Determinants of family business performance: succession issues and experience as the potential mediators

The characteristics and importance, including the antecedents to performance, of small to medium-sized
family owned firms to respective economies is widely known in business literature. While many have
studied factors which determine the business performance of family-owned firms, none has investigated
how succession issues (ranging from authoritarian owner, communication problem with siblings,
incompetencies, motivation to succeed, differences in opinions and decision-making power) and
succession experience on part of second or third generation owner (2GO/ 3GO) could affect the links to
the performance of such firms. The purpose of this paper is to reaffirm various factors influencing family
business performance among sixty family-owed firms situated in Northeastern of Peninsula Malaysia, and
establish succession issues and experience as the potential mediators which are contributive to the
business well-being. The main data source for the study was self-administered surveys of fifty-five 2GOs
or 3GOs, of three major races (Malay, Chinese and Indian) in Kelantan, Malaysia. Descriptive,
correlation and regression analyses were conducted to interpret findings. The research shows that
management style, relationship among family members, values and beliefs and preparation of heir
significantly influence family business performance in this context. Succession issues are found to have
partially mediated and succession experience fully mediates the relationship among the antecedents with
business performance. Both theoretical and practical implications as well as avenues for future research
are discussed.