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J Bus Econ

DOI 10.1007/s11573-016-0828-2
ORIGINAL PAPER

Whom do I want to be the next CEO? Desirable


successor attributes in family firms
Rodrigo Basco1 Andrea Calabro`2

 Springer-Verlag Berlin Heidelberg 2016

Abstract The aim of our study is to understand whether different incumbent attitudes towards desirable successor attributes have an impact on their intention to
nominate a family member or a non-family member as CEO and the extent to which
this intention is moderated by the number of family members working in the firm as
a proxy of socioemotional wealth preservation. Our main findings suggest that an
incumbents intention to nominate a family member as the next CEO increases
when they believe family standing attributes to be important and decreases when
they consider managerial competence attributes to be important. However, the latter
relationship weakens as the number of family members working in the firm
increases.
Keywords CEO succession  Family firms  Incumbent intentions  Socioemotional
wealth  Successor attributes
JEL classification M10  L2

& Rodrigo Basco


bascorodrigo@gmail.com
Andrea Calabro`
andrea.calabro@uni-wh.de
1

School of Business Administration, Sheikh Saoud bin Khalid bin Khalid Al-Qassimi Chair in
Family Business, American University of Sharjah, PO Box 26666, Sharjah, United Arab
Emirates

Witten Institute for Family Business, University of Witten/Herdecke, Alfred-Herrhausen-Strae


50, 58448 Witten, Germany

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R. Basco, A. Calabro`

1 Introduction
CEO succession is considered a relevant and critical event for any type of firm (Davis
1968; Kesner and Sebora 1994; Dyck et al. 2002) because it implies a change of
leadership during which an incumbent CEO is replaced by a new candidate. In nonfamily firms, decisions on CEO succession are taken by using economic reference points
(i.e., who is the best candidate to manage the firm in order to increase shareholder
return), whereas in family firms, because of the juxtaposition of family and business
systems, the same decision is based on economic and non-economic reference points
(i.e., who is the best candidate to manage the firm in order to increase shareholder return
and to preserve family socioemotional wealth). For family firms, managing such a
juxtaposition implies facing challenges and risks when it comes to planning for,
executing, and implementing a succession process (Miller et al. 2003).
CEO succession in family firms refers to a process that includes all actions,
decisions, events, and organizational mechanisms by which the firm leadership is
transferred (Le Breton-Miller et al. 2004). This transfer can be from one family
member to another, from one family member to a non-family member (Beckhard
and Gibb Dyer Jr 1983), or from a non-family member to a family or non-family
member. One important aspect of the succession process for both family and nonfamily firms is the nomination phase, because it is in this phase that someone is
officially suggested for the position. Despite the importance of this succession
phase, few studies so far have empirically attempted to further investigate the
factors affecting a successors nomination (e.g., Motwani et al. 2006; Bennedsen
et al. 2007; Lin and Hu 2007; Bocatto et al. 2010; Jaskiewicz et al. 2015; Fang et al.
2015) or to model the factors that influence the selection of a family member or a
non-family member as the future CEO (e.g., Lin and Hu 2007). To tackle this gap,
our study shifts the research focus onto factors that affect CEO nomination ex-ante.
That is, we focus on the incumbents intention to nominate a family member or a
non-family member as the next CEO (Churchill and Hatten 1987) rather than the
succession event itself.
The aim of this research is to better understand incumbents attitudes related to their
intention to nominate a family member or a non-family member as the next CEO,
because attitudes precede intentions, and intentions precede behaviors (Ajzen
1991)and therefore an incumbents intention may affect the succession process.
Specifically, in this article we focus on the antecedents of the incumbents intentions
by focusing on attitude toward behavior and subjective norms. Advancing the family
business succession literature, we suggest that there are two main groups of desirable
successors attributes that are based on different behavioral beliefsbased on (1)
family-oriented and (2) business-oriented logicsand that these represent the main
attitudes of incumbents regarding their firms future CEOs. We hypothesize that
family standing attributes (such as the importance of birth order, age, blood
relationship, gender, and current share ownership of the successor) may have an
impact on an incumbents intention of nominating a family member as the firms next
CEO (i.e., pressures to guarantee intra-family succession), whereas managerial
competence attributes (such as the importance of financial skills, marketing

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Whom do I want to be the next CEO? Desirable successor

experience, experience in other firms, and career path) may have an impact on an
incumbents intention to nominate a non-family member. However, intentions will be
strongly influenced by the context (Ajzen 1991) in which an incumbent acts and
decisions are made. Subjective norms are expected to play an important role in the
incumbents intention because the decision must satisfy (receive approval from)
reference groups (e.g., stakeholders). One of these referent groups is the family itself.
Therefore, by integrating into the debate arguments from the socioemotional wealth
(hereafter, SEW) perspective (e.g., Gomez-Mejia et al. 2011; Berrone et al. 2012;
Miller and Le Breton-Miller 2014), we hypothesize that a strong emphasis on SEW
preservation [manifested through the intensity of family relationships measured via
the number of family members working in a firm; Arregle et al. (2007)] moderates the
way in which an incumbents attitude regarding desirable successor attributes impacts
on his/her intention to nominate a family or a non-family CEO.
Our hypotheses are tested on a sample of Spanish family firms. The results
suggest that the intention to nominate a family-member CEO increases when an
incumbent perceives that family standing attributes are important for the future
CEO. However, the intention to nominate a family-member CEO decreases when an
incumbent perceives that managerial competence attributes are important for the
future CEO. We found that the latter relationship weakens as the number of family
members working in a firm increases (a proxy for SEW preservation) until the
relationship shifts and managerial competence attributes are not longer related to the
intention to nominate a non-family-member CEO.
This article contributes to the extant CEO succession literature in family firms in
several ways. First, we address the call for a better understanding of the main factors
affecting the transfer of managerial control in family firms (Lin and Hu 2007; De Massis
et al. 2008) by focusing on successor attributes (Chrisman et al. 1998) related to an
incumbents intention to nominate a family versus a non-family CEO. Specifically, we
extend the existing empirical literature (e.g., Bennedsen et al. 2007; Bocatto et al. 2010;
Fang et al. 2015) by stressing the importance of taking into account desirable successor
attributes (such as family standing and managerial competence attributes) in the
selection process made by incumbents. Unlike other studies (i.e., Fang et al. 2015) we
attempt to understand the incumbents intention as an ex-ante situation, which could be
the antecedent of effective behavior, instead of the successors nomination as an ex-post
situation (after the decision is taken). Additionally, in line with Jaskiewicz et al. (2015)
findings, our research offers empirical evidence of the existence of different logics
(family and business) that can influence, at minimum, the future successor nomination
decision. Second, our proxy variable for SEW preservation helps to shed light on how
factors such as the number of family members working in the firm can change the
incumbents reference point when nominating a family or a non-family member.

