Tacit knowledge transfer in family business succession

Tacit knowledge transfer in family business succession

Small business is the most common firm structure in the Canadian economy and accounts for the single largest share of economic activity. As the founders of these firms move to normal retirement age, they begin the transfer of the business to a family or non-family member. When the second generation assumes control of the firm, issues related to generational transfer of knowledge become important.
Financial and income and tax considerations have received the bulk of attention in research. This study focuses on knowledge transfer from the founder to successor.
Tacit knowledge has been identified as a key strategic resource and passing this knowledge from the founder to the successor is a key element in transition that ensures the business is viable and remains in the family A qualitative methodology based on the analysis of multiple case studies was used for this research. Eight cases of family business succession were investigated, with data collected from public sources and interviews with founders, successors (family members and non-family members) and key observers. A total of forty interviews were conducted, with interviews focused on the history of the firm and others on the
generational transfer of knowledge of the firm. A literature review provided a research foundation and a theoretical context that informed the case selection and
interview protocol.
This study confirmed the theoretical construct that succession can be framed in socialisation terms (derived from societal socialisation theory), but adds that family
and business socialisation while distinct, are not necessarily sequential or triggered by the identification of the family member as the successor. The study also supported the application of Nonaka and Takeuchi’s (1995) knowledge spiral in the context of family business succession. The role of trust in family business succession is supported by the study’s findings, but the findings expand on the existing literature by differentiating between relationship trust and business competence trust and
defining the two types of trust as essential. This study supports prior knowledge that female successors are often viewed as having less leadership ability than male successors, however in this study females experienced more business socialisation than reported in prior studies.
The contribution to practice includes some deliberative actions firm founders can take to support successful generational transition through successful tacit knowledge
transfer. Other contributions to practice are strategies for supporting successful success by female successors and for facilitating tacit knowledge transfer to successors. The most significant contribution is reinforcing the value to potential future successors of early informal exposure to the business.