American Journal of Industrial and Business Management, 2013, 3, 531-538
http://dx.doi.org/10.4236/ajibm.2013.36061 Published Online October 2013 (http://www.scirp.org/journal/ajibm) 531
The Intervention Effects of Succession Planning on
Offspring’s Willingness to Take over Family
Businesses—An Experimental Study Based on Behavioral
Decision-Making and Opportunity Cost Theories*
Jiemei Yang, Jing Xi, Xiaohua Han
School of Management, Guangdong University of Technology, Guangzhou, China.
Email: 1047103597@qq.com
Received May 10th, 2013; revised June 10th, 2013; accepted June 20th, 2013
Copyright © 2013 Jiemei Yang et al. This is an open access article distributed under the Creative Commons Attribution License,
which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
ABSTRACT
The fact that offspring’s willingness to take over family business is extremely low is a severe problem hindering Chi-
nese family businesses’ succession. This paper, based on behavioral decision-making theory and opportunity cost the-
ory, identifies the decision-making attribute of offspring’s willingness to take over the business first, then explores and
verifies the intervention effects of succession planning and temporal distance on such willingness. Experimental data
from 135 samples indicate: offspring’s willingness to take over the business is significantly higher in the situation
where parents develop a complete succession plan than in the situation where no succession plan is made; temporal dis-
tance moderates the effects of succession planning on offspring’s willingness. The study is supposed to provide theo-
retical evidence and practical suggestions for family business to promote offspring’s willingness to be the successor of
family business.
Keywords: Family Business; Children’s Willingness to Take Over the Business; Succession Planning; Intervention
Effect
1. Introduction
Intergenerational transmission is a major change which
affects the fate of the family business, especially for
first-generation family business who inherits for the first
time [1]. In the next few years, the family business of
China will meet the largest intergenerational inheri-
tance in the history [2]. Many scholars have pointed out
that children’s willingness to participate in and carry on
the family business and their commitment to family
business are the keys to family businesses’ smooth trans-
mission [3-5]. But children’s low willingness to take over
family business makes the China’s family business
whose main model is “inherited from his father” face a
crisis of leaving no successor [6]. Report on the Devel-
opment of Chinese Family Enterprises (2011) shows that:
among the entrepreneurs investigated, for those who are
over 50 years old, their children’s succession willingness
accounts for 35%, while for older owner’s children (av-
erage age is 35.7 years), their willingness to take over
only accounts for 18% [2]. How to intervene in chil-
dren’s willingness and provide the necessary human
capital for the family business is the challenge faced by
practitioners and theorists of the family business.
The research related to offspring’s willingness to take
over family business is not much. Some existing research
focuses on the family and the firm’s characteristics, the
children’s personal qualities, market demand and other
factors to predict willingness to succession [7,8]. These
studies explain the current situation of willingness to
succession, but because they put particular emphasis on
static and external factors, it is difficult to provide an
efficient way from the operational level for intervening
children’s succession willingness. Behavioral decision-
making theory and opportunity cost theory provide a
theoretical basis for intervening children’s succession
willingness in the short term. Existing research that re-
lates to family business succession will take “whether to
*Fund: National social science fund project (09csh012), key project o
f
humanities and social science base in Guangdong province Ordinary
University (09JDXM63010).
Copyright © 2013 SciRes. AJIBM
The Intervention Effects of Succession Planning on Offspring’s Willingness to Take over Family Businesses
—An Experimental Study Based on Behavioral Decision-Making and Opportunity Cost Theories
532
take over” as children’s career choices [7-9], while ig-
noring the forward attribute of the succession deci-
sion-making which is different from the ordinary young
people’s employment options. The Person-Organization
fit theory which is often used to explain self-employ ment
options considers that individuals choose future employ-
ers according to how much the organizational character-
istics (reputation, power, culture, compensation, etc.)
