Case Study Network Structures

Source: Author’s illustration.

Figure 14 shows the actual network structure of the car dealer (CASE 1). In this case, there is high dependence on manufacturers, as well as interdependency on the bank because of a high debt ratio. While other network partners are very important, the relationships are mainly optional. Because of the long product life cycle, customers are less relevant as network partners. This assumption was also confirmed by our interviewees. As successor 1 (SUC_1) has been in the family

117 business for four years, they have more relationships with a number of actors than successor 2 (SUC_2).

Figure 15: Case study 2

Source: Author’s illustration.

The network structure of the bicycle wholesaler and manufacturer (CASE 2) is shown in figure 15. In this case, there is also a subcase with a business succession process. To reduce complexity, it was decided to show only aspects of relevance to the main case in figure 15. As this is a smaller business than CASE 1 and CASE 3, there are also fewer main actors in the network. One interesting aspect is the significant network distance to the bank, as the business is completely self- financed. Although the successor has worked for six years in the family business, and the predecessor knows that some network partners are waiting for the succession, most relationships are with the predecessor. This is a special situation in that the successor is studying at university while working in the family business.

118 Figure 16: Case study 3

Source: Author’s illustration.

Figure 16 shows the supplier of lumber (CASE 3). In this case, predecessor and successor have been working together for ten years and are equal-share owners. The predecessor has to a great extent successfully transferred his contacts to network actors; this can be inferred from both actors’ confirmation that former business partners of the predecessor now contact the successor. The successor’s new network is also important, as he has not only adopted the existing network but has also built up a new one. Only the bank and subsidiary company are part of his connections within the business network.

The final case study (CASE 4) is shown in figure 17. Here, the predecessor and successor have already been working together for fifteen years, which is the longest timeframe for business succession among the observed cases. For this reason, as in CASE 3, most network contacts have already been transferred. One interesting point of difference from the other cases is that a second important bank was mentioned as a network partner. As the successor has an existing relationship with one bank, there is no contact with the second bank—a relationship that is still maintained by the predecessor.

119 Figure 17: Case Study 4

Source: Author’s illustration.

Based on our observations, these family business networks and their ties are illustrated in the graphs by lines of different strengths and by the distances between network contacts. To elucidate social capital structures during business succession processes, we reflected on two initial points. First, we thought about plotting the different actors and their importance to the respective businesses. We also wanted to characterize how predecessors and successors are linked to each other’s networks. To this end, we analyzed where they are similarly linked or where relationships are held only by one of them to establish the extent to which social capital has already been transferred. From our analysis of the interviews, we were able to identify two key relations: (1) high dependence over a longer period and (2) optional relations resulting from friendly or extensive cooperation. This perspective mainly reveals the relationships of the predecessor; the successor’s relationships to network actors are often still in development but may also be high-dependence or optional.

Where the successor becomes increasingly involved in the family business, his contacts will build up over time, as illustrated in these quotes from the predecessor and successor in CASE 1.

120

PRE_CASE_1: We are involved in an important network with other car dealers. In this network, our conversations are very important (for the use of our power as a group). I have an important position in this network because I am a friend of the president and vice president of the network. SUC 1_CASE_1: The network holds a round table every three or four months. I have been there from time to time, but it was not of interest to me. Perhaps I will intensify this in the future.

As the quotes above show, the strength of the tie and the evaluation of its importance differ for the two parties. In this case, the predecessor will remain in the family business in the coming years. The successor is still at the nurturing and development phase and currently has 10% ownership. Here, we observed a step- by-step business succession process, which is aligned with gradual social capital transfer. Modeling network structures, the responses of the most important network actors provide information about levels of trust and friendship. From these questions, we were able to establish whether the network is used only for business relationships or whether there is perhaps a high dependence on a particular supplier or customer. For example, one predecessor says that while in the case of one supplier, there is close collaboration without dependence (PRE_CASE_2), another relationship is “unavoidable” (PRE_CASE_2). The following quote clearly indicates a high level of dependency.

PRE_CASE_1: This one of my new goals: to change, with my son (successor), the 100% dependence on the one and only supplier (…). To design a new format and so become more independent.

Based on these statements, we analyzed all interviews to look for dependence between network partners. One example of an optional relationship is the statement “We have a multitude of suppliers” (SUC_CASE_3). Such statements are classified as optional relations “without” dependence. In some interviews, we found that optional relationships could result in friendship, and vice versa (e.g., CASE 1).

121 To assess the extent to which social capital is already transferred, we analyzed predecessors’ and successors’ answers about their first role in the family business and their current positions. For example, one predecessor reported that while at the beginning of the succession both of them handled customers, over time relationships with new customers have been maintained by the successor, and old contacts have also for the most part been transferred (PRE_CASE_4).

After describing the status quo in relation to social capital and predecessors’ and successors’ networks, we analyzed the process of transferring social capital; more precisely, we focused on the implications of the process of transfer of network contacts during the internal business succession. Two overall inferences can be drawn from our mapping of the networks. First of all, information asymmetries can be identified, in that some predecessors’ network contacts, although relevant to the company, were already unknown to their successors. Some successors did not know the names of key network contacts, and some were unable to evaluate the strength or importance of contacts (CASE 1). A second finding was that successors who already hold shares in the company are more integrated in the network than those who were currently only members of the management team (e.g., CASE 2 and CASE 3). Beyond these overall implications, we were able to identify specific phenomena that occur during transfer of network contacts, and these will be described in the next section.