Primogeniture Selection Penalty in Family Firms
Observational StudyReview
Passing chief executive positions automatically to the eldest son (primogeniture) rather than selecting managers based on talent leads to severe underperformance and lower management scores in family-owned businesses.
Picture this
Appointing the eldest son to run a major company simply because he was born first is like appointing the doctor's eldest son to perform surgery regardless of whether he went to medical school.
What the evidence says
Family firms that select CEOs based on primogeniture systematically score lower on management practices than professionalized family firms or non-family enterprises.
- Who was studied
- 6,000 medium-sized manufacturing firms across North America, Europe, Asia, and South America.
- How
- Comparative empirical analysis of management scores between family-owned firms with professional external CEOs versus family-owned firms with eldest-son CEOs.
What to do
Separate family equity ownership from executive hiring decisions by selecting chief executive officers through competitive, merit-based external recruitment.
From the source
"Family firms that pass down the CEO position by primogeniture—to the eldest son—typically perform significantly worse in terms of management practices compared to family firms that hire professional managers."
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