1. Family Business Review
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Succession Planning in Family Business: The Impact of Owner Gender
Paula D. Harveston, Peter S. Davis and Julie A. Lyden
Family Business Review 1997; 10; 373
DOI: 10.1111/j.1741-6248.1997.00373.x
The online version of this article can be found at:
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3. 374 Harveston, Davis, Lyden
nesses in the United States. Although the majority of these businesses are self-
employed women, they generate $2.28 trillion in sales and employ 18.5 mil-
lion people—27% of U.S. workers (The National Foundation for Women
Business Owners, 1996).
Despite the rise in the number of female-led businesses, “. . . the whole
role of the addition of women into the succession process has not been well-
developed” (Danco, 1994). Few studies have directly compared the succession
practices of male-led with female-led family businesses. More specifically, a
review of the literature failed to turn up any studies that examined the deter-
minants of succession-planning processes separately for businesses headed by
males and females. Several authors (e.g., Farquhar, 1989; Handler, 1994) have
argued that failing to include gender in our models has yielded a myopic view
of succession.
Based on theory and past research, our study examines the effects of
certain factors (i.e., individual, organizational, and capital) on the extensive-
ness of succession planning processes in family businesses. We make com-
parisons between male-led and female-led family businesses to determine
whether the effects of these variables differ according to the gender of the
owner/manager.
Succession in Family Businesses
Family businesses are unique institutions. They represent a context (or an
arena) in which two seemingly disparate social units (i.e., families and busi-
nesses) are highly integrated. In the family firm, “. . . the intimate connec-
tion between family and business is considered natural and compatible” (Davis,
1968). This connection extends to succession across generations, which, al-
though natural, can be a difficult process (Farquhar, 1989; Vancil, 1987).
Recently, driven by demographics and a heightened awareness of the issue,
the proportion of family-owned firms that have prepared plans to guide suc-
cession has doubled, although it still remains below 50% (Selz, 1995). A
failure to appropriately prepare for succession has been cited as a major im-
pediment to survival (Handler, 1988; Beckhard and Dyer, 1983). Other au-
thors, however, have challenged such arguments, stating that they find no
empirical linkage between the use of written succession plans and firm con-
tinuity (Astrachan and Kolenko, 1993). The need to improve our under-
standing of succession planning and its determinants is suggested by statis-
tics showing that only 30% of family businesses survive past the first genera-
tion (Beckhard and Dyer, 1983; Dyer, 1986), and only 10% to 15% survive
to a third generation (Applegate, 1994).
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4. Succession Planning in Family Business: The Impact of Owner Gender 375
Distinguishing Succession in Family Businesses
Over the years, there have been several exemplary reviews of research on the
topic of succession (e.g., Brady and Helmich, 1984; Gordon and Rosen, 1981;
Handler, 1994, 1988). A recent comprehensive survey of the past thirty years
of succession research by Kesner and Sebora (1994) found that although ar-
ticles on succession had increased by more than 250% since 1970, much of
this research has been so “. . . diffused and often chaotic [that] despite this
increased activity, results [do] not provide a clearer understanding of the hy-
pothesized relationships nor a consistent model of antecedents, consequences,
or contingencies” (p. 361). Some of this apparent chaos may be attributed to
gaps in our understanding of the succession process, particularly on the sub-
ject of succession in family firms. In her extensive review of succession re-
search in family firms, Handler (1994) identified four major areas where suc-
cession research is scant: succession among different ethnic groups, the im-
pact of family dynamics, the effectiveness of succession, and the role of gen-
der. This latter area is especially appropriate for study, now that women are
more and more frequently becoming founders of, and heirs to, family busi-
nesses.
This study on the role of gender in family businesses focuses on the suc-
cession planning process. The approach is consistent with the prevailing view
among researchers that “succession is more a process than an event”(Handler,
1994). The next section reviews prior research on factors likely to influence
succession planning. The focus then turns to evidence on whether the effects
of these factors on succession planning processes are influenced by the gender
of the owner/manager.
The Succession Planning Process
Considerable evidence exists to substantiate the belief that the presence of
conscious organizational planning and preparation for succession is among
the most important factors in ensuring effective executive succession (Kesner
and Sebora, 1994). Family succession (in the broadest sense, that of the mantle
being passed to the next generation) can be a highly emotional and conten-
tious issue, which can lead to major rifts within the family and the business as
participants “choose sides.” To maintain family and organizational cohesive-
ness, management must develop planning processes and mechanisms that pro-
vide a valid structure for the transference of leadership. By placing the succes-
sion process within a planning framework, the transition in leadership from
one generation to the next gains additional legitimacy.
By definition, plans for succession usually include an identifiable set of
elements, all of which must antedate the actual succession event. In his pio-
neering study, Christensen (1953) proposed some of the elements that would
most typically be included in such a plan: (1) identifying the pool of poten-
tial successors; (2) designating of the successor; (3) notifying the successor-
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5. 376 Harveston, Davis, Lyden
designate and other management leaders. The elements described by
Christensen provide a framework for understanding the tasks required for a
suitably comprehensive succession-planning process. For example, giving con-
sideration to several possible successors might indicate that a more compre-
hensive succession process is undertaken than when only one successor is
considered (Vancil, 1987).
Communication plays an important role in legitimizing the chosen suc-
cessor. Announcing the decision to others represents a public commitment by
the current leadership to implement change and legitimizes, in the eyes of
peers and subordinates, the process by which a successor was chosen. This
may help avoid power struggles within the organization, as nonsuccessors will
be less likely to successfully dispute the succession.
However, communications concerning a chosen successor may not elimi-
nate all conflict. Minimizing conflict over succession is not as simple as an-
nouncing a choice of successor. It can only legitimize the process; it does not
legitimize that person as the anointed successor. It does, however, provide an
important acknowledgment by the predecessor of the passing on of leadership
and responsibility for the family business. Consequently, an awareness of the
role of communication in the succession process can often help both family
and non-family members of the firm place their own situation in context.
