The “Start-up a Business” Strategy in the Succession Process Planning at the Top of Family Firms

Abstract

In small family firms, succession to the top is very critical stage of their lives. A high percentage of these firms do not survive their founder. When the successor takes the reins of the company, he has no experience and reputation. For this reason, he very often fails to allow the family firm to survive after its founder. Although many streams of research address succession in family businesses, significant gaps in the literature remain in the field of the strategies that can mitigate the vulnerability of the family firms when the old leader retires and a new leader takes the reins of the company. The underlying argument in this paper is: By starting up one’s own company some years before taking the lead, the successor can solve the problem of his lack of experience and entrepreneurial reputation. If he succeeds in starting up his own company, he will develop experience, reputation, and legitimation on becoming the new head of the family firm. The founder’s original collaborators, commercial partners, and stakeholders will also thrust him. Finally, this paper presents the results of a survey based on 28 questionnaires filled by the protagonists of the succession to the top of family firms. Some of the candidates to succession have started their own firms prior to taking on the reins of their family businesses. This sample is significant as this strategy of training and the gaining of experience by the successor after starting up his own business is not very widespread in family firms. Moreover, it has produced impressive results in companies that have adopted it. This strategy is also very useful in preventing father-son conflicts that affect the survival of many family firms and help the successor to build his reputation, legitimation, and to learn through experience how to manage an enterprise. It also allows the successor to experiment with innovations and internalisation processes in his own start-up; thus, removing any risk to his family firm. These experiences can benefit the family business after the successor takes over the leadership.