was .326 (P < .01) in the flrst-generation subgroup but dropped to .08, becomingnon-signiflcant, in the second-generation subsample. This flnding suggests that the tran-sition from founder-led (flrst generation) to successor-led (second generation) attenuatesthe effect that the formality of an organization's structure has on its organizationalactivities. A plausible explanation for this flnding is that structure may vary to a greaterextent among flrst-generation than among second- and third- (or later) generation firms.However, it is worth noting that no statistically signiflcant differences were found amongthe three groups in regard to their degree of formality. Alternatively, it may be thatfamily businesses that are experiencing succession for the flrst time are more responsiveto efforts at formalization than businesses that have previously experienced succession.Families that have already experienced one or more succession events are likely to havetheir own tried and tested ways and means that work for them. Hence, later-generationflrms do not flnd that the formalizing of relationships contributes to the process ofplanning for succession.

Finally, the results support those who would argue for considering resources whenplanning for organizational continuity. While the positive influence of resources onplanning was anticipated, it was somewhat surprising that the locus of resource effectsshifted according to the generation of the involved businesses. Among first- and second-generation family businesses, access to capital was paramount, whereas among third- (orlater) generation firms, influence shifted to the source of capital, seen here as theimportance of family as a provider of capital. ANOVA and additional post hoc Scheffetests showed that the first and third (or later) generations differ on access to capital (P< .001). Specifically, access to capital is improved for the third generation compared tothe first. In combination, these findings support suggestions by Stinchcombe (1965) thatfirst- and second-generation firms may suffer from the "liability of newness" in regardsto access to capital, which can only be resolved via organizational longevity. However,even maturing family businesses may find their access to capital limited. The resultssuggest that family firms may endeavor to resolve the access issue by turning to internalsources of funds (i.e., the family). Some evidence for this type of resource substitutioneffect is suggested in the negative correlation between access to capital (CAPACC) andthe family as capital provider (FAMFUNDS). It may be that, in providing resources tothe firm in its latter stages, the family is able to reassert a significant influence overorganizational activities and processes attendant to succession planning.

Managerial ImplicationsOne of the fundamental missions of a family business is to pass the business on to

subsequent generations (Davis, 1968). This paper aspired to build knowledge about thesuccession process in the family business across generations. This knowledge will notonly be a foundation for future research but also holds implications for family businessowner/managers and advisors.

First, and perhaps most important, the findings that the determinants of the exten-siveness of the succession planning process can be vested at different levels of analysis

48 ENTREPRENEURSHIP THEORY and PRACTICE

is important not just for academics, but for practitioners and family advisors as well.From the perspective of the owner/managers of the family firm, efforts to engage ineffective succession planning will be affected by factors that can only be observed atdifferent levels of analysis. In other words, our results show each generation of familyfirms to be influenced by different individual, family, organizational, and resource fac-tors. For instance, individual-level factors (attributes of the owner/manager) were influ-ential only in first-generation-led family firms. While succession planning is importantfor all family firms, there are different drivers for each generation of leaders. This findingfurther suggests that advisors to family firms should reject "cookie cutter" approachesto succession planning in favor of approaches that are tailored to the generation of theinvolved business.

A second important finding was that the only constant influence across generationsin the family business is the family. The obvious implication is that regardless of whichgeneration leads the business, the family exerts a constant positive influence to see thatadequate planning will be performed to ensure the survival of the business beyond thecurrent generation. However, the influence of family is not evenly distributed acrossgenerations, nor is all family influence necessarily beneficial. A potential problem inplanning for succession is that conflict may arise when family and business roles havenot been clearly defined, generational envy develops, or coalition politics among thefamily members spill over into the business arena, resulting in family conflict thatoverrules business reason. A good example is provided by the breakup of the multimediaempire of the Horvitz brothers, which was triggered by a battle for succession andcontrol of the business following the death of the founder (Kets de Vries. 1993).

Our evidence suggests that owners who want to ensure the continued family own-ership of the business would be well advised to employ more close family members towork in the business and to ensure they occupy positions of responsibility. It appears thatthese family members are the voice of the family, since those family members who arenot engaged in day-to-day operations did not appear to exert much influence oversuccession planning. This finding suggests that while family councils may be good forcommunications and public relations, they may not be as potent a source of influence inbusiness decision making as some family business consultants presume.

