What makes SMEs attractive to external successors?
| DOI | https://doi.org/10.1108/03055721011050640 |
| Pages | 108-135 |
| Date | 18 May 2010 |
| Published date | 18 May 2010 |
| Author | Susanne Durst,Stefan Gueldenberg |
| Subject Matter | Information & knowledge management |
What makes SMEs attractive to
external successors?
Susanne Durst and Stefan Gueldenberg
Chair of International Management, Institute of Entrepreneurship,
University of Liechtenstein, Vaduz, Liechtenstein
Abstract
Purpose – Taking company succession as an alternative means of embarking on an entrepreneurial
activity, the aim of this study is to explore those intangible assets that are regarded as attractive from
the viewpoints of external successors. Thereby, the focal point is on the preparation stage in which
promising companies are identified and scrutinised.
Design/methodology/approach – The strategy of research behind this paper is the application of a
mixed methods approach that is divided into an internet-mediated questionnaire and a series of in
depth interviews (given priority).
Findings – The findings suggest that intangible assets have a notable influence on the intention of
an external successor to take over a company. This would suggest that the traditional issues
considered with regard to company succession, such as tax, legal and financial aspects, should be
extended to include intangible aspects. The findings are summarized by proposing a framework for
the role of intangibles in external succession, thereby highlighting critical intangibles as perceived by
external successors.
Research limitations/implications – This explorative study is by no means exhaustive; however
it is regarded as a valuable fundament for further research activities associated with the role of
intangible assets in terms of company succession, particularly external succession.
Practical implications – The framework appears to be a valuable tool for understanding the
importance of intangibles in external company succession in general and particularly their influence
on external successors’ business acquisition intentions. The findings are particularly considered as
helpful for incumbent-owners who plan to sell off their companies.
Originality/value – The study’s findings can be viewed as a new perspective on company
succession as it highlights the intangible assets that make a company attractive to external successors.
Given the increasing number of small to medium-sized enterprises waiting to be transferred to new
owners, these findings are highly important as they provide a more holistic view of the dynamics of
company succession (and external succession in particular).
Keywords Small to medium-sizedenterprises, Intangible assets,Buying behaviour, Acquisitions
Paper type Research paper
Introduction
While a multitude of articles has focused on new venture creations a lack of articles
dealingwithcompanysuccessionasanalternativewayofembarkingon
entrepreneurial activities is apparent. This is surprising in view of research findings
The current issue and full text archive of this journal is available at
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An earlier version of this paper, entitled “The meaning of intangible assets: new insights into
external company succession in SMEs” was presented at the European Conference on Intellectual
Capital, INHolland University of Applied Sciences, Haarlem, The Netherlands, 28-29 April 2009
and published in a special issue of the Electronic Journal of Knowledge Management, Vol. 7 No. 4,
pp. 437-46.
VINE
40,2
108
Received 16 September 2009
Revised 14 December 2009
Accepted 1 February 2010
VINE: The journal of information and
knowledge management systems
Vol. 40 No. 2, 2010
pp. 108-135
qEmerald Group Publishing Limited
0305-5728
DOI 10.1108/03055721011050640
established by the Austrian Institute for Small and Medium-sized Enterprises (SMEs),
which indicated that the survival rate of business formations through company
succession is higher compared to that of new venture creations (Austrian Institute for
SME Research, 2004). Furthermore, it has to be taken into account that most jobs are
created by well established rather than newly created SMEs (Pasanen and Laukkanen,
2006). This aspect presents something of a contradiction to changing demographic
conditions which will reduce the pool of potential successors, to attitudes toward
self-employment, and to the increasing number of SMEs waiting to be transferred
(Commission of the European Communities, 2006). Moreover, it has to be mentioned
that in Germany succession within the family is decreasing (Kerkhoff et al., 2004) as
well, which can be, amongst others, regarded as a consequence of the changes in
demography. Taking this market situation, it can be argued that external successors
take on a critical role which induces them in a position to select the company that best
matches their expectations. This “investor market” is confirmed by taking a glance at
the online business exchange “nexxt-change” provided by, amongst others, the
German Federal Ministry of Economics and Technology. The number of firms waiting
to be transferred exceeds the number of potential successors. In this connection a need
for more research in this area is identified, paying particular attention to the external
successor’s point-of-view, which until now has tended to be underrepresented in
research papers on the issue of company succession.
On the other hand, in the past decades, a change regarding the critical assets in
firms can be observed. In addition to financial and physical assets, intangible assets
are now considered crucial to the success of all organizations (Marr and Spender, 2004).
It is generally acknowledged that these assets are chiefly responsible for company
value and growth in most industries (Sa
¨llebrant et al., 2007). With company succession,
a primary concern is whether the company in focus has the potential for a sustained
existence. Consequently, a business transfer will also be assessed as a failure, when the
company enters a state of crisis or consequently disappears from the market shortly
after succession has taken place. One explanation for this short-term failure can be that
the successors have not analysed the firm’s assets thoroughly enough (Ballarini and
Keese, 2006). Perhaps they relied too strongly on past business performanc e and
overlooked future prospects. Consequences of a high number of such failed business
transfers are obvious.
The meaning of intangible assets in company succession in terms of company
selection seems to be neglected in the academic literature so far. Instead in respect of
company succession the main focus of investigations has been directed to succession
and tax planning and to family-related issues (Morris et al., 1996). Especially the latter
represents a research area of great interest (e.g. Birley, 1986; Malinen and Stenholm,
2002; Cabrera-Sua
´rez, 2005). In the case of non-family succession it is the question of
chief executive officer (CEO) succession in large companies which has attracted most
attention (Bagby, 2004). Only recently, increasing research activities can be found to
have a particular focal point on knowledge transfer in company succession (e.g. Bracci
and Vagnoni, 2005).
The humble research attention may be a result of the fact that the intangible asset
phenomenon represents a relatively young field of study. One in which the increased
interest was shown only during the last decades of the previous century. Additionally,
this can also be the result of a primarily monetary perspective when dealing with the
What makes
SMEs attractive?
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