The framework proposed by Christensen (1953) is sufficient to maintain
basic organizational coherence while making it possible for the firm to plan
proactively for successful transitions in leadership. In contrast, attempts at
patchwork solutions can trap the predecessor between conflictual behavior in
the family and the necessity for transition. Implementing the succession pro-
cess as outlined above is an important mechanism in providing the family busi-
ness with identity, stability, and continuity.
Determinants of Succession Processes in Family Businesses
An extensive review of the literature reveals many variables to have been con-
jecturally or empirically related to succession. Handler’s (1988) theoretical
model of succession in the family business points to factors at the individual,
interpersonal, and group levels, as well as the organizational and even envi-
ronmental levels affecting succession planning. Given the intent of the present
study, our focus was on variables representing (1) individual attributes (e.g.,
demographics); (2) organizational characteristics (e.g., structure, size); and (3)
environmental factors (e.g., the availability of financial resources).
Manager Characteristics. The inclusion of individual characteristics (e.g.,
owner’s age and education) is consistent with the broader theory of organiza-
tional demographics (Pfeffer, 1983) and the upper echelons perspective ar-
ticulated by Hambrick and Mason (1984), both of which support managerial
background and characteristics as important predictors of organizational be-
haviors and outcomes. Pfeffer provides further support for their inclusion,
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6. Succession Planning in Family Business: The Impact of Owner Gender 377
arguing that managerial succession is influenced by the demographic compo-
sition of organizational leaders.
Age. In the succession process, one of the more important characteristics
of the family-business owner/manager is his or her age. As Lansberg (1988)
notes, the family’s approach to succession planning is often highly related to
the founder’s age. Research indicates that older executives tend to have a stron-
ger commitment to the organization (Becker, 1973) and to be more risk averse
(Carlsson and Karlsson, 1970). Preparations for succession may be a means by
which the owner can demonstrate commitment to the organization and its
future, while controlling risk. As the owner ages, his or her awareness of the
need to prepare for the inevitable transition of ownership and control increases,
and along with it, the need for succession planning.
Kets de Vries (1985) and Lansberg (1988) give reasons why succession
planning is a topic that family-business owners approach with some am-
bivalence. Owners may resist succession planning because they feel threat-
ened, perhaps, by their fear of losing control, their desire to avoid prefer-
ential treatment of children, or because a loss of identity and power in the
firm may also result in loss of stature within the community. Nevertheless,
with advancing age, the inevitability of death, and the threat of debilitating
illness tends to compel the owner to make preparation for the continuity
of the family business.
Education. Relatively little research has examined education and training
as they directly relate to planning for the succession process. However, there
are some studies of family businesses which show a positive relationship be-
tween education and innovation (Kimberly and Evanisko, 1981), while others
(e.g., Datta and Guthrie, 1994) have linked the owner’s level of formal educa-
tion with the willingness to implement change. While these studies provide
no clear confirmation of a positive relation between owner education and suc-
cession planning, nevertheless, they do provide a basis, however tentative, for
conjecturing that there is one. To the extent that planning for organizational
succession is innovative and represents the current owner’s willingness to re-
duce his/her commitment to controlling the organization, then the relation-
ship between the owner’s level of education and the extent of succession plan-
ning should be positive.
Financial Stake. Resource dependency (Pfeffer and Salancik, 1977;
Yuchtman and Seashore, 1967) theory structures our expectations about an
owner’s financial stake in the organization and the extensiveness of the succes-
sion process. Resource dependency theory suggests that as dependency on a
critical resource (or provider) increases, so too will the efforts of recipients to
control those interdependencies, and that as the current owner’s financial in-
terests increase, so too will the comprehensiveness of the succession planning
process. Research shows that financial indices, such as personal wealth, are
tied to entrepreneurial intentions and behaviors (Krueger and Carsrud, 1993).
In addition, formalizing the succession planning process could provide the
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7. 378 Harveston, Davis, Lyden
individual with a way to ensure the survival of the firm (the resource) on which
he or she depends. Cyert and March (1963) support this rationale with behav-
ioral arguments for a positive relation between a manager’s ownership in and
consequent commitment to the organization. More pertinent for this discus-
sion is Marino’s and Dollinger’s (1987) finding that a manager’s financial stake
in the organization has an important influence in succession decisions. Logi-
cally, we would expect that as an owner’s income and financial stake increase,
so too will his or her willingness to engage in succession planning.
Organizational Characteristics. Size. Although family business is often
thought to be synonymous with small business, this is not necessarily true. In
fact, some of the world’s largest companies (e.g., Cargill, M&M Mars) are
family-controlled (Litz, 1995). Although there is ample evidence in the litera-
ture linking organizational size to succession, most of these studies have fo-
cused on the relationship between size and the frequency of succession or the
effect of succession on stockholders while largely ignoring the effects of size
on succession planning (Davidson, Worrell, and Cheng, 1990).
For several reasons, increasing size may make family-owned businesses
more sensitive to the need for extensive succession planning. As organizations
become larger, they have greater opportunities to train and develop top man-
agement and more complex succession plans (Helmich, 1977). Trow (1961)
argued that large companies tend to have more elaborate training programs
and complex succession plans than do small firms. Thus, we would expect a
positive relation between the size of the organization and its preparations for
succession.
Furthermore, larger organizations have the resources to engage the out-
side counsel that might encourage planning for succession. They also have
access to external consultants whose professional advice may facilitate the suc-
cession planning process (Chaganti, Chaganti, and Malone, 1991). These fac-
tors alone might ensure that larger family businesses would have more quali-
fied, experienced candidates in place for possible succession.