2 Theoretical background
Family firm succession means the transfer of control in terms of ownership and
management (CEO succession) (Churchill and Hatten 1987), and it represents one
of the main challenges for family firms survival. Specifically, CEO succession is a

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process (Handler 1994; Dyck et al. 2002) encompassing all actions, decisions,
events, and organizational mechanisms by which a firms leadership is transferred
(Le Breton-Miller et al. 2004) from an incumbent to a successor (incoming), who
will either be a family member or a non-family member (Beckhard and Gibb Dyer
Jr 1983).
Several researchers have attempted to understand the factors that may affect the
nomination of a family or a non-family CEO once the event has already occurred
(ex-post) (e.g., Bocatto et al. 2010). Even though there are many studies
investigating the main antecedents to a successors nomination, the decision of
who will be the next CEO is rarely spontaneous. The nomination is a lengthy
process that starts with a systematic implicit process to identify a successor
(Keating and Little 1997) and extends through the stakeholder agreement to
successfully execute the transfer of control (Lambrecht 2005). Therefore, focusing
on the ex-ante factors that lead an incumbents intention to nominate a family or a
non-family CEO can shed new light on CEO succession processes in family firms.
CEO succession decisions are characterized as highly dependent on a single
decision maker (Feltham et al. 2005) who largely controls succession (Sharma et al.
2003)that is, the incumbent. The incumbent evaluates what the successor needs
(abilities, skills, and knowledge) to perform his/her future tasks as a leader of the
family firm (Schlepphorst and Moog 2014). In this context, and assuming that
attitudes precede intentions and intentions precede behaviors/actions (Ajzen 1991),
the incumbents intention seems to offer access to important insights regarding
succession processes. Intentions represent a persons motivation in the sense of
her/his conscious plan or decision to exert effort to enact the behavior (Conner and
Armitage 1998). Extending the theory of planned behavior to understand the
incumbents intention to nominate the next CEO and select a family or non-family
member, we can argue that the incumbents intention is linked to two main
antecedents: the attitude toward behavior and subjective norms.
Regarding the attitude toward behavior, an attitude is a disposition to respond
favorably or unfavorably to an object, person, institution, or event (Ajzen 1988).
Attitudes are based on beliefs (Ajzen 1988), and, while a person might hold several
beliefs, it is expected that only a few of them are likely to be salient (Conner and
Armitage 1998) in terms of affecting attitude. In family firms, it is the juxtaposition
of family-oriented and business-oriented logics that frames individual beliefs.
Family-oriented logic concerns those family aspects that may motivate an
incumbent to make decisions based on the well-being of the family (Basco and
Perez Rodrguez 2011). On the other hand, business-oriented logic is related to
those business aspects that may prompt the incumbent to make decisions based on
the well-being of the firm. Depending on how this juxtaposition is balanced, an
incumbents attitude regarding which successor attributes are important for the next
CEO will determine their intention towards the nomination of family and nonfamily CEO.
Regarding subjective norms, they refer to the perceived social pressures to
perform or not to perform a particular behavior (Ajzen 1991) and they are based on
normative beliefs which refer to the perception of approval or disapproval of
particular behavior by referent individual and/or social or kinship groups. That is,

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individual cannot be isolated from the environment in which decisions are made.
Prediction of intention is expected to vary across situations (Ajzen 1991). Having
few or no other family members working in the firm, which can be seen as a
measure of family social capital and ties (Arregle et al. 2007), may have an impact
on an incumbents desire to further preserve SEW (Gomez-Mejia et al. 2011).
Conversely, a high dependence on one main decision maker together with a
complex system of family social ties (Arregle et al. 2007) may also create an
emotional goal to perpetuate the family legacy that, in turn, influences the
nomination of the family firms next CEO.
In the following subsections, we theoretically frame the relationship between an
incumbents attitude toward successor attributes and their intention to nominate a
family or non-family CEO. We then discuss why SEW preservation may moderate
the above-mentioned relationships.
2.1 The intention of nominating a family CEO: the role of family standing
attributes
When thinking about what is going to happen next, an incumbents intention
to nominate the next CEO may be affected by socialization experienced under
family structure, culture, inheritance norms, and nepotism (Bertrand and Schoar
2006)that is, family-oriented logic (Jaskiewicz et al. 2015). Specifically,
keeping the business in the family might be the main priority, due to a strong
sense of duty toward other family members, or a more selfish desire to turn the
business into a family legacy (Bertrand and Schoar 2006; Gomez-Mejia et al.
2011).
For incumbents with a strong sense of family legacy, family tradition might be
recognized through the importance of inheritance norms, such as the role played by
the birth order of the family successor,1 their age, or their gender. For instance, the
firstborn is more likely to link values between the older generation and the newer
generation (Goldberg and Wooldridge 1993), and that makes him/her an ideal
candidate to inherit the leadership of the firm. Gender issues seem also to be
important in the selection of the next successor; while daughters tend to be excluded
(Keating and Little 1997; Stavrou 1999; Howorth and Assaraf Ali 2001; Bennedsen
et al. 2007) from the succession race, sons are seen as natural heirs for management
leadership positions (Ibrahim et al. 2001).
Hence, the family stamps its own logic onto the succession decision-making
process (Basco and Perez Rodriguez 2009), not only influencing the intention of
potential candidates to join the firm (Stavrou 1999), but also the incumbents
intention of nominating a family or a non-family member as a potential candidate.
When the selection of the future successor is based on such family standing
attributes (such as birth order, age, blood relationship, gender, and current share
ownership of the successor) (e.g., Alcorn 1982; Kuratko et al. 1993), incumbents are
mainly driven by family tradition. That is, these attributes represent the specific
1

