Ownership Succession Financing and Temporal Focus: Explaining the Entrepreneurial Orientation of Next-Generation Family Firms

Abstract

Entrepreneurial orientation (EO) is considered to be very important for family business success and survival. Until now, research has not reached consensus 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 which generation finances the share transition: predecessor financing (e.g., gift) versus successor financing (payment of a purchase price by the successor). Using data from 268 Belgian, privately-held family firms, we find that successor financing of the intergenerational ownership transfer is positively related to the next generation’s entrepreneurial orientation, as a result of a lower concern for family tradition and an increased orientation towards the future.