match their needs and values. The decision-making in-
formation is clear, static, and before long the decision-
makers make decisions, they will enter the organization
to work [10]. While the children begin to consider their
willingness to take over the family business from their
youth [11], the actu al handover tends to occu r after 10 or
even 20 years later and information for decision-making
is dynamic and uncertain. Therefore, the “succession” is
long-term decisions for the distant future. Based on the
theory of behavioral change, plans will change the deci-
sion-making of individuals [12]. The family business
decision-makers can use the distance of time points be-
tween the decision-making and the incident to develop
and implement effective succession planning, so as to
interfere in the children’s willingness to succession. The
opportunity cost theory also provides an in-depth theo-
retical support for it. The opportunity cost is one of the
core concepts of economics and it lies in the process of
decision analysis. It refers to the potential interests of
losses when you choose the best program and abandon
the suboptimal pr ogram in the process of decision analy-
sis [13]. On the contrary, the children do not take over
family business and choose the external employment that
means giving up the potential benefits of taking over the
family property and becoming entrepreneurs. Uncertainty
exists in both cases. Effective succession planning will
reduce the uncertainty of the succession and increase the
possibility of succession steadily and effectively [14,15].
Thereby it can improve the children’s expectations of
opportunity cost for giving up the succession and then
increase their willingness to succeed. At the same time,
behavioral decision researchers found that the distance of
time points between the decision-making and the incident
will affect people’s perception of valence about future
events then affect the individual decision-making [16]. In
most cases, long-term events (compare to recent events)
will make people have more positive thoughts, because
people’s emotional state of their own in the long-term
time will be better [17]. In this study, it means the earlier
the parents enact the succession plan, the more favorable
to enhance children’s succession willingness. According
to behavioral decision-making theory, event valance is
decision-makers’ expectation of the results for decision-
making. Positive ex pectations (e.g., happy, satisfied) and
negative expectations to the same thing (such as fear,
anxiety, regret) will lead to different decisions [18].
Family business researcher Hubler (1996) found in the
process of research and consulting practice that the po-
tential successor’s willingness may be low because they
feel anxious about their ability to assume the important
task of succession. However, careful succession planning,
especially the training program can give them a clear
cognition of future, and they will be more confident
about the implement and effect of the plan, it can also
reduce fear about the future, so as to enhance his succes-
sion willingness [12]. In addition, according to the theory
of opportunity cost, if the family business develops a
succession plan in the children’s young age, the children
will feel the opportunity cost of giving up external em-
ployment is low, otherwise they will feel the opportunity
cost is high, and his willingness to take over also will be
affected. Thus, the temporal distance has a direct impact
on the succession willingness, and it may adjust the ef-
fect of succession willingness by affecting the anticipa-
tory effect of the succession plan.
In summary, this article is based on a lack of under-
standing of the realistic predicament and theoretical
studies of the family business, and learning from behav-
ioral decision-making theory and opportunity cost theory,
it uses the experimental methods to explore the interve-
netion effects of succession planning and temporal dis-
tance (the distance of time points between the decision-
making and the incident) on offspring’s willingness to
take over family businesses, and to consider the moder-
ating effects of temporal distance on the relations be-
tween succession planning and the willingness to succes-
sion, so as to provide action able recommendations to im-
prove children’s willingness to take over the bu siness.