Such inheritance norms vary from strict primogeniture, through which the eldest son inherits
everything, to equal sharing rules among all the sons of a founder (Bertrand and Schoar 2006).

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rationality of family logic in defining the rules of the game based on family
tradition and culture that underpin the incumbents intention to guarantee intrafamily succession.
In such circumstances, the main goal is not to find the most competent successor
(Le Breton-Miller et al. 2004), but to select and to prepare a family member from
the younger generation to take on the leadership of the family firm. Therefore, the
more the incumbents focus is on family standing attributes, the higher the
probability that he or she will select a successor from within the family circle, to
ensure intra-family succession as mandated by family logic (family tradition).
Accordingly, we expect that:
Hypothesis 1 The more important a future CEOs family standing attributes are
for the incumbent CEO, the greater the incumbents intention will be to nominate a
family member.
2.2 The intention of nominating a non-family CEO: the role of managerial
competence attributes
When considering what is going to happen next, an incumbent is not only
influenced by family-oriented logic, but also by business-oriented logic. Business
context plays an important role in the socialization affecting an incumbents
intentions in selecting the next CEO. Here, the incoming successors competences
and skills become important (Chrisman et al. 1998; Ibrahim et al. 2004). Managerial
competence attributes refer to a set of knowledge, skills, and abilities that enhance
task performance in management roles (Day 2000). For incumbents, such
competences specifically represent those managerial skills that will be necessary
to manage the family firm (Le Breton-Miller et al. 2004) and that may help the
future leader to gain credibility and legitimacy (Barach et al. 1988).
Howorth and Assaraf Ali (2001), based on case studies, have found that potential
family successors tend to enter the family firm with comparatively low levels of
education and experience. This view is supported by research undertaken by
Fiegener et al. (1996), who discovered that formal education and experience are
considered to be less important for the next successor when he or she is a family
member. Family internal candidates could be regarded by the predecessor as
generally less competent that external candidates. Indeed, this consideration might
be grounded on the fact that the pool of potential internal family successors is
systematically smaller and limited if compared to the wider pool of external
candidates. In addition to that, it is also important to mention that the pool of nonfamily external successors is usually considered (even by the incumbent) more
competent as those potential candidates usually go through a market screening that
allows just the best candidates to compete for CEO positions. Therefore, though
some of the internal family candidates might be potentially worthy of consideration
for the CEO job, the incumbent tends to think they are less capable than external
candidates (non-family CEOs). Therefore, when an incumbent is aware that
managerial skills are needed for the future CEO, they may have to address a

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drawback of a limited pool of candidates inside the family to fulfill the position by
going outside the family to the broader labor market to find the best successor. That
is, specific and advanced managerial skills needed to manage a family firm may lead
its incumbent to nominate an external professional manager as the next CEO
(Burkart et al. 2003; Lin and Hu 2007). Therefore, we formulate:
Hypothesis 2 The more important a future CEOs managerial competence
attributes are for the incumbent CEO, the stronger the incumbents intention will be
to nominate a non-family member.
2.3 The moderating role of socioemotional wealth preservation
In the above section, we hypothesized that family- or business-oriented incumbents
attitude about which successor attributes are important may determine his/her
intention to nominate a family or non-family member as future CEO. Similarly,
while incumbents intention may depend on such attitude, the family-firm context
can also act as a contingent frame affecting the incumbents intention. As discussed
above, when family members occupy family roles and business roles at the same
time, borders between the family and business environments become blurred
(Redlefsen and Witt 2006). The meaning of family firms shifts from a mere profit
maximization instrument for shareholders to a profit and SEW maximization
instrument for the family, proportional to the extent to which family members are
embedded in both systems. The subjective norms act as pressures to behave in a
way that allows SEW preservation and garners approval of the group of influence
(i.e., the kinship group).
Socioemotional wealth preservation is highly related to the relational componentthat is, the importance of family relationships, belonging, affect, intimacy,
and family obligations (Gomez-Mejia et al. 2007). The density of family
interactions and relationships can vary within family businesses, depending on
the number of family members (Arregle et al. 2007) working in the firm. The
incumbent and the other family members working in the firm belong to the same
social group, and having the same interest in the success of the family firm increases
their interdependence (Arregle et al. 2007).
Consequently, the intentions of the incumbent CEO regarding the nomination of
the future CEO may be triggered correspondingly by the number of family members
working in the firm. Moreover, such interactions between the incumbent and other
family members generate greater levels of trust (based on shared norms and values),
principles of reciprocity (obligations) and exchange among family members
(Arregle et al. 2007), increasing the contextual pressure of the familys SEW
preservation on the incumbents intentions. It is, therefore, expected that the internal
incumbents attitude about their successors family standing attributes may be
intensified within the context of high SEW preservation (which we proxy by the
number of family members working in the firm), and reinforce the incumbents
intention to nominate a family member as the firms future CEO guaranteeing intrafamily succession. Thus, we formulate:

