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Article
Publication date: 21 November 2016

Geoffrey Martin and Luis Gomez-Mejia

A growing volume of family firm literature has argued that the preservation of family socioemotional wealth takes precedence over the pursuit of financial goals. The…

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Abstract

Purpose

A growing volume of family firm literature has argued that the preservation of family socioemotional wealth takes precedence over the pursuit of financial goals. The purpose of this paper is to develop a conceptual framework that builds knowledge regarding the two-way relationship between socioemotional and financial forms of wealth, to develop a more complete theory of wealth concerns that may inform family firm decision-making.

Design/methodology/approach

The authors conceptually examine contingencies affecting the relationship between financial and socioemotional wealth (in both causal directions).

Findings

The authors predict when one form of wealth (socioemotional/financial) is likely to dominate the other (financial/socioemotional) in the family firm’s strategic decisions.

Originality/value

The paper advances knowledge on the two-way relationship between socioemotional and financial forms of wealth providing a platform for further development in the nascent field of family business research, including our understanding of family firm decisions regarding control and influence over the family business, environmental policy, altruism toward family members, R&D, accounting choices and corporate diversification.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 14 no. 3
Type: Research Article
ISSN: 1536-5433

Keywords

Article
Publication date: 25 August 2022

Xi Zhong, Liuyang Ren and Ge Ren

The phenomenon of defamilization of family firms is gradually increasing for the growth of family firms, that is, nonfamily executives are increasingly present in the…

Abstract

Purpose

The phenomenon of defamilization of family firms is gradually increasing for the growth of family firms, that is, nonfamily executives are increasingly present in the executive teams of family firms. Although previous scholars have identified various determinants of family firms' defamilization, whether and when innovation underperformance affects the decision to defamilize family firms has not been explore. This study aims to fill the aforementioned research gaps.

Design/methodology/approach

This study empirically tests the theoretical view based on the data of Chinese A-share family listed companies from 2009 to 2017.

Findings

The authors found that innovation underperformance drives family companies to increase the percentage of nonfamily executives in their executive teams. Further, the authors found that family firms are less willing to hire nonfamily executives with an increase in socioemotional wealth, particularly when founders of such businesses serve as directors or are major shareholders, even when they are not directors.

Originality/value

This study shows that innovation underperformance and socioemotional wealth are important predictors of family firms’ defamilization decisions.

Details

Nankai Business Review International, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-8749

Keywords

Article
Publication date: 10 September 2021

Xi Zhong, Tiebo Song and Liuyang Ren

Based on the socioemotional wealth theory, this study aims to empirically investigate how founder reign, that is a founder serving as a cheif executive officer (CEO) or…

Abstract

Purpose

Based on the socioemotional wealth theory, this study aims to empirically investigate how founder reign, that is a founder serving as a cheif executive officer (CEO) or chairman, influences family firms' research and development (R&D) investment in emerging economies (e.g. China).

Design/methodology/approach

This study empirically tested the hypotheses based on a sample of listed Chinese family companies from 2008 to 2018.

Findings

Founder reign has a negative impact on family firms' R&D investment. Particularly, the negative impact of the founder serving as chairman on family firms' R&D investment is larger than the negative impact of the founder serving as CEO on family firms' R&D investment. Founder's military experience weakens the negative impact of founder reign on family firms' R&D investment, but founder's executive master of business administration (E)MBA experience has no moderating effect on this relationship.

Originality/value

First, the authors contribute to the family firm innovation literature by providing an alternative but complementary explanation of why family firms have relatively low R&D investment levels. This research shows that founder reign is a key reason for family firms in China eschewing R&D investment. Second, by incorporating the founder serving as CEO and the founder serving as chairman into the analytical framework, and then examining their impact on family firms' R&D investment, our research helps us to fully understand the impact of founder reign on firm strategic actions. Third, we contribute to the “founder reign-firm strategic actions” framework by revealing how founders' human capital profoundly affects the relationship between founder reign and family firms' R&D investment.

Details

European Journal of Innovation Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1460-1060

Keywords

Article
Publication date: 13 May 2019

Orlando Antonio Llanos-Contreras and Muayyad Jabri

The purpose of this paper is to determine how family and business priorities influence organisational decline and turnaround in a family business.

