Family Firm Successions: First-Generation Transitions in Latvia

We examine the emergence, succession, and performance of the initial cohort of family firms in Latvia. Latvia offers a natural setting to examine succession challenges faced by first-generation firms because a majority of these firms were established shortly after the country regained independence in the early 1990s. Our findings indicate that in 44% of sample firms the founding family did not have a majority stake at incorporation, but accumulated a majority stake over the first few years (1991-1999). It takes seven years for the average family ownership stake to exceed 75% and 23 years for firms with second-generation owners to reach 16% of the sample. Notably, approximately 80% of the sample firms are still majority-owned and managed by their founders. In line with previous research, we find that family firms outperform nonfamily firms by 3.1% in return on assets (ROA).