Addressing succession crisis through Employee ownership to promote sustainable development

As a large cohort of owners in closely held small and medium-sized enterprises (SMEs) nears retirement, succession is becoming a systemic challenge with effects beyond individual firms. This paper reframes the ‘SME succession crisis’ as an institutional and developmental issue, arguing that ownership-transfer choices can either worsen or alleviate sustainability challenges. Through an integrative literature review, it synthesizes research on succession in closely held and family-owned firms, employee ownership (EO) models and sustainable development as a multidimensional objective spanning economic, social, and environmental outcomes. The review suggests EO can align with owners’ non-financial goals – continuity, legacy preservation, and protection of stakeholder relationships – while reducing market and governance frictions that often limit succession options. Empirical and institutional evidence links broad-based EO to greater employment stability during downturns and transitions, wealth-building opportunities with lower within-firm wage dispersion, and conditions supportive of innovation via incentive alignment and information sharing. EO may also reduce risks of working poverty by enabling asset accumulation without upfront worker capital and can produce local spillovers through stewardship, lower turnover, and participatory governance. This paper proposes a conceptual framework connecting succession pathways to sustainable development outcomes, identifying boundary conditions and outlining policy and research implications.