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How does a succession influence investment decisions, credit financing and business performance in small and medium-sized family firms?

International Entrepreneurship and Management Journal volume 17, pages 423–446 (2021)Cite this article

Abstract

We examine the influence of succession in small and medium-sized family businesses by focusing on investment decisions, credit financing, and business performance. Using data on German SMEs, we find that the succession event affects investment behavior negatively before but positively after the transfer takes place when compared to firms without any succession intentions. With respect to performance, we show that firms’ growth rates increase after succession has taken place. Although hypothesized, we find no empirical evidence to suggest that banks tend to reject successors more often than they reject other business owners when deciding to extend credit to firms for investment purposes.

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Notes

  1. The sample size for those firms with a recorded succession event between 2002 and 2006 in the pre-succession phase was n = 14 (Table 3) and n = 12 (Table 4). The sample size in the post succession phase for these firms was n = 60 and n = 45 (Table 3, model ts + 1 and ts + 2) as well as n = 54 and n = 41 (Table 4, model ts + 1 and ts + 2).

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Authors and Affiliations

  1. Management and Entrepreneurship, University of Siegen, Unteres Schloß 3, 57072, Siegen, Germany

    Arndt Werner

  2. Institute for Organization and Human Resource Management, University of Bern, Engehaldenstr. 4, 3012, Bern, Switzerland

    Sabrina Schell

  3. Institut für Mittelstandsforschung Bonn (IfM), Maximilianstraße 20, 53111, Bonn, Germany

    Ljuba Haunschild

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  1. Arndt Werner
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Correspondence to Arndt Werner.

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Werner, A., Schell, S. & Haunschild, L. How does a succession influence investment decisions, credit financing and business performance in small and medium-sized family firms?. Int Entrep Manag J 17, 423–446 (2021). https://doi.org/10.1007/s11365-019-00613-5

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Keywords

  • Family business
  • SME
  • Succession event
  • Investments
  • Performance
  • Financial constraints