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R. Basco, A. Calabro`

Hypothesis 3a The number of family members working in the firm positively


moderates the relationship between the incumbents attitude toward the importance
of family standing attributes and their intention to nominate a family member as the
future CEO.
As advanced in Hypothesis 2, an incumbents intention to nominate a nonfamily member as successor increases when he/she considers managerial
competence attributes to be important. In that context, assuming that the
incumbent believes that economic aspects should be prioritized, he/she is
prepared to lose family control and influence and to not renew the family
dynasty. However, within an environment of high SEW preservation (such as
continuous interactions and relationships with other family members working in
the firm; Arregle et al. (2007)), the incumbents intention may change, even
when their principal attitude is to give priority to managerial competence
attributes and nominate a non-family CEO.
In this instance, despite assigning great significance to managerial competence
attributes, which could lead the incumbent to not select a family CEO, the
incumbent would carefully evaluate the consequences of this choice on the rest of
the family (Eddleston and Kellermanns 2007) and on the subsequent firm
survivability. That is, the normative belief, which frames the subjective norms for
the incumbent, defines the perception and attitude that the incumbent has regarding
approval or disapproval of a particular decision. The intention to preserve family
relationships and ties might contrast with the intention not to preserve management
control within the family, creating conflicts in terms of SEW (Vardaman and Gondo
2014). For example, such a decision could harm family relationships (Eddleston and
Kellermanns 2007), decreasing family social capital (Arregle et al. 2007) and
activating conflicts within the family. Therefore, incumbents may derive utility from
seeing relatives involved in the business, and they may decide to hire key managers
from within their kinship network rather than turn to (sometimes more talented)
professional managers (Bertrand and Schoar 2006). Stemming from these considerations, we formulate:
Hypothesis 3b The number of family members working in the firm moderates the
relationship between the incumbents attitude toward the importance of managerial
competence attributes and their intention to nominate a non-family CEO, such that
the incumbents intention shifts from nominating a non-family member to
nominating a family member as the number of family members working in the
firm increases.
The overall research model for this study is summarized in Fig. 1.

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Whom do I want to be the next CEO? Desirable successor

Family Standing Aributes

Hypothesis 1

Hypothesis 3a

Incumbent`s intenon to
nominate a Family CEO vs. a
Non-family CEO

Number of family members


working in the rm
Hypothesis 3b

Hypothesis 2

Managerial Competence
Aributes

Fig. 1 The research model

3 Methodology
3.1 Research design and sample
The empirical data presented in this article was derived from a study of Spanish
family firms. Because of the importance of informal institutions in Latin cultures
(Gupta and Levenburg 2010), it is reasonable to expect to find a significant overlap
between family and business. Spain represents an interesting context for analysis, as
family firms are the dominant form of organization, representing two-thirds of the
Spanish economy and generating more than 60 % of the countrys employment.
Moreover, it is estimated that 65 % of Spanish family firms are in the first
generation, 25 % are second generation (Zuniga-Vicente and Sacristan-Navarro
2009), and more than two-thirds will face an ownership and management transfer
prior to 2013 (European Commission 2003).
For this study, we have used family participation in the business as the main
criterion to operationalize the concept of family firm. To be considered a family
firm, a firm must have two characteristics: (a) there are family members on the
board of directors or in the top management team; and (b) the majority of the voting
shares are owned by members of a single family. The above parameters were
applied to two business information databases: Sistema de Analisis de Balances
Ibericos and Dun & Bradstreet. From an original sample of 16,000 Spanish firms
that fell within the size parameters, 4450 firms also met the family firm criteria.2 A
2

An exhaustive review of ownership, board of directors, and management composition based on the
name and the surname was conducted. The system of surnames in Spain makes it possible to identify
family relationships, due to the fact that women never take their husbands surnames and children take
both their fathers and their mothers surnames.

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R. Basco, A. Calabro`

stratified random sample was used, with the stratification variables comprising a
firms sector of economic activity and its autonomous community (first-level
political division of Spain). Out of the 4450 firms, 732 responded to a telephone
survey between July and October 2004. Chi-square analyses and Students t tests
confirmed that there were no significant differences between the sample and the
population regarding legal forms, sector of economic activity, location of the
enterprise, and number of employees. The response rate was 16.45 %, representing
the percentage of firms that fully completed the telephone interview. There were 17
Spanish autonomous communities and 23 sectors of economic activity represented,
the latter classified according to a National Classification of Economic Activities
code. The response rate was similar to that for other studies in the Spanish context
(Casillas and Moreno 2010).
For this study, we further removed 273 firms. These included cases in which
respondents answered that there was no clear intention yet to nominate a future
successor; cases with missing information; and, finally, cases in which the
respondent was not the current CEO.3 The final number of family firms was 459.
Family firms in our sample had been established for an average of 25 years and the
average number of employees was 106. In addition, 38 % of the family firms in our
sample were first generation, 45 % second generation, and 17 % third and
subsequent generations. Descriptive statistics for our final sample are presented in
Table 1.
3.2 Dependent, independent, and control variables and analyses
3.2.1 Dependent variables
The incumbents intention to nominate a successor was a binary variable that took
the value of 1 when the incumbents intention was to nominate a family CEO,
and 0 when their intention was to nominate a non-family CEO (Williams et al.
2013).
3.2.2 Independent variables
Successor attributes were measured using the scale advanced by Chrisman et al.
(1998), with the aim of the scale being to identify desirable successor attributes.
This scale, building on an extensive literature review, has been applied in Canadian
and Indian contexts (Sharma and Srinivas Rao 2000). We selected nine items, from
the original scale, representing the extremes of family-oriented and businessoriented successor attributes. The survey asked participants to answer, using a
Likert-type scale with a five-point response format, the question: To what extent
are the following attributes important for the future CEO? Using this information a
factorial analysis was carried out and a separate principal components analysis was
3

The CEO answering the questionnaire is the main decision maker about the future successor because
our study focuses on small- and medium sized private and non-listed firms, which have high concentrated
ownership.