Formality. Organizational structure has been described as a multidimen-
sional construct. Several reviews (e.g., Fredrickson, 1986; Hall, 1977) indicate
that formalization, integration, and centralization are the most consistent di-
mensions; this is supported by empirical research. The relevance of formality
for this research is provided by Miller’s (1987) finding that rational decision-
making in organizations may require organizations to be formalized and inte-
grated, but not centralized. Further support for the importance of formaliza-
tion comes from Fredrickson (1986), who argued that rationality in organiza-
tional processes is associated with three aspects of formalization. Specifically,
by the use of controls, specialization, and the implementation of formal poli-
cies and procedures. Miller also finds that formalizing the use of devices, such
as task forces and committees, provides a forum for discussion among manag-
ers and executives (e.g., boards of directors), and that this promotes a thor-
ough and multifaceted assessment of problems, proposals, and plans. Research
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8. Succession Planning in Family Business: The Impact of Owner Gender 379
links formality in organizations to their planning behaviors (Rue, 1973;
Robinson and Pearce, 1983).
In the context of family businesses, Kets de Vries (1977) provides support
for the importance of formality in raising the level of succession planning. He
finds that one of the key factors that most adversely affects success among
family business is the owner’s refusal to formalize the organization. One way
to provide additional structure and formalization within a family business is to
include external influencers, such as a board of directors (Barach, 1984). Rock
(1987) shows that outsiders influence the strategic decisions made by CEOs.
Miller, Droge, and Toulouse (1988) studied 77 small firms that were closely
held, either by an owner, a family, a group of partners, or a holding company,
and found evidence to support a positive relation between structural formal-
ization and rationality in decision-making processes within family businesses.
Although we lack direct evidence linking formality to succession planning,
prior findings suggest that increased formality has a positive affect on the com-
prehensiveness of the succession-planning process in family businesses.
Capital. Many authors argue that one skill necessary to survival is the
judicious acquisition of resources. The ability to gain access to resources
(e.g., capital) provides a cushion of actual or potential slack in resources that
gives managers discretion and flexibility in preparing the organization for
change, whether change is external (e.g., changes in markets) or internal
(i.e., succession). As Davis and Stern (1980) observe, “Organizational slack
provides a buffer with which to absorb the variances raised by family issues.”
Obviously, the most discretionary slack comes from the most discretionary
resources including cash, cash equivalents, and credit lines (Sharfman, Wolf,
Chase, and Tansik, 1988). As access to capital becomes easier, managers can
use spare or slack resources to prepare the organization for future succession
while insuring internal stability, perhaps by minimizing political behavior
and discord within the top management group via bargaining or coalition-
forming activities (Bourgeois and Singh, 1983). Consequently, slack resources,
in the form of accessible capital, can facilitate succession planning by allow-
ing the firm to focus attention on external opportunities rather than on in-
ternal conflict.
Some authors argue that family businesses may be at a disadvantage in
obtaining access to external capital (Kets de Vries, 1993). Therefore, they
may be forced to rely heavily on internal sources of capital, such as that
provided by family members. Of course, family businesses that have both
family investors and employees are more likely to be concerned with the
long-term survival of the firm (Gundry and Welsch, 1994). Having a clear
succession process is one way to ensure consistency in achieving the goals of
the family as well as those of the resource providers. Consequently, as the
family assumes a greater role as a provider of capital, the organization should
exhibit an increased tendency to implement succession-planning processes
as part of a broader effort to ensure the business’s survival.
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9. 380 Harveston, Davis, Lyden
In summary, the review of the literature suggests that each of the three
factors investigated here (i.e., individuals, organizations, and resources) should
exert a positive effect on succession preparation in family businesses. That is,
as individuals rise in age, education, income, and the percentage of worth they
have invested in the business, the more extensive the firm’s succession plan-
ning should be. Similarly, as organizations become larger and more formal,
the more extensive the firm’s succession planning. Finally, the more accessible
capital becomes and the greater the reliance on internal sources of capital (i.e.,
family), then the more extensive the firm’s succession planning.
The Effects of Gender on Succession Planning
Only recently has the topic of gender in succession planning become perti-
nent. According to Richard Burkholder, director of worldwide operations for
The Gallup Organization, “There is a strong perception that society favors
men over women” (Prasso, 1996). This persistent gender bias extends to the
workplace. Since males dominate top positions in the business world, entre-
preneurship and self-employment have become the primary routes by which
women can overcome gender discrimination (Cromie and Hayes, 1988). How-
ever, even self-employed women may face difficulties not common to self-
employed men because of barriers associated with education and family re-
sponsibilities (Aldrich, 1989; Goffee and Scase, 1983). Nevertheless, women
are starting their own businesses at twice the rate of men (Chaganti, Chaganti,
and Malone, 1991). Because of the increased presence of women, it is impor-
tant to consider implications that the gender of the owner/manager might
have on the succession process.
Women are often thought to be disadvantaged relative to men in the busi-
ness arena. It is commonly believed that female-owned business are less suc-
cessful and fail more often than male-owned businesses (Aldrich, 1989; Cuba,
Decenzo, and Anish, 1983). Various explanations have been offered to explain
the phenomenon of differences between male- and female-led businesses. Some
scholars argue that the impact of environmental attributes create barriers to
women’s success in business. For example, they argue that industries’ structure
and institutional arrangements allow social bias against women to influence
organizational behaviors and outcomes (Bandura, 1986).
Another stream of research vests gender differences in individual factors,
such as education, planning, and financial capabilities, areas that have been
identified by women as weaknesses (Hisrich and Brush, 1986; Stevenson, 1986).
