Investigation of Successor Selection Determinants and Their Effect on Family Business Survival

Abstract

Purpose: The study examined the factors to consider during the recruitment and selection process of the successor and how they affect the survival of family-owned manufacturing firms (FOMFs) in the Dar es Salaam region.

Design/Methodology/Approach: Correlational research design, quantitative research, cross-sectional field survey and structured questionnaire were employed as the research methods. The study used a sample size of 384 senior officers drawn by simple random sampling from the FOMFs. SPSS was used as an analytical tool for quantitative data and multiple linear regressions were used to test hypotheses.

Findings: Literature review revealed that incompetent successors and external recruitment of the successor intensify the conflicts of interest between the principal and the agent in FOMFs. Thus, internal recruitment of the successor and successor factors-work fit were empirically tested to examine their relationship with the survival of FOMFs. It was found that internal recruitment of the successor had no relationship with the survival of FOMFs while successor factors-work fit had a positive relationship with the survival of FOMFs.

Implications/Research Limitation: The implication is that grooming, developing and handing over power to the competent and suitable successor enhances the FOMFs survival and thus reduces the conflicts of interest between the principal and the agent. This study employed a purely quantitative survey questionnaire approach and was done in Dar es Salaam. Future studies can employ mixed methods research approach to get rich information on the relationship between empirically tested predicators and independent variables. 

Practical Implication: The FOMFs have to weigh out which recruitment type is worth and merit for the successors of FOMFs. Also, during the management succession planning process, FOMFs should groom, develop and hand over management power to competent successors in all key FOMFs leadership positions for effective and efficient management and sustainability of business survival.

 Originality/Value: A similar study had not been done in sub-Saharan African countries. Therefore, the study provides new knowledge and insight on the factors necessary for FOMFs survival across generations.