The Effect of Returning Family Successions on Firm Performance
Evidence suggests that successions from non-family CEO back to a family CEO successions improve performance by leveraging family assets while avoiding dysfunctional nepotism and other parochial family priorities.
Morten Bennedsen and Mario Amore have studied successions from a non-family CEO back to a family CEO - they labeled these
“Type-R” successions.
In a sample of 489 Italian family firms experiencing the departure of nonfamily CEOs, this stype successions represented 42% of all cases.
The difference-in-differences results indicate that family firms undertaking Type-R successions experience an 18% improvement in profitability. Exploring the heterogeneity underlying this result, Bennedsen and Amore found that Type-R successions produce weaker results in contexts that are highly volatile and that rely on innovative inputs before succession.
In studying the drivers of the performance increase they found that Type-R successions reduce labor costs and spur efficiency.
Collectively, evidence suggested that Type-R successions improve performance by leveraging family assets while avoiding dysfunctional nepotism and other parochial family priorities.
Published in the Strategic Management Journal in February 2021, you can read the paper here. It was written by:
Morten Bennedsen - INSEAD, University of Copenhagen
Mario Daniele Amore, Bocconi University
Isabelle Le Breton-Miller, HEC Montreal
Danny Miller, HEC Montreal