For example, evidence suggests that the effects of education on subsequent
decision making and managerial advancement are greater in men than among
women. Fagenson (1990) found that the skills acquired through training, edu-
cation, and work experience appear to influence managerial promotions, and
that these skills are better rewarded (via career advancement) for men than for
women.
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10. Succession Planning in Family Business: The Impact of Owner Gender 381
Because of this apparent gender bias, many scholars argue that theories
developed from research that have predominately utilized male samples may
not be transferable to discussions of female business owners (Powell and
Mainiero, 1992). Tharenou, Latimer, and Conroy (1994) recommend that the
effects of human capital factors (e.g., education) be included in studies involv-
ing differences between male and female managers.
Consistent with the preceding logic and empirical evidence, we tested the
following hypothesis.
Hypothesis 1: Individual characteristics (i.e., age, education, income)
will have a stronger impact on succession planning within male-led
organizations than those led by females.
Another line of research suggests that men and women differ in the way
they think and that this difference is reflected in the manner in which they
organize their businesses (Tannen, 1996 ). For example, a survey conducted by
the National Foundation for Women Business Owners (1994) found that male
entrepreneurs, to a greater extent than female entrepreneurs, stress logical
thinking, analyzing, processing information methodically, and developing pro-
cedures for getting tasks done. In effect, male-led organizations tend to be
more hierarchically oriented, with established rules and clear delegation of
authority. In contrast, female entrepreneurs tend to think of their businesses
as families and their professional relationships as networks. The study con-
trasted the differences between genders by noting that “Both within and out-
side their businesses, women think of the relationships with their employees,
suppliers, vendors, and customers as an interconnected network whereas many
men business owners think in hierarchical terms, compartmentalizing sets of
relationships or affiliations” (National Foundation for Women Business Own-
ers, 1994).
As argued above, differences between male and female owner/managers
may vest themselves in the way they organize their businesses. These differ-
ences may affect the relation between an organization’s structural characteris-
tics (e.g., formality) and its succession-planning processes. Consistent with
this logic and the empirical evidence, we tested the following hypothesis.
Hypothesis 2: The effects of organizational characteristics (i.e., size,
formality) on succession planning will differ between male-led orga-
nizations and female-led organizations.
Another major challenge that confronts female-led organizations is find-
ing sufficient capital to fund their businesses and provide needed slack. The
popular press is full of anecdotal accounts that give the impression that many
women business owners believe they are operating at a disadvantage in today’s
financial environment.
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11. 382 Harveston, Davis, Lyden
One reason that women face restricted access to capital may have some-
thing to do with the “liability of newness” concept proposed by Stinchombe
(1965). Consistent with this concept, female-owned businesses, like other new
forms of organizational phenomena, can be expected to have a more difficult
time than male-owned businesses in establishing their legitimacy, obtaining
capital, and developing a customer base. Often operating on a shoestring and
lacking cash flow or credit history, many women business owners find capital
from traditional sources hard to come by. The result is that women are fre-
quently forced to rely on credit cards, personal savings, and family loans to
fund their businesses’ capital needs (Malloy, 1996).
Despite evidence of capital restrictions among women-owned businesses,
a recent survey by the National Foundation for Women Business Owners (1994)
and Dun & Bradstreet Information Services, found that nearly three fourths
of the women-owned businesses in existence in 1991 were still operational
three years later, as compared with only two-thirds of all companies. In any
event, it appears that access to capital may play less of a role in ensuring the
survival and continuity of female-led organizations than of male-led ones.
Consistent with this logic and prior empirical evidence, we tested the follow-
ing hypothesis.
Hypothesis 3: Capital factors (i.e., access to capital, family funding)
will play a greater role in succession planning within male-led organi-
zations than within female-led organizations.
In summary, our review indicates that despite many calls for research on
women-led businesses (Bowen and Hisrich, 1986; Cromie and Hayes, 1988;
Hisrich and Brush, 1984; Kallenberg and Leicht, 1991; Schwartz, 1976), most
of what we know about owner/executive succession comes from studies of male-
led organizations. Although the literature abounds with implications suggest-
ing that the strength of proposed relationships may depend on the gender of
the owner/manager, there is little previous research specific to the investiga-
tion of gender and its relation to succession in family businesses. Since very
little is known about succession in female-led organizations, our hypotheses
must be regarded as tentative, and the nature of our research considered as
exploratory rather than confirming.
Method
Sample. The data used to tests the hypotheses were collected as part of two
national telephone surveys conducted in 1993 and 1994 by the Gallup Com-
pany for Massachusetts Mutual Life Insurance Company. The surveys investi-
gated the operations of family-owned businesses. The samples of potential
businesses were drawn randomly from a comprehensive database of family-
owned businesses maintained by Dun & Bradstreet and Survey Sampling. Since
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12. Succession Planning in Family Business: The Impact of Owner Gender 383
t-tests on all pertinent variables revealed no significant differences across the
two survey periods, the data from the 1993 and 1994 surveys were combined
to create a single sample
The data have been used previously in studies of family business. For ex-
ample, Astrachan and Kolenko (1994) used the data from the 1993 survey as
the basis for a study addressing human resource practices among family busi-
nesses.
The sample included a wide range of family-owned businesses that com-
pete in most major U.S. industries. The firms surveyed had to meet the fol-
lowing criteria: the company had to have at least ten employees; annual rev-
enues of at least $2 million; and the company had to have been founded at least
ten years prior to the survey. To be included, respondents were required to be
the primary owners of businesses, as identified by the title they held (e.g.,
owner, president, CEO), and had to identify their business as a family busi-
ness. In addition, respondents were asked whether they either “did,” “did not,”
or “did not know” their plans to pass their ownership position in the business
to a “close relative or relatives.”
