Family Business Governance Evolution during Intergenerational Succession

Abstract

Intergenerational succession stands as one of the most complex and defining junctures in the life cycle of family enterprises. It is during this phase that the firm’s governance structure, management philosophy, and cultural underpinnings undergo rigorous testing and strategic transformation. As control shifts from the founder to the successor generation, family firms must evolve from relationship-oriented, centralized models of governance toward more institutionalized, professional systems capable of balancing family values with business efficiency. By drawing on socioemotional wealth (SEW) theory, institutional theory, and agency theory, this study develops a multi-dimensional analytical framework to examine the evolutionary trajectory of governance during intergenerational succession. It focuses on the interaction between emotional attachment and rational management, exploring how family cohesion, successor capability, and external pressures collectively delineate governance outcomes. Using China’s Midea Group as the primary case and Fotile Group as a comparative reference, this paper identifies three dominant governance pathways of family firms during intergenerational succession—progressive hybridization, transformative professionalization, and conservative family reinforcement. These findings underscore that sustainable intergenerational transition necessitates the harmonization of socioemotional wealth with institutional adaptation.