Abstract

Purpose

The purpose of this paper is to determine how family and business priorities influence organisational decline and turnaround in a family business.

Design/methodology/approach

Following critical realism as philosophical orientation, this research is based on an exploratory single case study.

Findings

This research identified specific socioemotional wealth priorities driving this organisation decline and turnaround. The study also determined how the family and business dynamic leads to decisions that first trigger the organisational decline and then explain the successful implementation of turnaround strategies.

Research limitation/implications

Findings of this research provide limited and contingent theoretical generalisation. Accordingly, replication and further quantitative research is required for a better understanding of this phenomenon.

Practical implications

Managers can benefit from this paper by noting which behaviour could lead to organisational decline and which factors could lead to a turnaround. Similarly, managers can learn about the importance of the alignment of socioemotional wealth priorities as a critical response factor to determine whether to follow exit strategies or turnaround (succession) actions.

Originality value

The study contributes to the organisational decline literature and family business literature. It advances the understanding of how family businesses should balance family and business priorities to avoid organisational decline and identify strategies successfully implemented for turning around.

Objetivo

El objetivo de este artículo es determinar cómo las prioridades familiares y del negocio influyen sobre la declinación y recuperación organizacional en una empresa familiar.

Diseño/Metodología/Enfoque

Se usa investigación cualitativa basada en caso único de estudio y realismo crítico como orientación filosófica.

Hallazgos

Esta investigación identifica prioridades socioemocionales específicas que explican la declinación y recuperación organizacional de una empresa familiar. Se determina como la dinámica familiar y empresarial lleva a tomar decisiones que primero desencadenan declinación organizacional y luego explican la implementación exitosa de estrategias para la recuperación organizacional de la empresa en cuestión.

Limitaciones

Los resultados dan soporte a una generalización teórica y contingente. En consecuencia, se requiere replicación y más investigación cuantitativa para una mejor comprensión de este fenómeno.

Implicaciones prácticas

los gerentes pueden beneficiarse de este artículo al identificar qué comportamiento podría conducir a la declinación de la organización y qué factores podrían conducir a su recuperación. Del mismo modo, los gerentes pueden aprender sobre como alinear prioridades socioemocionales y hacer de esto un factor crítico en la definición sobre implementar estrategias para continuar (sucesión) o dejar el negocio.

Originalidad/Valor

El estudio contribuye a la literatura sobre declinación organizacional y también a la literatura sobre Empresas Familiares. Avanza en la comprensión de cómo las empresas familiares deben equilibrar las prioridades familiares y del negocio para evitar el declive de la organización y da luces sobre estrategias implementadas con éxito en la recuperación organizacional de una empresa familiar.

Article
Publication date: 25 March 2021

Carlos Rafael Contreras-Lozano, Maria Virginia Flores-Ortiz and Ma. Del Carmen Alcalá-Álvarez

The authors identify the theoretical constructions measuring the intentions to pursue succession as well as the socioemotional wealth theoretical framework, and the…

Abstract

Purpose

The authors identify the theoretical constructions measuring the intentions to pursue succession as well as the socioemotional wealth theoretical framework, and the authors propose an objective of testing the relationships existing between them so as their importance giving evidence of their relevance.

Design/methodology/approach

It is a research with a positivist philosophical position measuring in a quantitative way with a deductive and structured approach applied to 98 CEO owners of Mexican companies, using nonparametric methodologies the authors simulated subsamples with structural equation modeling in SmartPLS 3.3.2, the metrics on the model are described as a functionalist paradigm.

Findings

Directors' attitudes paired up with the intentions of succession are significantly related to the socioemotional aspect of the family business; although the theory proposes three aspects to measure these intentions, the social norm in this research has not been strong enough to be a predictor as an influence on the company's socioemotional wealth.

Originality/value

The authors found this a valuable paper for the complement of theory focused on purely manifesting aspects in family companies, because they identified theoretical and empirical relationships opening up guidelines for new research in socioemotional aspects in accordance with the entrepreneurs attitudes to achieve succession, the differentiation lies in measuring psychological aspects of the director's behavior toward succession and not to the succession per se as done in most research; also, the methodology of data analysis facilitates the reader to easily recognize the relationships between the proposed theoretical constructions, showing the detailed metrics development by researchers in the family business field.

