The Source of Succession Funding and Temporal Orientations: Explaining the Entrepreneurial Orientation of Family Successors

Abstract

A high degree of entrepreneurial orientation (EO) is considered to be very important for family business success and survival (Rauch, Wiklund, Lumpkin, & Frese, 2009). Until now, research has not been able to reach consensus (neither theoretically, nor empirically) regarding the effect of the entry of a new family generation on EO. Adding to this debate and using insights from the theories on imprinting and temporal orientation, our study shows that the financing mode of an ownership transfer influences the incoming generation’s entrepreneurial orientation through its impact on the successor’s temporal focus. We distinguish two types of ownership succession financing, depending on the source of financing for the share transition: predecessor financing (e.g., gift) versus successor financing (payment of a purchase price). Using data from 264 Belgian, private family firms, we find that successor financing is positively related to the next generation’s entrepreneurial orientation, as a result of an increased orientation towards the future and a lower concern for family tradition.