2. Theoretical Foundation and Research
Hypotheses
2.1. The Content Elements of Intergenerational
Succession Planning and Its Impact on
Offspring’s Willingness to Take over Family
Business
Firstly it should be explicated what should be included in
the intergeneratio nal succession planning, since the focus
of our research is to examine the function of the com-
plete and effective succession planning to the succession
willingness. In general, intergenerational succession
planning means the necessary preparation to assure the
family humanity and enterprise intergenerational succes-
sion, which should taken into account the needs of the
future of the enterprise and family in the field of family
business research [20]. However, scholars have not been
able to reach a consensus on the content elements. Chris-
tensen (1953), the pioneer of the family business succes-
Copyright © 2013 SciRes. AJIBM
The Intervention Effects of Succession Planning on Offspring’s Willingness to Take over Family Businesses
—An Experimental Study Based on Behavioral Decision-Making and Opportunity Cost Theories 533
sion pointed out in its pioneering research on the succes-
sion of the family business that succession planning has
three elements should be in cluded as a process: the iden-
tification of potential successor, appointed successor and
to communicate with other management personnel about
the appointed determine [11]. Lansberg (1988) focused
on the study of the heritage of the first-generation family
business. He pointed out that the succession plan should
be included to clarify and share the vision after the foun-
der leaving the enterprise, the selection and training of
successors and future senior management team, design
power pass the procedures, the development of property
plans to clear the family property and business ownership
allocated among the members of the family younger
generation, equipped organizations respond to manage-
ment of change (including the Council for the Family,
and management of the special working Group and the
Board of Directors), and let them teach family members
to identify future ind ividual the rights and responsibilities
of the role [20]. Sharma and other scholars (2003) sys-
tematic induction the elements of the succession plan for
the first time by combing the relevant research literature,
they think that the family business succession plan
should include four elements: the selection and training
of the successor, the formulation of business strategy
after heritage, determine the role after the departure of
the incumbent and communicate with key stakeholders of
the succession decision [21]. As Sharma and other schol-
ars (2003) concluded more integrated comprehensive,
and it also used in the empirical research, this article us ed
it to determine the content elements of succession plan-
ning. The discussion in this paper is the effect of succes-
sion planning on succession willingness of children, not
the problem of successor. Therefore, we finalize four
succession plans: Successors training, heritage decision
communication, departure Role Orientation, and the en-
terprise strategy and management mechanisms after suc-
cession. The experimental situation questionnaire is de-
signed in these four dimensions. Children need to bal-
ance two opportunity cost when they making succession
decisions: First, the costs of loss external employment
opportunities because succession; second, the cost of
give up succession the family wealth and become entre-
preneurs. There are large uncertainties among two op-
portunities; such as the external employment opportuni-
ties are unsatisfactory or successor business may also
face the risk of could not competent. A complete and
thorough successio n plan can chang e ch ild ren’ s cog nitiv e
to succession events and enhance the opportunity cost to
give up of succession, so that children prefer succession
when they balance the two opportunity cost. Family
business researchers believe that an effective succession
plan can greatly enhance the probability of succession,
because it can provide good interpersonal atmosphere for
children, and make children have the necessary capacity
by comprehensive training, make plans for the difficult-
ties may face after the succession [22]; on the other hand,
there are will be cause serious management problems
because lack of succession planning, or even lead to the
company collapse [23]. So it may be assumed that:
H1: develop a complete succession planning have an
active effect on enhance the offspring’s willingness.
2.2. The Effects of Temporal Distance on
Succession Willingness and Its Impact on
Offspring’S Willingness to Take Over family
Business
Temporal distance is the interval between the decision
time points and the incident time points. Behavioral de-
cision researchers find that the temporal distance can
change decision-makers’ expectation to the future events
results [24]. In most cases, long-term events (relative to
recent events) will make people have more positive
thoughts, because people estimate their long-term emo-
tional state will be better [17]. Therefore, early arrange-
ment of children’s succession is beneficial to improve
their succession willingness. But the current study find
that the incumbents of family business, in particular the
founders generally show reluctance to let go because
they fear of losing the status of the parents, or distrust for
others. The data shows that approximately 44.8% of fam-
ily business owners do not consider the shift, the major-
ity of family businesses is still lack of clear planning on
whom to pass and how to pass [2],succession issues shall
not be often considered the incumbent poor health only.
At this time, the opportunity cost will increase undoubt-
edly for children to make decisio n to tak e over. Just think ,
if the parents tell their children to take over at their
59-year-old, it means children have to take over one year
later, the children might have been th irty or forty years at
that time, succession means giving up their own business
foundation accumulated over the years, and the hasty
succession will reduce the success probability, it is clear
that the opportunity cost is higher; but if parents tell
children to succeed earlier, for example, at 50 years old,
which means children have to take over ten year later,
this time children might be more than twenty years old,
their career foundation is weak, and they have sufficient
time to prepare for the succession, succession opportu-
nity cost is relatively low, the succession willingness will
rise. It may be assumed that:
Assumption 2: when temporal distance between suc-
cession decisions and succession events is short, children
succession willingness is lower; but when the temporal
distance is long, children succession wi llingness is higher.