Details

Journal of Family Business Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2043-6238

Keywords

Book part
Publication date: 7 July 2015

Olof Brunninge and Anders Melander

In this chapter, we explore the impact of socioemotional and financial wealth on the resource management of family firms. We use MoDo, a Swedish pulp and paper firm…

Abstract

In this chapter, we explore the impact of socioemotional and financial wealth on the resource management of family firms. We use MoDo, a Swedish pulp and paper firm, covering three generations of owner-managers from 1873 to 1991, to grasp the shifting emphases on socioemotional and financial wealth in the management of the company. Identifying four strategic issues of decisive importance for the development of MoDo, we analyze the organizational values that guided the management of these issues. We propose that financial and socioemotional wealth stand for two different rationalities that infuse organizational values. The MoDo case illustrates how these rationalities go hand in hand for extended periods of time, safeguarding both financial success and socioemotional endowments. However, in a situation where the rationalities are no longer in line with the development of the industry context, the conflict arising between the two rationalities may have fatal consequences for the firm in question.

Details

New Ways of Studying Emotions in Organizations
Type: Book
ISBN: 978-1-78560-220-7

Keywords

Article
Publication date: 19 June 2017

Esperanza Huerta, Yanira Petrides and Denise O’Shaughnessy

This research investigates the introduction of accounting practices into small family businesses, based on socioemotional wealth theory.

1965

Abstract

Purpose

This research investigates the introduction of accounting practices into small family businesses, based on socioemotional wealth theory.

Design/methodology/approach

A multiple-case study was conducted gathering data through interviews and documents (proprietary and public). The sample included six businesses (five Mexican and one American) from different manufacturing and service industries.

Findings

It was found that, although owners control the implementation of accounting practices, others (including family employees, non-family employees and external experts) at times propose practices. The owner’s control can be relaxed, or even eliminated, as the result of proposals from some family employees. However, the degree of influence of family employees is not linked to the closeness of the family relationship, but rather to the owners’ perceived competence of the family employee, indicating an interaction between competence and experience on one side, and family ties on the other.

Research limitations/implications

First, the owners chose which documentary data to provide and who was accessible for interviews, potentially biasing findings. Second, the degree of influence family employees can exert might change over time. Third, the study included a limited number of interviews, which can increase the risk of bias. Finally, all firms studied were still managed by the founder. It is possible that small family businesses that have undergone a succession process might incorporate accounting practices differently.

Practical implications

Organizations promoting the implementation of managerial accounting practices should be aware that, in addition to the owner, some family employees and external experts could influence business practices. Accountants already providing accounting services to small family business are also a good source for proposing managerial accounting practices

Originality/value

This study contributes to theory in four ways. First, it expands socioemotional theory to include the perceived competence of the family employee as a potential moderator in the decision-making process. Second, it categorizes the actors who can influence managerial accounting practices in small family businesses. Third, it further refines the role of these actors, based on their degree of influence. Fourth, it proposes a model that describes the introduction of managerial accounting practices in small family business.

Details

Qualitative Research in Accounting & Management, vol. 14 no. 2
Type: Research Article
ISSN: 1176-6093

Keywords

Article
Publication date: 7 September 2015

Jonathan B Dressler and Loren Tauer

A family member may work for the family business even though the direct financial benefits he or she may receive in the form of a salary may be lower than what could be…

Abstract

Purpose

A family member may work for the family business even though the direct financial benefits he or she may receive in the form of a salary may be lower than what could be earned working for a non-family business. The lower amount may be accepted because of benefits of association with the family business. This psychic non-pecuniary return has been called socioemotional wealth in the family business research literature. The purpose of this paper is to propose a method to estimate socioemotional wealth and apply that technique to a group of family dairy farms to estimate socioemotional wealth for those family farms.

Design/methodology/approach

A panel regression method was used to empirically allocate net farm income to the unpaid factors of equity, labor, and management provided by a family member in a family farm partnership. The estimated returns of labor plus management are compared to the market salary earned by farm managers who manage farms. The difference between the higher hired farm manager salary and what the family manager earns in the family farm from labor and management is an estimate of the non-pecuniary return the family member receives from managing the family farm as compared to managing the non-family farm.