An ANOVA across these three groups indicated that the group that “did”
intend to pass on ownership was significantly different in the comprehensive-
ness of their preparations for succession from both the “did not” and “did not
know” groups. The “did not” and “did not know” groups were not signifi-
cantly different from each other in this regard. Only those 983 individuals,
792 males and 191 females, who indicated they did intend to pass on their
ownership were retained for subsequent analyses.
Measurement of Variables
Succession Process. In developing the dependent variable examined here, we
tried to be consistent with Christensen’s (1953) presentation in identifying
elements that would effectively illustrate the main characteristics evident in
planning for succession. This led us to identify six items on the survey that
appeared to capture the comprehensiveness of the succession planning pro-
cess. These included whether a written or unwritten succession plan had been
put in place; whether a possible successor had been identified and if so, whether
consideration was given to only one successor or several possible successors;
whether the chosen person or persons were informed that they were being
considered; whether a successor had been chosen to assume operating control
of the business; and whether the decision had been announced to others.
The previous items were then collapsed to form a single scale whose val-
ues ranged from zero (low) to seven (high). The resulting composite scale was
created by scoring each of the six items as either zero or one, based on whether
it was or was not present. The sole exception was the question of whether a
possible successor had been identified and, if so, whether consideration was
given to only one successor or several possible successors. Responses were
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13. 384 Harveston, Davis, Lyden
scored zero if no one had been identified, one if only possible successor was
considered, and two if more than one successor was considered.
Owner/Manager Characteristics. Our study included four measures of
individual factors anticipated to relate to the comprehensiveness of succession
planning: age (AGE); education, (EDUC); income (INCOME); and the per-
cent of their net worth invested in the business (WRTHPCT).
Each respondent’s age was computed using his or her self-reported date of
birth. The male respondents were slightly older (mean=52.7 years; s.d.=12.45),
than female respondents (mean=48.4; s.d.=11.81). This difference was statisti-
cally significant (t-value=4.3, p-value=.000).
Education was approximated on the basis of the level of educational at-
tainment of the respondent. We used a six-point scale with values ranging
from one (when the respondent was not a high school graduate) up to six (when
the respondent had a doctoral, masters’, or other post-graduate degree). Males
were more likely than females to have attended college, 49.3% compared with
31.9%. Analysis confirmed that the average educational achievement of male
respondents (mean=3.82; s.d.=1.22) was significantly higher (t-value=3.93; p-
value=.000) than that of female respondents (mean=3.34; s.d.=1.13).
We rated each respondent’s current annual income on a four-point scale
of “1” (less than $50,000), “2” ($50,000 to $100,000), “3” ($100,000 to $250,000)
and “4” (more than $250,000). The average level of income for male owner/
managers (mean=2.54; s.d.=1.00) was significantly higher (t-value=5.92; p-
value=.000) than that for females (mean=2.05; s.d.=.88).
We determined the dependency of the owner and his or her family on
wealth invested in the business by asking respondents, “What percentage of
your family’s net worth is tied up in the business?” Answers were rated “1” for
“less than 25%” to “4” for “75% or more.” The percentage of a family’s wealth
invested in the business was significantly higher (F=2.67; p-value=.008) among
Table 1. Correlation Coefficients
Variable Mean Succession Age Educ Income Wrthpct Size Formal Famfund Capacc
Planning
Succession 2.17 1.204
Planning
Age 51.87 .228c 12.444
Educ 3.72 .010 -.054a 1.540
c c c
Income 2.44 .093 .224 .205 1.000
Wrthpct 2.68 .012 .017 -.031 .077b 1.033
b c
Size 2.42 .071 .022 .202 .281c .096c 1.616
c c c c
Formal 2.18 .137 .047 .118 .201 -.025 .110 1.066
b b c
Famfund 2.10 .071 .013 -.077 -.054 .089 -.077b .025 1.037
Capacc 3.09 .111c .025 .010 .293c -.044 .140c .089c -.073b .954
a b c
< .10, < .05, <.01, standard deviations are shown in the diagonals
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14. Succession Planning in Family Business: The Impact of Owner Gender 385
male-led business (2.73) than among females-led businesses (2.50). Descrip-
tive statistics and correlations for all variables included in the study appear in
Table 1.
Organizational Characteristics. We used two variables to define assessed
organizational characteristics. These were a firm’s size (SIZE) and its formal-
ity (FORMAL). As is common in the literature (e.g., Datta and Guthrie, 1994;
Friedman and Saul, 1991; Helmich and Brown, 1972), we used the reported
number of employees in the organization to measure the size of the firm. Among
the sampled firms, total employment ranged from a low of ten (the cut-off for
inclusion in the study), to as many as 36,000. Since the size variable is not
normally distributed, we used the natural log of total employees in all subse-
quent analysis. In our sample, male-led businesses were much larger than fe-
male-led organizations, with an average of 67 employees (s.d.=255.89) versus
17.37 (s.d.=32.93). These differences in size were statistically significant (t-
value=4.12; p-value=zero). We used four items to assess the formality of an
organization’s structure: “written job descriptions,” “fixed compensation plans,”
“formal employee performance review processes,” and “the holding of regular
board meetings.” These items were collapsed and recoded to yield an interval
variable, whose values ranged from zero (indicating a low degree of formality)
to four (indicating a high degree of formality). Analysis showed that male-led
businesses were, on average, significantly more formal than female-led busi-
nesses (t-value=2.03; p-value=.043).
Capitalization. We used two separate indicators to measure capitaliza-
tion: access to capital (CAPACC) and family funding (FAMFUND). We de-
termined the firm’s access to capital by asking owners to rate their current
access to capital as “poor,” “fair,” “good,” or “excellent.” These responses were
then scaled from one to four, respectively. In addition, we asked owners to rate
the importance of family funding as a source of capital, using a scale ranging
from one, not at all important, to four, most important. Among our sample,
male-led family businesses were not significantly different from their female-
led contemporaries on either of these two measures.
