Conditions to performance of privately held family firms under a descendant CEO

Abstract

A recent stream of research investigates family firm characteristics that could have an influence on performance measures. One such specific characteristic is the CEO position in a family firm. Although there are some results that suggest that descendants perform better than their founder CEO counterparts, the majority of studies suggest that descendant CEOs do not have the same degree of positive influence on family firm performance as founder CEOs have. The findings are, however, slightly different on the degree of negative impact on family firm performance. Therefore, there might be situations in which a descendant is detrimental for the performance of a family firm but also other occasions when there might be advantages connected to a descendant CEO in charge of a family business. This study investigates whether the board of directors has a moderating effect on the descendant CEO’s influence on private family firm performance. As performance has several dimensions, we choose to measure performance variability as a proxy for entrepreneurial behavior. Our findings suggest that when a private family firm is lead by a descendant CEO, a vigilant and empowered board of directors will lead to more innovation and entrepreneurial behavior.