A Theoretical Approach Exploring Knowledge Transmission Across Generations in Family SMEs

Introduction

Although family business is a well-developed field of research, scholars are not unanimous in defining a family firm. This chapter follows Chua et al. (1999, p25), by defining a family business as: “a business governed and/or managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families” (italics added for emphasis).

However, regarding such sustainability, family firms show a long-term survival problem: approximately 40% make a positive transition to the second generation and only 12% to the third (Bridge et al., 2003). De Massis et al (2008), in their review, summarized the main causes preventing intra-family succession, identifying individual, relational, contextual, financial and even process factors. Thus business transmission seems, without doubt, to be the most critical event in a family firm’s life. This event is a process, rather than a moment: the founder slowly hands over the management of the business to the successor, who gradually becomes an entrepreneur (Chirico, 2008). Transferring, sharing and creating knowledge between people who are involved in succession plays a fundamental role in this delicate and uncertain process (Cabrera-Suarez, 2001; Cope, 2005; Koiranen, Chirico, 2006; Le Breton-Miller, 2004), but this knowledge transfer does not occur automatically (Boyd et al. 2015; Del Giudice, 2011; Konopaski et al., 2015). Indeed, an important reason for the failure of organizational processes to facilitate knowledge sharing is the lack of consideration for how the organizational and interpersonal context influences knowledge sharing (Carter & Scarbrough, 2001; Voelpel, Dous, & Davenport, 2005). Organizational Learning Theories applied to family business (Moores, 2009) assert that knowledge is a fundamental asset in ensuring a firm’s development and survival (Durst & Edvardsson, 2012; Grant, 1996; for a review see Wang & Noe, 2010). however, although business transmission is maybe the most investigated issue by family business scholars, to date the process through which knowledge is created, shared and transferred across generations has not been comprehensively examined (Chirico, 2008). A little research has focused on specific factors (e.g. leadership style: Cunningham et al., 2016), but current research is far from being completed. Therefore, the main purpose of this chapter is to suggest a theoretical framework for addressing investigation of family firm heterogeneity in knowledge sharing.

Literature suggests that succession is largely in the control of the incumbent leader of the family firm (Lansberg, 1988; Malone, 1989; Rubenson & Gupta, 1996) and in SMEs in particular seniors, (often tacitly), share their knowledge and expertise with juniors day-by-day. Although literature acknowledges the relevance of knowledge sharing to organizational performance (for a review see Wang & Noe, 2010), research shows that one of the main causes, that occurs recursively, of firm failure is the successor’s business incompetence (Carter, Van Auken, 2006; Gibb, Webb, 1980), thus suggesting that knowledge is not always properly transferred between generations. In particular, current literature has not until now fully investigated individual and organizational factors which affect knowledge sharing during business transmission, both formally and tacitly. Hence, drawing on Organizational Learning Theories (Argote, 1999; Kogut & Zander, 1992, 1996; Spender, 1996), this chapter highlights how knowledge sharing and transferring processes should be not properly implemented during business transmission.