Sons are much more likely than daughters to take over as CEOs in family-run businesses
In Finnish family-owned firms, we found that sons are four times more likely than daughters to inherit leadership roles. This raises questions: How do entrepreneurial families arrive at such gender-skewed decisions—and what policy implications emerge from these choices?
Our recent IZA Discussion Paper shows that the path to succession begins early—at the stage of family formation. Compared to other Finnish parents, entrepreneurs are more likely to show son-biased fertility preferences. If their first child is a girl, they are more likely to have additional children. Entrepreneurs are also more likely to adopt boys and to stop having children after the birth of a son. Interestingly, female CEOs buck this trend: they are more likely to adopt girls.
Families that display son-biased fertility preferences also groom their children differently for succession—sons receive less general education but more training in the family firm than daughters.
The effects of these early decisions are visible long before the formal handover of the company. Sons typically gain greater ownership stakes, board positions, and higher earnings; with a 27% earnings gap between sons and daughters in family firms, compared to 16% in the broader Finnish labor market.
Industry plays a key role in all the outcomes we studied. In traditionally male-dominated sectors like manufacturing and construction, daughters are far less likely to pursue related studies, work in the family business, or become CEO. In more female-dominated industries like education, hospitality, or healthcare, the gap narrows, but daughters still are not preferred over sons when it comes to succession.
What happens to the business itself when children take over? On average, we do not find clear evidence that firms perform worse when passed down to the next generation. However, performance often dips when other family members, such as a spouse, sibling, or parent, take the reins. We also found that succession circumstances vary widely by gender. After a CEO’s death, most sons who stepped in had prior experience working in the family firm. Only 29% of daughters had the same.
These findings are particularly relevant in the context of declining fertility. With fewer children, there are fewer potential heirs to take over the family firm. Excluding daughters further shrinks this pool, increasing the risk that firms will struggle to find successors, underinvest, or be sold in distress. Policymakers have taken notice: for example, the European Investment Fund now supports businesses facing closure due to a lack of successors.
In short, succession is a long-term process that starts with family formation and continues through the education and early careers of the next generation. This suggests temporary changes in policy may have little effect, and permanent changes might work their way through the system only slowly. Public policies aimed at supporting family businesses (e.g., tax incentives for intergenerational transfers or entrepreneurship training) should account for this long planning horizon.
© Ciprian Domnisoru, Robert A. Miller
Ciprian Domnisoru is Assistant Professor of Economics and Data Science at the Aalto School of Business, Helsinki GSE, and IZA Research Fellow
Robert A. Miller is Professor of Economics and Strategy at Tepper School of Business at the Carnegie Mello University
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We recognize that IZA World of Labor articles may prompt discussion and possibly controversy. Opinion pieces, such as the one above, capture ideas and debates concisely, and anchor them with real-world examples. Opinions stated here do not necessarily reflect those of the IZA.
Related IZA World of Labor content:
https://wol.iza.org/articles/working-in-family-firms by Thomas Breda
https://wol.iza.org/articles/internal-hiring-or-external-recruitment by Jed DeVaro
https://wol.iza.org/articles/the-value-of-hiring-through-employee-referrals-in-developed-countries by Mitchell Hoffman
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