A final implication of the current research is that it may circumvent the necessity toroot prescriptions in the actual relationship between family members. While our researchpresents the family business owner as operating within a network consisting of a mixtureof kinship and business relations, many previous researchers advocated a clinical ap-proach to examining the psychology of family businesses. For example. Handler (1992)found that the level of mutual respect and understanding between generations was acritical factor. Despite the strength of our findings, we cannot claim the results of thecurrent study to be more than suggestive. Rather, we would agree that embedded in thisfoundation is a network of real and imagined psychological relationships. But. in focus-ing on the psychological aspects of family relationships, important questions of thedeterminants of variations in the structural aspects of family influence, and how suchvariation might affect the degree of similarity among family businesses, have beenlargely neglected. It is our contention that a developed conception of the structure offamily relationships may provide a useful point of departure for future explorations.

The main accomplishment of this study was to provide a guide and focus for futureresearch regarding the succession planning process. The ways in which this knowledgecan lead to improvement in the family business succession process are several. First,succession should not be treated as an event but as a process that is influenced by manyvariables both within and external to the organization. Additionally, this study has led toa greater awareness of generation-specific drivers of succession planning.

Spring, 1998 49

LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCHThe present study is unique in several respects. First, it represents a rarely seen

large-scale study of succession planning processes among family businesses. Second, itsexamination of the group-level (family) influence exerted by family members is almostunprecedented. Third, it provides a significant advancement in the measurement offamily influence beyond the simple numerical counts proposed previously by Gundryand Welsch (1994). Finally, the study provides a bridge that fills an important gap in ourknowledge concerning the role of generational effects in the succession planning pro-cess.

In interpreting the results of this study, certain limitations should be observed. First,while the sample was large and the issues examined were germane to succession, manyissues that might be pertinent to succession planning processes were not addressed aspart of the original research design. Second, the effects of certain variables included here,(e.g., size) may have been masked by the limited power of the tests employed, the lessthan perfect measures employed to assess size, or because of differences in some third(unexamined) factor to which both size and the succession planning process may berelated. Finally, while a key informant methodology (Phillips, 1981) was utilized so asto ensure accessibility to appropriate information, future research may gain additionalinsights by including multiple respondents from the same organization as part of thedata-collection process.

Two observations concerning the cross-generational effects observed here are worthpursuing because they impact future research. First, while each of the four levels ex-amined here (i.e., individual., group, organizational, and resources) were found to besignificant among first-generation firms in explaining the extensiveness of the succes-sion planning process, the number of factors found to be significant declined with eachsucceeding generation. This finding suggests there may be practical limits to the ex-planatory power vested in these levels and/or particular variables. Perhaps future re-searchers might extend the theoretical base to incorporate additional levels of analysis.For example, research incorporating institutional theory would seem to be in order, asother organizations affect internal processes, perhaps via mimetic behavior. Second, onlyinfluence exerted at the group-level by family members involved in day-to-day opera-tions consistently remained significant across all generations. Perhaps future researchersmight find it worthwhile to investigate power and conflict relationships among familymembers as they affect the relationship between the leader (owner/manager) and thesuccession planning process. One approach may be to describe specific family-levelinfluences, such as family culture, family dynamics, and functionality, and the degree ofcommunication and sharing of information within the family.

In conclusion, this study has illuminated some key determinants of succession plan-ning processes. In particular, some factors that drive the extensiveness of the successionplanning process were found to be unique to particular generations, while other factorswere common to all generations. Clearly, our results can only be generalized to familybusinesses. However, all businesses face the problem of survival and therefore, to theextent that we have articulated processes pertinent to succession issues, all businessesmay benefit.

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Peter S. Davis is Professor of Management at the University of Memphis.

Paula D. Harveston is a doctoral candidate at the University of Memphis.

The authors gratefully acknowledge the Massachusetts Mutual Insurance Company (MassMutual) for theirassistance in this study.

Spring, 1998 53