Family Firm's Succession and Firm's Sustainability

Family firms are an important source of wealth creation and employment growth. One reason for the low survival rate of family firms is issues with succession, as the failure to plan for succession may shake the firm's foundation. As competitive advantages do not exist forever, successors should take over at an appropriate time to maintain the firm's sustainability. This study used archived data to identify who is a comparably better successor and during what lifecycle period firms should execute their succession to be the most helpful for their sustainability. The sample included firms in Taiwan with key data listed in Taiwan Economic Journal Databases (TEJ) from 1996 through 2017. The main findings indicated that firm performance does not necessarily decline after succession. When considering both succession factors and the corporate life cycle, succeeding a firm to children during its growth stage is the first choice for family firms. However, in terms of the corporate life cycle, family firms should avoid succession to children during either the firms' maturity or shake-out stages as well as succession to an external CEO during the firms' introduction stage.