Further analysis of the influence of time factor on suc-
cession willingness finds that temporal distance may ad-
Copyright © 2013 SciRes. AJIBM
The Intervention Effects of Succession Planning on Offspring’s Willingness to Take over Family Businesses
—An Experimental Study Based on Behavioral Decision-Making and Opportunity Cost Theories
534
just the effect of succession planning on children succes-
sion willingness by changing children’s expectation for
the implementation of succession planning. For example,
Kuenster (1988) thinks that children will have more op-
timistic expectation s to succession results, and thus more
are willing to go into the family business, because it pro-
vides sufficient time to change the unfavorable factors
and cope with stress if succession planning is made early
[25]. On the contrary, if the parents have no time to plan
for their own retirement, the family business may be col-
lapse when they leav e. In this case, children will be wor-
ried if they join the family business in their 45 - 50 years
old, then once parents retire, they would face unem-
ployment [26]. Therefore, the succession planning should
be made as soon as possible to enhance succession will-
ingness. It may be assumed that:
Assumption 3: when temporal distance is larger, the
promotion effect of succession planning on children suc-
cession willingness is more significant than the temporal
distance is smaller.
3. Research Methods
Previous studies have researched the factors that affect
children’s succession willingness from organizational,
domestic and individual aspects, which were based on
the traditional organizational behavior research methods.
The basic assumption is that: an individual’s willingness
to succession is always the same in a same family busi-
ness and the same situation. In order to change the suc-
cession willingness, we must transform relevant factors.
Obviously it will be a difficult and long , even impossible
process. In this paper, we will use the experimental
methods and base on the behavioral decision-making
perspective to carry out the research. Behavioral deci-
sion-making theory takes the economy and structural
characteristics involved in the decision-making as a fixed
factor and focuses on people’s decision-making process
so as to help people make better decisions [27,28]. Its
basic assumption was that: in different situation, the
same individual may make different decisions. This pa-
per will not change the organization , family and the chil-
dren’s characteristics of a family firm and will use ex-
perimental methods to explore whether their succession
willingness will change when the same children face the
different succession planning and temporal distance in
the family business. This experimental method has been
widely used in the field of economic management and
sociological research, but is still uncommon in the family
business study.
3.1. The Sample
In this study, the samples are children of the family
business who major in management from a high grade
provincial key university in Guangzhou, including un-
dergraduate students, graduate students, and alumni.
They are searching for a job, determining the d irection of
career development or just have embarked on the society,
facing with the problem of re-making a career choice,
and taking over the family business is one of their op-
tions. The samples’ age distribution is between 19 - 28
years old, as Strain (1998) said; this is the age to make
the decision on whether to inherit the family business
decisions. 95% of the samples are college students from
Guangdong province, where the family business devel-
oped earlier in China, and the district (Dongguan and
Foshan) is one of the most densely populated areas,
which are also the most prominent family business suc-
cession areas.
This research uses pen and paper test, requiring the
subjects spend 25 - 30 minutes to complete the q uestion-
naire. The subjects are voluntarily participating in the
experiment, and the subjects must have not participated
in similar test before. There are 157 subjects to partici-
pate in the study; a total of 135 participants completed
the questionnaire. The sample characteristics are as fol-
lows: on grade distribution, undergraduate students ac-
counts for 71.1%, postgraduate accounts for 6.7% and
alumni accounted for 22.2%; on sex distribution, male
accounted for 54.1%; the average age of the subjects is
21.9 years old.
3.2. Experimental Design
This research designed the Group experimental in the
form of 2 (to develop a succession plan: with and without)
× 2 (temporal distance: long and short) that the factors
between groups are whether developing succession plan-
ning and temporal distance. The participants were asked
to evaluate their succession willingness under the four
decision-making situations. To let they fully understand
and integrate into the decision-making situations, the
researchers introduced the four elements and its expected
effects of the succession planning before the experiment,
and guided the participants to imagine the decision-
making situations: “This morning, your father (mother)
talks to you to allow you to take over the family busi-
ness”. In the formal experiment, the researchers con-
trolled on whether to develop a succession planning and
the temporal distance, First of all, participants were
asked to evaluate their own successive willingness when
there with/without succession plans respectively under
the premise of “Mom and Dad want you to take over in a
year”; Then, participants were asked to evaluate their
own willingness to succeed when there with/without
succession plans respectively under the premise of “Mom
and Dad want you to take over 10 years later”. Thence, a
total of 540 (135 × 4) decision-making datum were col-
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The Intervention Effects of Succession Planning on Offspring’s Willingness to Take over Family Businesses
—An Experimental Study Based on Behavioral Decision-Making and Opportunity Cost Theories 535
lected.
