Chapter 5: The Succession Question and the Family Firm: A Theoretical, Conceptual, and Historical Reflection

All human institutional leadership eventually faces the succession question. Any succession mechanism that addresses it rests on three fundamental pillars: I. Who is eligible as a successor? II. Who has the power to elect the successor? III. According to which criteria should the successor be elected? History has shown that the diversity of answers to these questions is a source of enduring and fundamental organizational heterogeneity. Leader-centered institutions, such as founder-led firms and family firms, are particularly affected by the trajectories that succession mechanisms create. By introducing a three pillar framework and by providing enlightening historical examples, this essay contributes to the succession literature by casting light on how organizational outcomes are shaped by: the scope of eligibility (Pillar I), by the behavioral aspects of the elector (Pillar II), and by the attributes of those elected (Pillar III). The proposed framework systematizes the mathematical, behavioral, and normative elements of the succession question, which maps onto accordant game theoretical, socio- and psychological, as well strategic management-oriented research perspectives. Moreover, the three pillar framework rests upon a theoretical model of decision in family firms that particularly emphasizes the role of behavioral dominant owners. Thereby, this article contributes a conceptualization of administrative decision in family firms and to the literature of goal setting in family firms. To inform the extensions provided by the three pillar framework, a series of propositions is derived from it to serve as a basis for future research.