It is an important strategic succession decision to hire CEOs from family members or professional managers for the first generation entrepreneurs to handle over the management rights. A lot of studies on family business imply that CEOs who are members of the founding families underperform, but still a few family firms, even some public firms, hire the family members as CEOs in the reality. To explain the seemingly inefficiency succession decisions, this paper sets management professionalization of private firms under the background of trans-generation succession, extends the focus from profit-seeking firms to families behind the firms, and explores the antecedents of succession decisions from the perspectives of the heterogeneous goals of controlling families. According to a multi-task principal-agent model, it establishes a matching framework between companies and CEOs driven by noneconomic goals of controlling families, and finds that families that pay more attention to noneconomic goals tend to give lower-level incentive compensation contracts, require lower-degree capabilities of the CEO candidates to run the businesses and prefer the family identity of CEOs. It tries to confirm that the succession decisions of CEOs are endogenous from the heterogeneous goals of controlling families, and make up the theoretical gap of logic relationship between willingness and abilities of families. The analysis of the antecedents of succession decisions of family firms deepens the organization theory in the context of family businesses and gives some advices on succession decisions for the first generation entrepreneurs.
Hiring a Family CEO or a Non-family CEO? Research on the CEO Successor Choice Based on Heterogeneous Goals of Controlling Families
Foreign Economics & Management Vol. 38, Issue 12, pp. 3 - 18 (2016) DOI:10.16538/j.cnki.fem.2016.12.001
Cite this article
Zhu Jian'an, Chen Ling, Wu Bingde. Hiring a Family CEO or a Non-family CEO? Research on the CEO Successor Choice Based on Heterogeneous Goals of Controlling Families[J]. Foreign Economics & Management, 2016, 38(12): 3–18.
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