Structuring Family Business Succession: An Analysis of the Future Leader's Decision Making

Dean A. Shepherd and Andrew Zacharakis

Entrepreneurship Theory and Practice, 2000, vol. 24, issue 4, 25-39

Abstract: This article examines the perception of potential family business leaders from a behavioral economics theory perspective. The findings suggest that high financial and behavioral sunk costs, as well as the requirement to ‘earn’ the right to lead the family business results in the future leader valuing the business more highly. Only financial sunk costs lowered the successor's proclivity to take risky action after acquiring the business. Therefore founders should structure succession so that the future leader incurs both financial and behavioral sunk costs as well as hold the future leader to stringent performance requirements prior to the succession.

Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:24:y:2000:i:4:p:25-39

DOI: 10.1177/104225870002400402

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