Abstract

Family owned businesses are central to the economy (Astrachan & Shanker, 2003), yet have been historically understudied. Improving understanding of the challenges these companies face in the inter-generational succession process is vital as many fail at this point (Ward, 1987). While a field of family business research has emerged in recent decades (Sharma, 2004), little empirical research on the challenge of succession has been informed by theories from psychology. This research begins to bridge this gap by applying contemporary control theory to understanding business succession. This project involved three studies of Canadian family-owned businesses whose incumbent leader was at, or nearing, retirement age. The first considered the association between indicators of business readiness for succession and levels of control held in the business by the incumbent and successor. Results suggest indicators of succession are more reliably associated with control for the successor than for the incumbent. In addition, there were few associations between the levels of control of the two generations, implying succession may impact each differently. Study 2 was a longitudinal follow-up, and found indicators of succession readiness at Time 1 associated with change in the amount of control held by the successor at Time 2. As in the first study, there were very few associations between the predictors and the extent of control held by the incumbent. Study 3 considered the role that personality may play in incumbent beliefs and behaviors relating to retirement. Cross-sectional and longitudinal results indicate incumbent goal adjustment capacities are associated with their expectations and planning for retirement. Further, an interaction between disengagement and business performance was revealed, suggesting goal adjustment may protect leaders from an escalation of commitment if their business had been recently struggling. Overall, these findings clarify that progress towards succession has little effect on control for incumbent leaders, but theories of control may point to individual differences in self-regulation capacities among these leaders that may have a bearing on family business succession. Implications from these results are discussed.