Results
To investigate the hypothesized relationships, we used hierarchical multiple
regression analysis in which we divided our independent variables into or-
dered sets by content—individual factors (age, education, income, percentage
of individual worth invested), organizational factors (size, formality), and capital
factors (access to capital, family funds)—entering blocks of data in that order.
We regressed these blocks against the dependent variable (i.e., the compre-
hensiveness of the succession planning process). We then repeated our analy-
sis for the two subsamples of male-led and female-led family businesses, re-
taining only those variables that demonstrated a significant predictive relation
to succession when we examined the total sample. Table 2 presents the results
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15. 386 Harveston, Davis, Lyden
Table 2. Results of Multiple Regression Models Predicting
Comprehensiveness of the Succession Planning Process
Male-Led Female-Led
Combined Family Family
Sample Businesses Businesses
Independent b Standard b Standard b Standard
Variables Error Error Error
Owner Attributes
Owner Age .0216*** .0033 .0257*** .0034 .0087 .0068
Organization
Formality .1291*** .0380 .0961* .0407 .2386** .0719
a
Size .0363 .0260 .0211 .0258 .1548* .0626
Financial
Famfund .0875* .0384 .0660 .0404 .1766* .0821
Capacc .1262** .0436 .1188** .0448 .1181 .0866
b
N 958 780 178
a
Measured as the logarithm of the total number of employees
b
Attrition in sample from 983 to 958 is due to the exclusion of 25 observations due to missing values.
*p<.05, **p<.01, ***p<.001
of regression analyses for the total sample and separately for the two subsamples
of family businesses headed by men and women.
Total Sample. For the total sample, the results in Table 2 provide evi-
dence that the characteristics of the owner/manager, the organization, and the
availability of financial resources (capital) affect the comprehensiveness of prepa-
rations for organizational succession in family businesses. Specifically, we find
that the owner’s age, the organization’s formality, and the financial importance
of family funding, and access to capital positively influence the succession pro-
cesses we examine here.
Although it is not significant in the total sample, we retain the variable
size of the organization for further analysis. We did this based on theoretical
arguments relating formality to size. The correlation between size and for-
mality in the sample examined here is low (.110) but highly significant (p<.001).
The results confirmed many of our a priori expectations that as the owner
grows older, as the family business becomes more formalized, as the business
relies more on family funding for capital, and as capital becomes more acces-
sible, the the succession-planning process becomes more comprehensive.
Having confirmed our a priori expectations, that these factors generally
demonstrate a positive and significant relation to succession planning, the next
question we addressed was whether the relative impact of each of these factors
varies according to the gender of the owner.
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16. Succession Planning in Family Business: The Impact of Owner Gender 387
The Impact of Owner Gender. Table 2 presents the results of the analyses
testing the effects of gender on determinants of succession processes. To con-
firm whether the results obtained for male and female owners were statisti-
cally different, we used a Chow test (Chow, 1960). The results of the Chow
test confirmed that the overall regression equation for male owners is signifi-
cantly different (p<.05) from that obtained for female owners.
Consistent with Hypothesis 1 (the effects of individual characteristics on
succession planning), we found that the owner’s age plays a greater role among
male-led organizations than among female-led organizations, where the age
of the owner does not appear to be significant.
The second research hypothesis, which posited that certain organizational
characteristics (i.e., size and formality) differed between male- and female-led
organizations, was supported by the finding that organizational formality has
a stronger effect on female-led businesses than on male-led businesses. Fur-
ther evidence supporting the hypothesis indicated that among the sample of
female-led family businesses, increasing the size of the firm significantly in-
creases the comprehensiveness of the succession planning process. In effect,
increases in the two organizational variables (size and formality) also increases
the comprehensiveness of the succession planning process among female-led
businesses to a greater extent than among male-led businesses.
The third hypothesis, which posited that capital factors (i.e., access to capital
and the importance of family funding) would play a greater role in determin-
ing the comprehensiveness of the succession-planning process within male-
led organizations than within female-led organizations, was rejected. Although
access to capital does significantly (p<.01) increase the comprehensiveness of
the succession-planning process within male-led family businesses, family funds
have, at best, a marginal effect (p<.12). In contrast, we observed a nearly oppo-
site effect among the female-led contingent, in which family funds play a sig-
nificant role (p<.05) and access to capital is not significant (p<.16).
Discussion. In general, this study supported its underlying thesis: that the
relatedness between individual, organizational, and resource variables and the
comprehensiveness of the succession-planning process differ according to
whether the family business is headed by a male or female owner/manager.
We confirmed that significant differences in succession planning processes
exist across male- and female-owned businesses at all three levels of analysis
(individual, organization, and resource).
Surprisingly, at the resource level, succession planning within male-led
businesses benefits more from increased access to capital than do female-led
businesses, whereas the opposite is true for the provision of family funding.
Importantly, those differences that we found between male- and female-
led family businesses cannot be attributed to differences between the genders
on the emphasis that each places on preparations for succession. Indeed, post
hoc analysis confirms that the mean value of the comprehensiveness of succes-
sion planning (the dependent variable) for females does not differ from the
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17. 388 Harveston, Davis, Lyden
mean value of males. However, while both groups appear to place similar im-
portance on preparations for succession, we found that the determinants of
the comprehensiveness of involved succession processes differ between the
sexes. To some extent, these findings are consistent with many previous stud-
ies that have suggested that men and women behave differently. In effect, the
results obtained here suggest that even though they may have the same goals
in terms of succession planning, alternative mechanisms are at work in female-
led versus male-led organizations.
The factors studied here that affect succession planning in organizations
were organized into individual- and macro-level variables. The former included
attributes associated with individual owners and managers, such as age and
educational attainment. The latter included attributed of the involved organi-
zations and their resource environment, such as organizational size, formality,
access to financial resources, and the sources (providers) of capital.