3.3. Variable Measuring
In our study, the dependent variable is the succession
possibility in all decision-making Situations. We require
the participants to answer the questions “how likely you
to be the leaders and full responsibility for the business
management?” We used Likert 6 o’clock scale measure-
ments to analysis the decision results, and 1 stands for
completely impossible, 6 entirely possible, the higher the
score, the greater the possibility.
The independent variables and the manipulated vari-
able of this study are the decision-making situations.
According to the elements of succession planning built
by Sharma and other scholars (2003), it should present
two different independent variables level. The first level
is: the parents have made a careful succession planning,
including the successor training program, formulation of
business strategy after succession, the role arrangements
after father/mother (the responsible person) leaving, to
clear the enterprise strategy and management mecha-
nisms after succession. The second level is: the parents
don’t have any succession planning. Before the start of
the experiment, we explain the elements factors of the
succession planning:
1) The successor training program. Made detailed ar-
rangements for training content, training methods, time
and progress so that successor have the ventures required
knowledge, experience, skills and entrepreneurship.
2) Exchanges succession decision-making. Do the de-
tailed arrangements for how to described succession can-
didates, the process of inheritance, succession issues to
family members and corporate management so that the
successor can be supported and acceptance by the rele-
vant staff.
3) The role arrangements after father/mother (the re-
sponsible person) leaving. do the detailed arrangements
of status in the corporate and the interests after the par-
ents take the decision-making to their children, and make
this arrangement is identity by other relevant personnel
and successor.
4) To clear the enterprise strategy and management
mechanisms after succession. Detailed description the
strategic plan and internal management mechanism after
the parents leaving the family business, so that the suc-
cessors clearly what to do and how to do it after he took
office.
The manipulated variable is the temporal distance.
Originally we have designed four distances: 1 year, 5
years, 10 years, and 20 years. But the pre-test found the
subjects clearly lost patience for repeated four tests,
meanwhile, they think it is difficult to imagine things
after 10 years in their age and background; it is difficult
to distinguish the difference between 5 years and 10
years. Taking into account the purpose of our study is to
explore the effect of making succession planning sooner
or later on succession willingness, in reality, family bus i-
nesses current leader often considering succession ar-
rangements after they face the health problems or other
special circumstances, and scholars predict it will face
the peak in next 5 - 10 years, so we ended up using the
distance of 1 year and 10 years, and to distinguish be-
tween the following statement “parents tell yo u that after
1 year they will retire” and “parents tell you that after 10
years they will retire”.
4. Hypothesis Testing
Hypothesis testing: we use the possibility of children
willingness to take over as the dependent variable, whe-
ther to develop a succession planning an d the distance of
time points between the decision-making and the incident
as the independent variable to analysis of variance. The
main effect is significant of whether to develop a succes-
sion planning, F (1,300) = 1126.63, p < 0.001; the main
effect is significant of temporal distance, F (1,300) =
285.35, p < 0.001; the interaction effect is significant of
temporal distance and whether to make a succession
planning, F (1,300) = 111.13, p < 0.001.The assumption
has been verified. Further compare the effect of success-
sion planning on willingn ess we find: when the temporal
distance is long, the succession willingness that have
succession planning to take over is significantly higher
than the willingness of without succession plan (M with
plans = 5.26 > M without plans = 290) (p < 0.05); while
the temporal distance is short, the succession willingness
that have succession plan to take over is significantly
higher than the willingness of without succession plan
(M with plans = 3.25 > M without plans = 1.52) (p <
0.05), but the significance level is significantly lower
than the long distance time context. From the significant
differences of succession planning on offspring’s will-
ingness to takeover we know that temporal distance plays
a regulate role, Assumption 2 is further confirmed.
