Successor selection in family business—A signaling game

Signaling theory has been widely used to explain phenomena in personnel selection processes. We investigate whether and how signaling occurs in family businesses’ intra-family CEO successor selection. We apply a multiple case study approach using data from twelve German family businesses. Our analysis affirms that hard-to-fake signals as well as costly signals are present in the intra-family CEO successor selection process. More interestingly, the specific context in family businesses influences the signaling game. Signaling occurs during a much longer timeframe compared to non-family businesses, signals are sent and perceived in the private (owner family) as well as in the family business context, and negative signals are utilized by family members to exclude themselves from the pool of potential successors. We derive several propositions that we integrate into a conceptual model and discuss the implications of our findings for theory and practice in the family and the non-family business contexts.