The weakness of strong ties: Sampling bias,social ties,and nepotism in family business succession |
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| Institution: | 1. University of Connecticut, USA;2. Lancaster University, UK;3. Drexel University, Department of Management, USA;4. University of Ottawa, Telfer School of Management, 55 Laurier Ave. E., Ottawa, ON K1N 6N5, Canada;5. University of Central Florida, College of Business Administration, USA;6. University of Colorado, Leeds School of Business, USA;7. Middle Tennessee State University, Jennings A. Jones College of Business, USA;1. Behavioural Science Centre, Stirling Management School, Stirling University, United Kingdom;2. UCD Geary Institute, University College Dublin, Ireland |
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| Abstract: | Decision-making is a complex cognitive activity filled with bias. Leader decision-making is unique because it occurs in a social context. We examine how biases resulting from social network dynamics complicate leaders' decision-making. In particular, we focus on a specific case of leader cognition: nepotism in the succession decisions in the context of family businesses. Succession often leads to a decline in performance because leaders frequently choose family members as their successor, a form of nepotism. We show that even when a leader can overcome individual decision biases, a bias in sampling resulting from families' strong ties can still allow a leader to wrongly conclude that family members are better qualified than external candidates when the opposite is true. We demonstrate this phenomenon using simulation modeling and explore solutions to family business succession planning. |
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