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0.370

89.940

0.163

105.605

24.871

3. 3rd generation

4. Firm size
(number of
employees)

5. Firm age

2.298

0.499

1.564

1.000

1.000

3.878

4.516

0.540

2.490

0.000

0.000

7. Board size
(number of
board members)

8. Return on assets

9. Respondent
affiliation

10. Number of
family members
working in the
firm

11. Family
standing
attributes

12.Managerial
competence
attributes

1.000

-0.099*

0.122**

0.127**

0.120**

0.014

-0.118*

-0.073

-0.043

-0.118*

-0.079

-0.039

1.000

0.014

-0.052

-0.091

0.084

0.035

-0.022

-0.071

0.021

-0.035

-0.404**

** Correlation is significant at the 0.01 level (two-tailed)

* Correlation is significant at the 0.05 level (two-tailed)

7.358

11.811

3.449

6. % external
capital

12.656

0.499

0.455

2. 2nd generation

0.443

SD

0.730

Mean

1. Incumbent
intention

Variables

Table 1 Descriptive statistics

1.000

0.249**

0.015

0.264**

0.061

0.040

0.033

0.099*

0.019

-0.018

0.064

0.218**

0.110*

0.075

1.000

-0.087

-0.010

0.010

-0.137**

1.000

-0.009

-0.040

-0.021

0.042

-0.101*

0.175**

-0.021

0.110*

0.134**

1.000

-0.015

-0.056

-0.121**

-0.146**

0.150**

0.033

0.038

1.000

0.023

-0.047

1.000

-0.100*

0.071

0.014

-0.025

0.078

1.000

0.029

-0.144**

0.022

0.046

1.000

10

0.000

1.000

11

1.000

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Whom do I want to be the next CEO? Desirable successor

123

R. Basco, A. Calabro`
Table 2 Factorial analysis of desirable successor attributes
Attributes

Factor loadings
Factor 1

% of variance

0.847

34.87

0.816

29.07

Factor 2

Family standing attributes


Birth order of the successor

Cronbachs a

0.87

Age of the successor

0.83

Blood relationship

0.82

Current share ownership of the successor

0.74

Gender of the successor

0.68

Managerial competence attributes


Experience and financial skills

0.83

Experience and marketing experience

0.82

External experience in other firms

0.79

Career path and past performance

0.78

Note Factor loadings less than 0.40 were omitted

used to define the factors/dimensions (Hair et al. 2010). Items that loaded on a factor
at approximately 0.50 or above were subject to reliability analysis. To assess the
internal reliability of the constructs, Cronbachs alpha coefficients were calculated;
the analyses showed that all the dimensions had a value higher than 0.60. Table 2
provides further details about the items included in the questionnaire and the
statistical information of the factor analysis. Two factors emerged, and based on our
own interpretation and following previous literature (Chrisman et al. 1998; Sharma
and Srinivas Rao 2000; Cater and Justis 2009), we labeled them family standing
attributes and managerial competence attributes.
Socioemotional wealth preservation was measured by using the number of family
members working in the firm as a proxy variable. Our theoretical argument to justify
this is based on the assumption that socioemotional wealth preservation is highly
related to the relational component and the number of family members working in
the firm gives a sense of density of family interactions, relationships, and
interdependence (Arregle et al. 2007). Therefore, number of family members
working in the firm was measured as the absolute number of family members
working in the firm.
3.2.3 Control variables
Several variables were used in order to capture the family and business variables
that may affect the relationships under investigation. For family control, one
variable was selected: generation. Previous research has shown the importance of
generation on family firm behaviors (Ling and Kellermanns 2010), and we expected
that generation would have an effect on an incumbents intention regarding his/her
nomination of the next CEO. Generation was measured by defining three dummies:
the first generation, the second generation, and the third or later generations.

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Whom do I want to be the next CEO? Desirable successor

For business control variables, five variables were selected to capture firm
complexities that may affect the nomination of a family or a non-family member as
the next CEO (Bhattacharya and Ravikumar 2004; Bocatto et al. 2010): firm size
was measured as the number of employees, firm age was measured as the years
since the firm was created, % of external capital as the percentage of the firm
capital in non-family owners, board size as the number of board members, and past
performance as return on assets for the year preceding the survey.
Finally, we also controlled for the affiliation of the incumbent who answered the
questionnaire. The variable respondent affiliation can have the value of 1 if the
respondent is a family member or 0 if the respondent is a non-family member. In
this case, we control for the cognitive bias that the respondent can have when they
belong to the family.
3.2.4 Analyses
To test our hypotheses, we used a logistic regression on the categorical dependent
variable (intention to nominate a family or a non-family CEO). Other studies have
used this technique in family business literature (e.g., Bocatto et al. 2010) with
similar objectives. The aim of logistic regression is to predict the probability of an
event occurring. The statistical model estimated the effects caused by an increase in
each independent variable on the likelihood that the dependent variable takes the
value of 1 (intention to nominate a family CEO) as opposed to 0 (intention to
nominate a non-family CEO).

4 Results
Table 1 shows the descriptive statistics and correlation matrix. Multicollinearity
was not a problem, as none of the correlations appear to be large (Hair et al. 2010).
Before performing the logistic regression, we checked the possible existence of
multicollinearity by calculating the variance inflation factor (VIF) for each
independent variable. All of the VIFs were below 10 (the recommended cut-off
point), providing further evidence that no significant multicollinearity problems
existed in the data. Since the variables were self-reported, we checked for common
method bias by entering all the variables into a factor analysis (Podsakoff and Organ
1986). The results showed that common method bias was not a concern.
The results of the logistic regression are presented in Table 3. For each predictor
variable, Table 3 shows the following: the maximum likelihood estimate (b), the
significance of the estimate, estimates of the robust standard errors of the estimated
coefficient (in parentheses) and the odds ratio. To interpret our results, we used the
odds ratio, which shows the probability of an event occurring (i.e., intention to
nominate a family or non-family member as the future CEO) versus the probability
of the event not occurring, the marginal effect for continuous variables, and the
discrete effect for dummy variables.
Model 1 shows the logistic regression with control variables. The model confirms
our assumption that firm and family complexity affect an incumbents intention

123

R. Basco, A. Calabro`
Table 3 Logistic regression
Variables

Model 1
Coefficient
(robust
S.E.)

