Miller, Le Breton-Miller and Scholnick (2008) summarize and discuss two major perspectives constructed from the literature on family owned businesses (FOBs): stewardship and stagnation theory. In this paper the stagnation theory is being put to the test on Dutch small/medium enterprises (SMEs). According to Miller et al. (2008), FOBs taken over by family members may be subject to unusual stagnation, more specifically: “FOBs are said to face unique resource restrictions, embrace conservative strategies, eschew growth, and be doomed to short lives.” This paper tests the existence of the stagnation theory within SMEs in the Netherlands. It does so by studying a sample of 296 small/medium enterprises that originally were family owned and have been acquired either by a family member (N =158), and thus remain family owned, or by a third party and thereby no longer be family owned (N = 138). The empirical findings of this paper do not show any stagnation in family-to-family succession, compared to a third party succession on all of the four dependent variables: the solvency rate, EBDITA, possible risk-aversive behaviour of family firms and the firm’s growth rate. A possible explanation for these findings is that Dutch SMEs are among the top of the innovators worldwide. The findings are presented with cause, because of the relative small sample, the self-reported data and the ordinal measurement of most dependent variables.
