The role of social capital in intra-family succession : ensuring the transition of networks to the second generation

Abstract

Given the era of the new economy the role of social capital is even more important and the preservation and transfer of it in a situation of intra-family succession should be one of the major considerations when conducting succession planning. Relationships as form of assets are often neglected and this study emphasizes the role of social capital in the future success of a company. The aim of this study is to shed light on the role of social capital during succession and focus on the competitive advantage it is able to bring to the company. This study uses qualitative and interpretive analysis approach in order to determine the role of social capital, the creation and management of social networks, and the processes for transferring it to the next generation. The study focuses around a case company, where the succession process is ongoing and the founders’ will is to step aside during the next five to ten years. With the help of formal planning and considerations for transferring social capital to the successors, the age and experience gap between generations could be reduced. The results point towards the perspective of family business: social capital is seen as automatically transferred to the second generation due to the family aspect. The common process of natural immersion in family businesses was highlighted, however, the better utilization of networks as a creator of competitive advantage needs to be acknowledged. This utilization can be done more extensively after deliberate transfer of social capital in the phases of gradual succession. The effectiveness of the transfer of social networks and tacit knowledge are key ingredients to future success of the company.