Till Differences Do Them Part: Intergenerational Co-Governance and Attention to Strategic Transformation in Family Firms

Family firms often strengthen their focus on strategic transformation during periods of intergenerational succession as they prepare for future competitiveness under a new generation of family leadership. However, uncertainty and tension tend to increase within the top management team during periods of succession, undermining the formation of strategic consensus and distracting firms from their strategic transformation. To reconcile these contradictory findings, we examine intergenerational co-governance, a transitional governance structure often adopted by family firms to assist the process of dynastic succession, where the junior successor and the founder are co-present within top management starting from the appointment of the former until the ultimate exit of the latter. We theorize that the period of intergenerational co-governance strengthens top management team (TMT) focus on strategic transformation than the periods before and after it, because this period incorporates a fresh future-oriented vision of a younger generation, it heightens the urgency to build long-term competitiveness, and the founder’s managerial presence can effectively from strategic consensus at TMT. Whereas the facilitating effect of intergenerational co-governance on TMT attention to strategic transformation can be reinforced by stronger family control over the firm’s voting rights, the effect becomes negative when there is high heterogeneity between the founder and the junior successor. Our hypotheses are supported by an analysis of the digital transformation of 855 publicly listed Chinese family firms between 2009 and 2019. We discuss our study’s contributions to the literature on succession and strategic transformation, upper echelons theory, organizational design, and family businesses.