CEO succession choice: A qualitative exploration of Finnish family firms

Abstract

Objectives

The main objectives of this study were to examine the factors affecting the CEO succession choice in family firms and explore how these choices affect the successfulness of the succession process. This was done through a qualitative exploration in form of interviews with controlling family members of Finnish family firms.

Summary

First, literature on succession in family firms was gone through and a conceptual framework was created. Then, three interviews with experts in the field from influential Finnish family firms were conducted. The primary data was then analyzed and later discussed with regard to the literature review. Finally, a revised conceptual framework was constructed.

Conclusions

The most important factors affecting the choice of CEO are nepotism, the firm structure and current governance, the skills, experience and knowledge needed, as well as investor protection. It was found that founder-CEOs are beneficial for firm performance. Whether other family-CEOs or nonfamily-CEOs are more beneficial depends on the situation. Owner family members tend to believe that family-CEOs are more beneficial, this mainly due to their shared values and their understanding of the family business complexity. External advisors are important in assuring success in the succession process as well as openness and communication between different players. Social ties play a big role in family firms, it affects decision-making and can lead to nepotism and other sometimes irrational behavior.