Model 2
Odds
ratio

Coefficient
(robust
S.E.)

Model 3
Odds
ratio

1.016***
(0.338)

Coefficient
(robust
S.E.)

Odds
ratio

Constant

1.009***
(0.331)

1.029***
(0.352)

2nd generation

-0.373
(0.251)

0.689

-0.368
(0.254)

0.692

-0.410
(0.260)

0.663

3rd generation

-0.603*
(0.330)

0.547

-0.606*
(0.336)

0.546

-0.677*
(0.348)

0.508

Firm size (number of employees)

-0.002
(0.001)

0.998

-0.002
(0.001)

0.998

-0.002*
(0.001)

0.998

% of external capital

-0.003
(0.009)

0.996

-0.002
(0.010)

0.998

-0.001
(0.010)

0.999

Board size (number of board


members)

-0.103**
(0.051)

0.902

-0.097*
(0.052)

0.908

-0.111**
(0.053)

0.894

Return on assets

0.676
(0.609)

1.968

0.478
(0.633)

1.613

0.455
(0.649)

1.576

Respondent affiliation (1 = family


member; 0 = no-family
member)

0.514**
(0.229)

1.672

0.617***
(0.237)

1.853

0.624***
(0.240)

1.867

Number of family members


working in the firm

0.224**
(0.089)

1.251

0.223**
(0.097)

1.305

0.266
(0.085)

1.305

Family standing attributes (FSA)


(Hypothesis 1)

0.307**
(0.124)

1.360

0.288
(0.236)

1.333

Management competence attributes


(MCA) (Hypothesis 2)

-0.257*
(0.135)

0.773

-0.855***
(0.230)

0.425

FSA 9 number of family members


working in the firm (Hypothesis
3a)

0.008
(0.099)

1.008

MCA 9 number of family


members working in the firm
(Hypothesis 3b)

0.256***
(0.074)

1.291

Statistical information
-2 log-likelihood

251.55

245.24

238.92

v2

24.76***

32.51***

41.20***

Pseudo-R2

0.06

0.08

0.11

No. of observations

459

459

459

The table reports coefficient and Odds ratio. Robust standard errors are reported in parentheses.
Dependent variableincumbent intention 1 = family CEO and 0 = non-family CEO
For all independent dummy variables the reference category is 0 (zero)
*** Indicates significance at 0.01
** Indicates significance at 0.05
* Indicates significance at 0.10

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Whom do I want to be the next CEO? Desirable successor

regarding the nomination of the firms future CEO. Specifically, board size, firm
size, and family generation involved in the firm increase the likelihood of an
incumbents intention to nominate a non-family member as the next CEO. On the
other hand, we found that the number of family members working in the firm
increases the likelihood of an incumbents intention to nominate a family member.
In Model 2, we added desirable successor attributes to test Hypotheses 1 and 2. The
Chi-square test of Model 2 was significant (p \ 0.01). The HosmerLemenshow
test statistic, which measured the correspondence between the actual and the
predicted values of the dependent variable, was not significant, indicating a good
model fit. Therefore, the results support the models ability to predict an
incumbents intention regarding the nomination of the future CEO. The R2L ratio,
based on improvements in the log-likelihood value, was 0.07. Both hypotheses are
supported, suggesting that when an incumbent considers family standing attributes
to be important, the likelihood of his/her intention to nominate a family CEO
increases (b = 0.255, p \ 0.05), whereas when an incumbent considers that
management competence attributes are important, the likelihood of their intention to
nominate a non-family CEO increases (b = -0.255, p \ 0.1). These results
confirm the consistent logic of an incumbents attitudeintention, specifically
regarding the attitude toward successor attributes and the intention to nominate a
family or non-family member as future CEO.
However, while the above-mentioned results show the consistent logic of the
incumbent, we found only partial support for our Hypotheses 3a and 3b, which
consider context as a contingency dimension altering the relationship between
desirable successor attributes and an incumbents intention (see Models 3 and 4).
Specifically, we found that the number of family members working in the firm, as a
proxy variable of SEW preservation, does not moderate the relationship between
family standing attributes and an incumbents intention to nominate a family
member as the next CEO, as we had expected. However, we did find that the
number of family members working in the firm does moderate the relationship
between management competence attributes and an incumbents intention to
nominate a non-family member as the next CEO (b = 0.272, p \ 0.01).4

5 Discussion and conclusions


This study sheds some light on the debate about CEO succession in family firms.
We focused on the nomination of a firms next CEO, and, specifically, on the
incumbents intention, which is considered to be an important part of the succession
process (Le Breton-Miller et al. 2004; Schlepphorst and Moog 2014). CEO
nomination is much more complex in family firms than in non-family firms because
of the critical role that incumbents may have in the decision and the economic and
non-economic reference points they might use to decide who is the best future
4

We also tested, as one of the reviewers suggested, an additional model by considering the interactions
between the desirable successor attributes and the fact that the incumbent CEO was a family vs. a nonfamily CEO. The interactions were not significant and therefore no additional table is reported.

