THE EFFECT OF MANAGEMENT SUCCESSION ON CORPORATE GROWTH STRATEGY AMONG LOCAL FAMILY BUSINESSES IN THE MANUFACTURING SECTOR IN NAIROBI COUNTY

Abstract

Family businesses are important contributors to wealth and employment creation in any country. Indeed the economic landscape of most nations remains dominated by family firms. In Kenya, one of the Vision 2030 objectives is to create new jobs and the growth of family businesses is important to help achieve this objective. Unfortunately, many family businesses collapse within the first few years of operation and others stagnate leading to loss of jobs and greatly affecting the Kenyan economy. This study sought to investigate the effect of management succession on growth strategy among the local family businesses in the manufacturing sector in Nairobi County. The study investigated how succession planning, succession timing and successor commitment affect corporate growth strategy. It also examined if organization culture had any influence on management succession and corporate growth strategy. The study specific objectives were: To determine the effect of succession planning on corporate growth strategy; To establish the effect of succession timing on corporate growth strategy; To investigate the effect of successor commitment on corporate growth strategy, To establish the combined effect of succession planning, succession timing and successor commitment on corporate growth strategies and To examine the influence of organization culture on management succession and corporate growth strategy. To realize these objectives, a descriptive census survey was employed. The study population comprised of 97 local family business manufacturing organizations and the response rate was 67%. Primary data was collected using questionnaires and data was analyzed using descriptive statistics, linear and multiple regression analysis. The study results revealed that management succession in general influences corporate growth strategy among local family businesses in the manufacturing sector in Nairobi County. In relation to individual measures, succession planning had statistically significant effect on corporate growth strategy; however succession timing and successor commitment had no statistically significant effect on corporate growth strategy. The results further showed that the joint effect of succession planning, succession timing and successor commitment had a statistically significant effect on corporate growth strategy. Furthermore the relationship between management succession and corporate growth strategy was mediated by the organization culture. These results have made contribution to the theory and practice in relation to strategic management and family business in general and more specifically on management succession and corporate growth strategy. The results have in particular offered clarification into the relationship that exists between succession planning, succession timing, successor commitment, organization culture and corporate growth strategy. The research had a drawback in that it was based on the perceptions of senior managers in the organization and the researcher recommends a similar study based on the perceptions of external publics.