From Father to Son: Succession in Small and Medium-Sized Family Businesses

Firm succession is critical to family-owned business because many firms close their doors as a result of issues that arise in the transition between generations. In this article, we analyze the process of succession in five small and medium-sized family businesses (SME). Following Davel et al. (2000) definition, a firm is considered a family business if: i) the family owns the firm; ii) the family participates actively in the management of the business; iii) the values of the firm and the firm are mingled; and iv) the family determines the succession process. A comparative case study was carried out using qualitative data analyzed using content analysis techniques. Principal findings were that formal planning did not guide the succession process and that although the old leadership remained in the firm, they demonstrated awareness that power was now in the successors' hands; and a harmonious relationship between family and organizational interests was perceptible. These results suggest that the small and medium-sized firms studied were able manage the succession process without major mishaps and even take advantage of the growth opportunities emerging from the transition. On the downside, however, the lack of preparation of the successors and succession planning can lead to conflicts over the distribution of inheritance and to financial losses. The contribution of this study is showing that for SME difficulties in the process of succession can lead to learning opportunities, organizational growth, restructuring of processes and innovation that increase firm competitiveness.