The Relationship between Successor, Planning Characteristics, and the Transfer Process on Post-Transfer Profitability in SMEs

The aim of this study is to examine the relationship between successor characteristics, transfer planning characteristics and post-transfer profitability within Dutch SMEs. On the one hand, based on the resource dependency view, it is assumed that successors with more knowledge and experience, derived from work experience from outside the target firm, will be able to extract higher rents from the firm than those with less (diverse) work experience. On the other hand, based on the knowledge management literature, and in particular, concepts such as tacit knowledge, this research makes the contrasting prediction that post-transfer profitability is likely to be higher in firms where the successor is an insider and is related to the predecessor. Moreover, this paper proposes, based on the theory of planned behaviour, that written plan and strategic intent have a positive association with post-transfer profitability. The study is based on quantitative analysis of a random sample of Dutch SMEs. Initial results from the current study suggest that determinants of post-transfer profitability may be quite different in the family-to-family ownership vs. nonfamily ownership transfer conditions (i.e. whether or not the successor is related to the predecessor). Significant interaction effect is found such that the effect of strategic planning, in particular, varies depending on the nature of the transfer relationship (family to family, vs family to non-family). Other results offer mixed support for the proposed theories.