Findings

Differences in managers’ salary working for the non-family farm and the implied family manager financial compensation estimates indicate that family business managers’ non-pecuniary return from managing the family farm had an implied economic value averaging $22,026 per year over 1999-2008. Assuming that the manager would be indifferent between working for the family farm or the non-family farm if the sum of pecuniary and non-pecuniary returns were the same, the non-pecuniary annual benefits of $22,026 accrues in the form of socioemotional wealth associated as a member in the family business.

Originality/value

Although the literature discusses how family members may accept a lower salary working for the family business than they could earn doing comparable work in a non-family business because of non-financial rewards they experience working for the family business, there have been no estimates of the value of this pecuniary benefit. The authors arrive at an estimate using a group of family dairy farm businesses that have multiple family managers.

Details

Agricultural Finance Review, vol. 75 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 21 November 2016

Cristina Cruz and Horacio Arredondo

This commentary elaborates further upon the work by Martin and Gomez-Mejia (this issue) about the two-way relationship between financial wealth and socioemotional wealth

405

Abstract

Purpose

This commentary elaborates further upon the work by Martin and Gomez-Mejia (this issue) about the two-way relationship between financial wealth and socioemotional wealth (SEW). This paper aims to provide a better understanding of the micro-foundations of the SEW approach, and how the research community could further develop it based on the SEW behavioral roots.

Design/methodology/approach

The paper explores recent refinements of the SEW approach, its underpinnings, limitations and potential. It undertook a review of the behavioral foundations of SEW, exploring the implications of those foundations in the interplay between SEW and financial wealth. It also examines aspects of SEW that are still under researched using behavioral lens, as well as some ideas about how the field could move forward.

Findings

The authors note that the SEW approach has become so widespread that some are wrongly using it just as an “umbrella term” to account for the non-economic utilities of family owners, forgoing its theoretical roots and implications. Drawing on its theoretical foundations, the authors theorize on the limitations of the SEW approach when wrongly used, and on its potential when properly applied. The main conclusion is that if the SEW approach aims at becoming a dominant paradigm in the family business field, then going back to its behavioral foundations is needed.

Research limitations/implications

The main conclusion is that if the SEW approach aims at becoming a dominant paradigm in the family business field, then going back to its behavioral foundations is needed.

Originality/value

Overall, this work calls for the use of a “back-to-the-basics” strategy, in which the field clearly understands the original purpose of the SEW perspective, as well as its limitations and potential to become a dominant paradigm in the family business field.

Details

Management Research: Journal of the Iberoamerican Academy of Management, vol. 14 no. 3
Type: Research Article
ISSN: 1536-5433

Keywords

Article
Publication date: 13 January 2022

Arindam Das

A key characteristic for a family firm, preservation of socioemotional wealth, may appear to be at conflict with the concept of organizational diversity. The authors…

Abstract

Purpose

A key characteristic for a family firm, preservation of socioemotional wealth, may appear to be at conflict with the concept of organizational diversity. The authors investigate how organizational diversity, captured through heterogeneity in ownership structure, diversity in the senior management team, interfaces with the concept of the socioemotional wealth of family businesses in an emerging economy, when these firms pursue inorganic growth strategies.

Design/methodology/approach

Drawing on the concepts of socioemotional wealth, behavioral agency theory and bifurcation bias, the authors develop perspectives on how ownership structure, family influence in executive management and institutional shareholding influence a family firm's internationalization strategies captured through propensity to pursue cross-border M&A – an activity that may threaten the preservation of socioemotional wealth. The authors also explore the role of business group affiliation, another organizational diversity construct, and contingent parameters like past financial performance and export intensity in this study. The authors take pooled data over 15 years, involving 346 large firms from India, which are family-controlled, to carry out the study.

Findings

The authors’ empirical analysis shows that family stake in the company and family members' presence in the executive team negatively influence the propensity to pursue cross-border M&A activities. A firm's affiliation to a business group moderates these negative relationships. On the other hand, the presence of institutional shareholders, positive past financial performance and export intensity positively influence cross-border M&A propensity.

Originality/value

The results establish that family businesses' attempts to preserve socioemotional wealth may come at the cost of promoting organizational diversity.

Details

Journal of Family Business Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2043-6238

Keywords

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