Considerable research on the role of gender in family business initiatives
has focused on micro-level variables, identifying individuals’ demographic and
personality characteristics that precipitate entrepreneurial ventures (e.g., Ward,
1987). While these micro-level variables provide some insight into the reasons
women become entrepreneurs, their effects on succession planning have not
received much attention.
Intuitively, the lack of significance of individual factors found among our
sample of women business owners could be interpreted as implying that indi-
vidual variables (i.e., age, education, worth invested in the firm) are not as
important in determining succession behaviors within female-led family busi-
nesses as they are within male-led ones. On this basis, our results seem to
question the necessity of including human capital factors in theories of women’s
managerial advancement (Tharenou, Latimer, and Conroy, 1994).
Be wary, however, of drawing possibly premature conclusions based on
the results obtained here. For example, given how recently women have come
into prominence as owners/managers of family businesses, we might expect
them to be younger, less educated, and less affluent than their male counter-
parts. As reported earlier in the “Methods” section, such was the case among
the present sample. In our sample, male owners were older than female own-
ers, had a higher income, and were more likely to have attended college than
their female counterparts. Differences in characteristics between the sample
groups may offer an alternative explanation as to why individual variables have
a weaker effect on succession planning among women-led organizations than
in male-led organizations.
On the macro side, we hypothesized that differences between males and
females would affect the relation between various structural devices (e.g., as
formalization), such organizational characteristics as size, and, the resulting
comprehensiveness of succession planning. Our results indicated that although
the effects of increasing structural formalization appeared greater within fe-
male-led businesses, male-led businesses also benefitted.
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18. Succession Planning in Family Business: The Impact of Owner Gender 389
One explanation for this finding is that as the organization matures and
evolves toward succession, it naturally becomes more formalized. Such matu-
ration processes, including increasing organizational formality, might enable
family businesses to focus managements’ attention on issues while avoiding
“power games” by family members, firm managers, and external constituen-
cies (DiMaggio and Powell, 1983). Paradoxically, the effects of imposing in-
creasing structure within the family firm may actually allow the owner greater
freedom to identify prospective successors and to prepare for the ultimate tran-
sition of power.
Of course, it is also possible that the effects of formalization on succession
planning may be spurious, attributable to some other causal mechanism, such
as whether intergenerational succession has previously occurred in the firm.
While the effect of organizational formality on succession planning pro-
cesses is positive for both male- and female-led family businesses, the same is
not true for organizational size (i.e., number of employees). Instead, we find
that size has a significant positive effect only among the female-led family
businesses. One reason may be due to the relative newness of the wide-spread
phenomenon of female-led family businesses. Because of their recency, family
organizations headed by women might be smaller and less formal than organi-
zations headed by males. In fact, these differences prevailed in the sample. As
we noted in the “Methods” section, male-led businesses in our sample were
both larger and more formal than their female counterparts. These differ-
ences in formality and size can also explain why small changes in these two
organizational variables exert a stronger influence on succession planning
among female-led family businesses than in male-led ones.
Finally, we have provided a rationale for expecting that reliance on the
organization’s resource environment, in particular as providers of capital, in-
fluences succession planning. Because of the relative newness of female-led
business, or perhaps because of a lack of financial support, we have hypoth-
esized that women will suffer from constraints in regard to capital that are not
faced by their male counterparts, and that these constraints inhibit succession
planning.
One explanation for the importance of the family as a source of financial
support and its subsequent affect on succession-planning processes used by
women business owners is that the sources of financial and social support are
inextricably intertwined. This interpretation is supported by a recent study by
Englebrecht, Chandler, and Jansen (1996), which found that women business
owners tended to cite the same sources (i.e., family) as the primary locus of both
social and financial support. Their findings are compatible with Hisrich’s and
Brush’s (1986) conclusions that women turned to family members first when
seeking assistance.
On the other hand, misperceptions among the involved population of
women business owners as to their access to various sources of capital may
have biased them toward certain providers of capital. One possible source of
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19. 390 Harveston, Davis, Lyden
such misperceptions is the business and popular media, which Aldrich and
Liou (1996) show as having systematically neglected to cover women entre-
preneurs and owners. As a result, current and prospective women business
owners may have been led to expect difficulty in accessing external capital and
are therefore extremely sensitive to the influence of family members. In addi-
tion, the lack of media coverage may have engendered a lack of awareness of
women owners as a potential market for capital providers, thus further re-
stricting the influence of external capital providers in organizational affairs.
Implications and Conclusions
One of the fundamental missions of a family business is to pass the business to
subsequent generations (Davis, 1968). A substantial amount of literature has
addressed issues of succession-planning processes. Our results suggest that the
factors that most influence succession-planning processes are those that de-
pend on the gender of the involved owner/manager of the family firm.
Although the field has recognized the possibilities of gender differences,
it has yet to clearly address the effects these differences might have for succes-
sion behaviors. The working assumption has been that the same factors have
equal importance, regardless of the owner’s gender; however, this assumption
has rarely been tested. Consequently, studies such as ours, which have exam-
ined succession and the determinants of succession-planning processes, are
especially promising, partly because the effects of differences in owners’ gen-
der have not received appropriate attention.
The finding that gender matters has important implications for the re-
searchers and professionals who work with family-business owners. First, be-
cause our findings show that gender makes a difference, it should be clear that
a “cookie-cutter” approach to succession issues may not be appropriate. The
benefit of this knowledge is twofold: It allows us to evaluate the importance of
gender-specific models of organizational succession, and it highlights the dif-
ferential impact of specific variables on succession processes.
Second, in devising approaches for dealing with succession issues, con-
sultants and family-business owners should recognize that what works well for
male-led businesses will not necessarily work well for the female-led businesses.