123

R. Basco, A. Calabro`

candidate to manage the firm in order to increase shareholder returns and to preserve
family SEW. In this context, this study helps scholars and practitioners better
understand whether a successors desirable attributes affect an incumbents
intention to nominate a family or non-family member as the next CEO, and the
extent to which the contingent condition of having family members working in the
firm, as a proxy variable of SEW preservation, affects the incumbents intention.
The main findings confirm the relationship between attitude and intention.
Specifically, we found that, when incumbents attitude toward family standing
attributes is important, their intention to nominate a family CEO increases.
Conversely, when incumbents attitude toward managerial competence attributes is
important, their intention to nominate a non-family CEO increases.
Our focus on desirable successor attributesspecifically, family standing and
managerial competence attributes helps untangle the preferences of incumbents in
terms of their intentions regarding the succession process, enriching our
understanding of CEO succession processes in family firms. We assumed that
these two groups of attributes represent different logicsfamily logic and business
logicaffecting an incumbents intention. For instance, family standing attributes,
which include birth order, gender, blood relations, and current ownership
participation, have a positive impact on an incumbents intention to retain the
management of the firm in the familys hands, and therefore to transfer managerial
control to the incoming family successor. This result is in line with research
undertaken by Lin and Hu (2007), who found that firms with low requirements in
managerial skills are more likely to choose a CEO from within the family. This
finding also provides more evidence of the importance of family structure, culture,
inheritance norms, and nepotism (Bertrand and Schoar 2006) on family firms
behaviors. Contextualizing our results in a country such as Spain, where there is a
tradition of primogeniture inheritance and a preference for men running a firm
(Colli et al. 2003), a biological imperative to keep the management (control) in the
familys hands affects succession nominationspecially, the intention to nominate
a family member as CEO. On the other hand, desirable successor attributes
regarding managerial competence, which include financial skills, marketing
experience, experience in other firms, and a career path, have a positive effect
impact on an incumbents intention to nominate a non-family member as CEO. That
is, when an incumbent recognizes that managerial competences are more important,
their nomination intention shifts away from an emotional and a biological
imperative (family logic) to a business one (business logic).
However, the latter relationship is altered by the number of family members
working in the firm (a proxy for SEW preservation). Indeed, an incumbents
intention shifts from nominating a non-family member to nominating a family
member as CEO as the number of family members working in the firm increases. In
other words, despite the fact that an incumbent might consider managerial
competence attributes to be important, the likelihood of their intention to nominate a
non-family member as the next CEO decreases as the number of family members
working in the firm increases (see Fig. 2). The more family members work in the

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Whom do I want to be the next CEO? Desirable successor

-.1

Effects on Pr (Incumbent intention)


-.05
0
.05
.1

.15

Average Marginal Effects of "MCA" with 95% CIs

Number of family members working in the firm


Fig. 2 Interaction effect

firm, the more likely it is that one of these family members is sufficiently qualified
to become the next CEO.
This finding suggests that family relationships and ties (Arregle et al. 2007) play
a key role in shifting an incumbents reference point from an economic one (when
they believe that managerial competence attributes are important) back to a
socioemotional one (the importance of SEW preservation increases when an
incumbent works with other relatives in the firm). The reason for this effect may be
because the density of family interactions and relationships, depending on the
number of family members (Arregle et al. 2007) working in the firm, reinforces
family relational components [i.e., importance of family relationships, sense of
belonging, and family obligations; Gomez-Meja et al. (2007)], which is one of the
dimensions that constitute the SEW construct. That is, when an incumbent and his/
her relatives work together, their interdependence (Arregle et al. 2007) affects the
perception of SEW preservation. Consequently, we expect that the frame created by
this context may affect an incumbents intention.
Moreover, selecting a non-family CEO within a context of high SEW
preservation would be seen as a betrayal toward the family and its legacy and
might negatively influence family relationships within the firm (Eddleston and
Kellermanns 2007). In addition, family members working every day in the firm
might fight an incumbents final decision by not being supportive towards the new
(external) CEO and creating additional conflicts and frictions within the firm, which
could be detrimental socioemotionally but also with respect to firm profitability.
This finding also suggests that the more an incumbent is exposed to interactions and
exchanges with other family members working in the firm, the more likely it is that
they will develop a conflict in terms of their SEW preservation tendency (Vardaman
and Gondo 2014).

123

R. Basco, A. Calabro`

Our findings shed new light on the debate about succession in the family business
research field, providing several contributions. First, our research contributes to the
succession literature by addressing the call for more investigation of the factors
affecting the successor CEOs nomination process in family firms (Lin and Hu
2007; De Massis et al. 2008). Specifically, following Schlepphorst and Moog (2014)
by taking the predecessors perspective, our research extends this debate by
focusing on an incumbents attitude and how that attitude relates to an incumbents
intention to nominate a family or non-family member as the next CEO. We
demonstrated the existence of consistency in an incumbents attitude (desirable
successor attributes for the next CEO) (Chrisman et al. 1998; Sharma and Srinivas
Rao 2000; Ibrahim et al. 2004) and his/her intentions (to nominate a family or nonfamily member as the next CEO). This consistency is linked to the institutional
logicsfamily-oriented and business-oriented logics (Jaskiewicz et al. 2015; Reay
et al. 2015)that frame the incumbents beliefs. In our study each desirable
successor attribute for the next CEO may be considered as a pressure from different
logics. For instance, family standing attributes correspond to a family logic and
managerial competence attributes correspond to a business logic. Therefore, in line
with Jaskiewicz et al. (2015) findings, our empirical research suggests that
incumbents have to address different logics in their decision to nominate the future
successor. Moreover, our findings also extend previous empirical literature on CEO
nomination processes (e.g., Bennedsen et al. 2007; Bocatto et al. 2010; Fang et al.
2015). Bocatto et al. (2010), as well as Fang et al. (2015), focused on the successors
nomination once the event had already been accomplished, trying to identify (expost) the causes that had affected the election of a family or a non-family member.
In our study, the focus is on the ex-ante intention of an incumbent to nominate a
family or a non-family member as the next CEO. Our results suggest that an
incumbents intention to nominate a family member as the next CEO is based on
family culture, inheritance rules, and nepotism aspects (e.g., firstborn status, age,
gender, blood relationship). Bocatto et al. (2010) justified their findingthat a
family member was more likely to be appointed as the next CEO in relation to the
number of years that the successor had been on the board of directors prior to
nominationby arguing for the importance of that family members experience and
knowledge of the firm. Although our study focuses on private family firms whereas
Bocattos research focuses on listed firms, and different points of time are used to
analyze the nominations (ex-ante in our study, ex-post in Bocatto et al.s (2010)
study), both studies draw a similar inferencethat family attributes are deemphasized and experience and knowledge of working in the family firm emphasized as
reasons for selecting a family member as the next CEO. The reasoning behind this
contention is that, in the time between an incumbents intention to nominate the
next successor and the effective nomination, some internal and direct socialization
lvarez et al. 2002) to transfer
processes take place (Fiegener et al. 1996; Garca-A
the implicit knowledge (Cabrera-Suarez et al. 2011) and to justify the selection of a
family member instead of non-family member as successor.
Second, introducing SEW wealth preservation (i.e., family members working
in the firm) as a contingency dimension helps elucidate the relationship between
attitude and intention. Specifically, we found some evidence that the context in