5. Conclusions
Starting from the real problem, based on behavioral deci-
sion-making and the opportunity cost theory, we use the
experimental methods to explore the interventions on
children’s willingness to succession. Firstly, we make a
new research perspective different from the previous,
which clarify the long-term attribute of children’s will-
ingness to succession and distinguish with ordinary young
people employment options. Then, we interpret the in-
tervention effect on presence or absence of succession
planning and succession decision point to succession
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The Intervention Effects of Succession Planning on Offspring’s Willingness to Take over Family Businesses
—An Experimental Study Based on Behavioral Decision-Making and Opportunity Cost Theories
536
event point through literature review which has been
verified by experimental study. In the family business
entrepreneurs of aging, intergenerational transmission
peak is approaching. This study provides a theoretical
basis and operational measure to solve the family busi-
ness facing problem that “no successors” and to pro-
mote the smooth family business succession.
Experimental study data from 135 people of the
family business undergraduates show that: the success-
sion willingness with complete succession planning is
significantly high er than the succession willingness with-
out comprehensive succession planning if other factors
remain unchanged. This suggests the incumbents that
when they let their children make the succession choice,
they can simultaneously show a complete succession
plan which can effectively enhance the child’s willing-
ness to succeed. This conclusion makes it possible that
intervention in children’s succession willingness, in a
short, also makes up for the existing research blank of
intervention successio n willingn ess and enables p eop le to
have a new understanding of succession planning. Exist-
ing studies have focused on exploring the front variables
and backward utility that affect making and implement-
ing succession planning, but few are concerned about the
reverse function of succession planning on succession
willingness. For example, Sharma (2003) [21] and Dou
Jun-sheng, Jia Sheng-hua (2007) [29] explore the effect
that incumbents and children succession willingness on
formulating and implementing of succession planning
based on the theory of behavior. Morris, etc. (1997)
pointed out that the degree of readiness of the successor,
the relationship between the members of the family, the
type of planning and controlling activity and other fac-
tors determine the results of intergenerational transmis-
sion [30]. In this paper, thanks to the theory of behavioral
decision-making and opportunity cost, we use a new
perspective, and have a new understanding about the
reverse function of succession planning on succession
willingness.
The results also show that in different temporal dis-
tance, the possibility of whether the children would like
to take over is different. When temporal distance is short,
children’s willingness to succeed is low; when temporal
distance is long, children’s willingness to succeed is high.
The inspiration that the conclusion brings to our practice
is that: The current family business owners should take
precautions, guide their children to make the succession
choice as soon as possible, so as to avoid the succession
willingness will randomly reduce as cost growth when
their children grow older. The conclusion of this study is
that the moderating effects of temporal distance on the
succession planning and the succession willingness fur-
ther remind the family business owner to pay attention to
the effect of time factor on ch ildren’s willingn ess and the
succession results, because the time distance not only has
direct impact on children’s succession willingness , but
also can make the influence of succession plan on suc-
cession willingness more significant when the time dis-
tance is longer, and less significant when the time dis-
tance is shorter. This is a warning for family business
owners who are “reluctant to let go”. The succession is
an inevitable question for family business [31], the own-
ers can only take action on several options of “take ac-
tion now or take action in the future” [32], even “take
action after the death” [33]. According to the study, the
family business owners should not only make succession
decisions early, but also make a succession planning as
soon as possible, which will not only ensure the per-
formance of the succession, but also improve children’s
willingness to take over the business.
In this study, there are some limitations: first, this
study only uses students who come from the same uni-
versity as samples and its typicality and representative-
ness a re restr icted. Ther efore, whether the conclusions of
this study are applicable to other regions and age or other
educational level should be verified by the further ex-
panded scope of the sample. Second, this study only con-
siders the succession planning as a whole variable to in-
flu en c e children’s succession willingness, but not in-depth
enough, analyzes the separately effect of different ele-
ments on succession intention. The contents in the suc-
cession planning (such as successor training program,
formulation of business strategy after the succession, the
role arrangements after parents leaving, the enterprise
strategies and management mechanism after succession)
will interfere in succession willingness, and more effec-
tive intervention to succession willingness has a great
significance for raising children willingness to take over
quickly and effectively. Future research should provide a
reliable basis for further optimization on the basis of the
study design.
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