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Is nepotism a good old-fashioned virtue? Examining its impact on family business succession and the role of familial pride: Evidence from Indonesia

Abstract

Objective: The objective of the article is to verify the role of familial pride in strengthening nepotism’s influence on family business succession in Indonesia, as it relates to the communality value embedded in family business culture. Further, family businesses support the Indonesian economy, but according to several sources, their existence is threatened when the business passes to the next generation, and the second generation proves decisive.

Research Design & Methods: The research design was quantitative, and we collected data by distributing questionnaires via snowball sampling to second-generation members of family businesses in Indonesia. Because the population size was unknown, we adopted the ten-times rule. After ten months of data collection, we analysed the returned responses using partial least squares techniques.

Findings: Among the second generation of small and medium-sized family businesses in Indonesia, familial pride plays a significant role in family business succession. However, the expectation that familial pride amplifies nepotism’s negative influence on succession finds no support because familial pride is inseparable from the dynamics between nepotism and family business succession.

Implications & Recommendations: The second generation in small and medium-sized family businesses sees family business succession as a complex process still shaped by nepotism and familial pride. Family business succession cannot be separated from familial pride, although nepotism is considered harmful. Familial pride will encourage family business succession and support business continuity and sustainability.

Contribution & Value Added: The study demonstrates the importance of familial pride and nepotism in delivering succession in family-owned businesses. The results merit examination at a larger scope, because Indonesia’s cultural diversity and varied backgrounds can map the family business landscape, attract foreign business, and raise awareness.

Keywords

family business, nepotism, succession, familial pride, communal value

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Author Biography

Anita Maharani

Professor at the BINUS Business School Master Program. Her research interests include human resource management and entrepreneurship.

Dewi Tamara

Associate Professor at the BINUS Business School Master Program. Her research interests include entrepreneurship, finance, and general business.


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