Chengwei Liu & Dawn Eubanks, Associate Professors, Warwick Business School

Nepotism is detrimental to family businesses - more than 70 per cent of them fail after the first generation primarily due to poor succession decisions. Despite this well-known statistic nepotism persists, why?

One possible reason is that the family business founder may wrongly believe that their offspring, typically their son, is the most skilled candidate for the job. Consider the example of Jack, a family business owner, who is considering two candidates to succeed his position, his nephew Tom, and another non-related candidate Sam.