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Whom do I want to be the next CEO? Desirable successor

which an incumbent is embedded affects the reference point used to make


decisions. That is, within an environment of high SEW preservation (such as
continuous interactions and relationship with other family members working in
the firm; Arregle et al. (2007)), an incumbents attitude will likely change from
an intention to appoint a non-family member to that of appointing a family
member, even when the incumbent is inclined to give priority to managerial
competence attributes. In this context, what may happen is that an incumbent
perceives the difficulty, in terms of family conflict, rivalry, and expectations, in
following business-oriented logic by appointing a non-family member.
Finally, we believe that, by shifting the focus on a different point of time (i.e.,
when the succession has not yet taken place), we help complete the picture of
successor nomination by considering ex-ante factors related to an incumbents
intention. In this sense, our study contemplates an incumbents internal attitude (i.e.,
desirable successor attributes) and external conditions (i.e., number of family
members working in the firm, as a proxy of SEW preservation). Future studies
should link both ex-ante and ex-post analyses in the same longitudinal study to
better understand the nomination process as a whole.
5.1 Implications for practice
Our study has also several implications for practice. Its focus on desirable
successor attributes, and especially, on the role family standing and managerial
competence attributes play in forming an incumbents intention in nominating
their firms next CEO. It offers interesting insights for professionals involved,
at any level, in mentoring current and future leaders concerning succession best
practices. Furthermore, timing and awareness of family firm succession have
been shown to play an important role. Indeed, our focus on a specific point of
time (ex-ante) highlights the advantage having enough time to evaluate the
different options, and offers family firms current principals and managers an
interesting starting point from which to check if the desirable successor
attributes they have in mind are available (awareness), and, if not, to instigate
specific actions (e.g., successor development programs) that provide potential
candidates for the CEO position with specific knowledge, thereby ensuring the
protection and potential growth of financial aspects and/or the SEW of the
family (Williams et al. 2013). Hence, antecedents of an incumbents intention to
transfer the leadership position may represent a key starting point for successful
succession processes, and would help to interrelate ex-ante (intention to transfer
the leadership) and ex-post (completed CEO succession) stages of the succession
process.
5.2 Limitations and future research directions
This research is not without limitations. First, we focused our attention on an
incumbents intention to nominate their firms next CEO by assuming, because of

123

R. Basco, A. Calabro`

their power and influence in the process, that incumbents are reliable and useful
sources of information for understanding of the phenomenon under investigation.
Ideally, though, the points of view of other important stakeholders should also be
taken into account in order to capture the various nuances of the overall intention to
nominate a family or a non-family member as the firms next CEO. Future studies
should therefore endeavor to conduct research using more than one information
source per firm in order to compose a more complete picture of how different
stakeholders (family and non-family) affect the successor nomination process.
Second, one of the main limitations of our article is that even though the variable
family members working in the firm is probably correlated with SEW, it is, of
course, a proxy. In this sense, future studies should attempt to explicitly measure
SEW preservation in order to better understand how subjective norms created by the
SEW preservation forces affect incumbent intention in the nomination of future
leaders. Third, future research in this stream might also take into consideration new
variables that could be incorporated in our model. For instance, new contextual
variables (i.e., firm strategic behavior) would provide some additional evidence
about conditions under which the succession decision has to be made and the extent
to which context frames the attitude of an incumbent and their intention to nominate
a family or non-family member as the future CEO. Fourth, contextual factors may
vary across countries, and it would be interesting to know how the reference point of
an incumbents intention changes in different cultural contexts.
Fifth, we have also not considered that different family principals might have
different identities, strategic preferences, and goals (also because of their different
degrees of involvement and attachment) and that this might be a source of potential
intra-family conflicts (Chrisman et al. 2004), which in turn might affect incumbents
succession intention. Indeed, some family firms might have multiple generations
and family branches, with a high degree of ownership dispersion among family
members and only few of those actively involved in the management and/or control
of the firm. In those types of family firms the likelihood that intra-family agency
conflicts might take place is very high and might influence the incumbent towards
different succession choices. Future research could explicitly take into account
additional family-firm specific moderating variables, such as: the degree of family
ownership dispersion (measured through the Herfindal-Index on the three/five major
family shareholders), the number of family branches/tribes and their respective
amount of shares held, the involvement of family members within the management,
and/or the supervisory/advisory boards by specifically identifying those family
members who also are shareholders of the firm. Exploring all these aspects would
give the opportunity to better tackle how the risks of potential intra-family agency
conflicts could impact ex-ante succession processes. Finally, it would be worth
going beyond the distinction between the intention to nominate and the effective
nomination of a new CEO, by investigating how these two different stages of the
succession process are related. Longitudinal analyses might be a feasible vehicle
through which to understand not only whether the factors affecting the intention to
nominate and those for the effective nomination of the next CEO are the same, but

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Whom do I want to be the next CEO? Desirable successor

also whether and to what extent the intention to nominate and the effective
nomination of the next CEO changes over a specific period of time.

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