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Internal Versus External Ownership Transition in Family Firms: An Embeddedness Perspective

Authors

  • Johan Wiklund,

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    • Johan Wiklund is a Professor in the Whitman School of Management, Syracuse University, 721 University Avenue, Syracuse, NY 13244-2450, USA, a Professor at Stockholm School of Economics, Stockholm, Sweden, and a Professor at the Jönköping International Business School, Jönköping, Sweden.
  • Mattias Nordqvist,

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    • Mattias Nordqvist is a Professor at the Jönköping International Business School, PO Box 1026, SE-551 11 Jönköping, Sweden.
  • Karin Hellerstedt,

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    • Karin Hellerstedt is an Assistant Professor at the Jönköping International Business School, PO Box 1026, SE-551 11 Jönköping, Sweden.
  • Miriam Bird

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    • Miriam Bird is a PhD candidate at the Stockholm School of Economics, PO Box 6501, SE-113 83 Stockholm, Sweden.

Please send correspondence to: Johan Wiklund, tel.: 315-443-3751; e-mail: jwiklund@syr.edu, to Mattias Nordqvist at mattias.nordqvist@jibs.hj.se, to Karin Hellerstedt at karin.hellerstedt@jibs.hj.se, and to Miriam Bird at miriam.bird@hhs.se.

Abstract

We investigate factors that influence family business owners' choice between passing ownership within the family or to new external owners. Taking an embeddedness perspective focusing on owner-family structure and involvement, we hypothesize that ownership dispersion, number of potential heirs, multigenerational involvement, and whether the chief executive officer is a family member influence the choice of an internal or external transition of ownership. We build a longitudinal data set from a sample of 3,829 family firms and their ownership transitions. Our theorizing and findings regarding ownership transitions complements the abundant research on management succession and therefore constitutes an important contribution to the literature.

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