Unfortunately, the current literature on succession in family firms does not
explicitly tie recommended actions and processes to the gender of the owner,
so the prescriptions may not have universal applications. Professionals and
practitioners should use the gender of the owner to better identify and evalu-
ate variations in the critical drivers of succession processes.
Our advice to consultants and researchers is to be selective in the atten-
tion paid to certain individual and organizational characteristics and attributes.
For example, our finding that certain characteristics (e.g., age) of the owner
are important as a determinant of succession-planning processes among male-
led, but not among female-led, family businesses challenges life-cycle ap-
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20. Succession Planning in Family Business: The Impact of Owner Gender 391
proaches to management of succession.
Third, family-business consultants and owners should be aware that mana-
gerial or other interventions aimed at affecting any one of these drivers may be
inappropriate if the desired effects stem from another source. For instance, for
female owner/managers, the source of capital (e.g., family) is more important
than mere access to capital, while the reverse is true for male-led family firms.
On the other hand, certain factors are important regardless of gender,
although the size of the effect may differ. For example, the impact of formal-
ization is consistent within both male- and female-led family businesses—that
is, the more formal the organization, the more likely the owner/manager
(whether male or female) is to pursue a comprehensive succession-planning
process.
In summary, succession is as difficult a process as it is vital to the continu-
ance of every family business. Because succession may occur only once every
few decades, succession planning may not assume the priority it deserves in
family businesses (Lansberg, 1988). Professionals who interact with family
businesses must be aware that business continuity is largely under the control
of the current owner/manager (Lansberg, 1988), and they also need to be aware
that male owners and female owners operate under different predictive pro-
cesses on the issue of succession planning. In fact, the results of our study
show that male and female owner/managers are influenced by different indi-
vidual, organizational, and resource (capital) issues.
How family-business owners can be directed toward more planned ap-
proaches to succession is a research issue worthy of more investigation. To
move beyond description into prescription requires that researchers take a
longitudinal perspective that includes consideration of similarities and differ-
ences between male- and female-led family businesses. Becaues the current
literature on succession planning in family businesses does not explicitly tie
owner gender to prescribed activities and processes, professionals who work
with family businesses should extensively monitor the emergence of women
owners.
An unanswered question is whether an overall family-business model may
arise that encompasses both genders, or whether convergence in behaviors
might occur as females gain parity in this arena. If so, then an important issue
for professionals would be whether men begin to adopt characteristics consis-
tent with the female-led model evidenced here, or vice versa. Their observa-
tions may serve to facilitate the implementation of appropriate succession plan-
ning processes that are consistent with the owner’s gender.
Limitations and Suggestions for Future Research
Because the number of new female entrepreneurs is growing at a faster rate
than male entrepreneurs (Schlender, 1994), the importance of continuing to
examine the gender issues surrounding succession is increasing. The present
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21. 392 Harveston, Davis, Lyden
study attempts to bridge a gap in our knowledge regarding the role of gender
on succession behaviors. In doing so, it provides a seldom-seen large-scale
study of succession planning processes.
We should note that our research has its limitations, not the least of which
is the research tool and variable measures. In addition, while the sample is
large and the issues examined are germane to succession, the study does not
examine many other issues that might be pertinent to succession. Thus, the
results should be seen as an incremental step in compiling knowledge about
the role of gender in succession planning processes.
To advance our knowledge in this area, future researchers might choose
research designs that allow the use of alternate analytical techniques, such as
qualitative research approaches. Perhaps a more “sensitive” research instru-
ment and the use of alternative analytic techniques might better capture some
of the variation in the human capital factors of female owners who either face
the succession decision or are in the middle of implementing a succession plan-
ning process.
In addition, future research should identify other, perhaps equally impor-
tant, issues specific to female managerial actions and preparation for succes-
sion. Two avenues in particular might be worth exploring: One is the influence
of family members (i.e., relatives in the workplace) on succession decisions.
For example, perhaps the influence of family members is contingent on their
familial relationship (e.g., spouse, parent, child, sibling, cousin) and their posi-
tion or role in the organization (e.g., line management, staff, operative). In
addition, the influence these family members exert may have both direct and
indirect components.
Another area for future investigation could involve generational differ-
ences in family businesses as leaders prepare for succession. For example, when
the original founder/entrepreneur is present compared with a firm in which
one or more succession events have already occurred. It could be that the per-
sonality and other individual characteristics of the founder play a much greater
role when the original founder is present than when succession has previously
occurred. Furthermore, the founder may continue to exert influence or cast a
“shadow” over the organization, even when he or she is no longer in direct
control or physically present.
In addition, future researchers may find it fruitful to examine the correla-
tion between the gender of the owner and the gender of the successor and its
impact on the succession planning process. This area of family business has
received some attention. For instance, through interviews with members of 18
family businesses, Dumas (1989) found that females were “invisible succes-
sors.” Other researchers (e.g., Barnes, 1988; Iannarelli,1992) have showed that
in family business, there are more men holding leadership positions than
women.
We feel this area can be further developed by examining the succession
planning process from both perspectives (i.e., successor and owner/manager)
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22. Succession Planning in Family Business: The Impact of Owner Gender 393
and incorporating the influence of gender. Hence, future research may lead to
a richer understanding of the mechanisms and the processes that are involved
in succession planning and the family business.
The results of this study clearly demonstrate that gender plays a role in
succession planning. Ignoring gender, as previous studies have done, denies
the richness and complexity of the succession process. This study has illumi-
nated some key elements useful in developing models of succession particular
to male- and female-led family businesses. Clearly, caution should be exer-
cised when extending our results beyond the context of family businesses.
However, all businesses face the problem of survival, and therefore, to the
extent that we have articulated processes pertinent to succession issues, all
businesses may benefit.
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