Family Ceo Succession, Innovation Activity and Firm Value
Description: The succession issue of family owned businesses (FOBs) has received widespread attention because many owners who are a part of the baby boomer generation are close to retirement age. This suggests that succession issues in FOBs not only impact firms themselves, but also economic and social development worldwide. The accumulated evidence to date shows that the majority of FOBs across the world cannot remain successful over the long run, suggesting that we have to exert more effort to understand why FOBs cannot perform well after succession. Based on the accumulated research evidence, the fundamental question of why FOBs’ firm value after post-succession is not generally maintained should be clarified in relation to the successor, because the CEO successor usually has a number of impacts on corporate strategy and consequently affects the firm value. Recent studies tend to show a negative effect of family CEO succession on firm value. However, according to agency theory, family successors should be more effective than their non-family counterparts in maintaining their family and business wealth because of interest alignment. The incompatibility between the theoretical expectation and the empirical findings could mean that agency theory should be complemented by other theoretical perspectives to more effectively capture the relationship between family CEO succession and firm value. The stagnation perspective may be capable of patching up the inadequacies of agency theory in explaining the effects of family CEO succession. In addition to employing multiple theoretical perspectives to assess the effect of family CEO succession; the controversial effect of family CEO succession could be further clarified by investigating mediating variables in the relationship between family CEO succession and firm value. Numerous evidences show that founder-controlled FOBs have a higher level of firm valu, because those FOBs have a higher propensity to engage in exploratory innovation that will open new areas of technical advance and ensure a firm’s long-term sustainability. For the reason given above, FOBs’ investment in exploratory innovation could not remain the same before and after CEO succession; so exploratory innovation could play the role of an important mediator. Furthermore, the literature indicates that the succession processes are controlled by the predecessor founder CEOs, implying that with a predecessor founder on the board, the successor CEOs are more likely to cater to the preferences of the founder. Therefore, the effect of family CEO succession on exploratory innovation would be moderated by the presence of the founder on the board. The second and third research purposes thus are to examine whether exploratory innovation mediates the relationship between family CEO succession and firm value, and the moderating effect of the presence of the predecessor founder on the board on the relationship between family CEO succession and exploratory innovation.
Amount: TWD 545,000
Funding type: research
Funder scheme: 學術補助
Investigator: 李振宇
Institution: 南臺科技大學管理與資訊學系
Funded outputs count: 1
Funder award ID: MOST106-2410-H218-016
OpenAlex ID: G2645912331