In the Horns of the Dilemma: Socioemotional Wealth, Financial Wealth, and Acquisitions in Family Firms

2015 ◽  
Vol 44 (4) ◽  
pp. 1369-1397 ◽  
Author(s):  
Luis R. Gomez-Mejia ◽  
Pankaj C. Patel ◽  
Thomas M. Zellweger
Keyword(s):  
Decision Making ◽  
Family Firms ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Socioemotional Wealth ◽  
Family Control ◽  
Financial Wealth ◽  
Empirical Results ◽  
Problem Framing ◽  
Firm Owners

We posit that family firms often face a dilemma in their strategic decision making: whether to maintain current socioemotional wealth or pursue prospective financial wealth. Applying such a mixed gamble perspective to acquisitions, family owners assess potential acquisitions with regard to their impact on both wealth dimensions. In line with this reasoning, our results show that family control implies a general reluctance to acquire and, when an acquisition happens, a preference for related targets. Because financial and socioemotional viewpoints lead to largely incompatible predictions about the occurrence and relatedness of acquisitions, family firm owners use their firm’s vulnerability as a signal. Increased vulnerability leads to a heightened propensity to prioritize financial over socioemotional wealth problem framing, which is reflected in the acquisition of unrelated targets. Empirical results are supportive of these predictions.

Strategic decision-making in family firms: an explorative study

2018 ◽  
Vol 12 (5/6) ◽  
pp. 655
Author(s):  
Andreas Kallmuenzer ◽  
Wolfgang Hora ◽  
Mike Peters
Keyword(s):  
Decision Making ◽  
Family Firms ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Explorative Study

Relational and Contractual Governance in Family Firms: Effects on Strategic Decision Making

2002 ◽  
Vol 15 (3) ◽  
pp. 205-222 ◽  
Author(s):  
Mikko Mustakallio ◽  
Erkko Autio ◽  
Shaker A. Zahra
Keyword(s):  
Decision Making ◽  
Social Control ◽  
Structural Equation ◽  
Family Firms ◽  
Strategic Decision ◽  
Equation Modeling ◽  
Strategic Decision Making ◽  
Formal Control ◽  
Governance Model ◽  
The Social

Governance of family firms differs from mainstream corporate governance in an important respect: Important owners, i.e., family members, may have multiple roles in the business. In this paper, we develop and test a model of family firm governance that incorporates both formal control and social control aspects of governance. Governance based on the formal control draws on agency theory, whereas the social control aspects draw on social theories of governance, addressing social capital embedded in relationships. Drawing on these theories, we examine the influence of different governance mechanisms on the quality of strategic decision making. The Family Business Governance Model is tested using survey data from 192 family firms in Finland. We use structural equation modeling in testing the empirical validity of the model. The empirical analysis largely supports our hypotheses on formal control and social control as well as their influences on the decision-making quality.

The Psychological Foundations of Management in Family Firms: Values, Biases, and Heuristics

2021 ◽  
pp. 089448652098563
Author(s):  
Pasquale Massimo Picone ◽  
Alfredo De Massis ◽  
Yi Tang ◽  
Ronald F. Piccolo
Keyword(s):  
Decision Making ◽  
Conceptual Framework ◽  
Family Business ◽  
Research Agenda ◽  
Family Firms ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Future Research ◽  
Future Research Agenda ◽  
Biases And Heuristics

Considering the heterogeneity of family firm behaviors as reflecting the values, biases, and heuristics of individuals, we discuss the implications of the psychological foundations of management in family firms. We develop a conceptual framework for investigating how the values, biases, and heuristics of family and nonfamily members affect strategic decision-making and the outcomes of family firms. To advance the field, we put forward some relevant questions and offer a future research agenda at the intersection of the psychological foundations of management and family business.

scholarly journals Predecessors’ Attitude toward Conflict Predictor of Family Business Sustainability

2018 ◽  
Vol 1 (1) ◽  
pp. 3
Author(s):  
Linda Salim ◽  
Mohd. Noor Shariff ◽  
Darwina Ahmad Arshad
Keyword(s):  
Decision Making ◽  
Family Business ◽  
Family Firms ◽  
Qualitative Interviews ◽  
Business Leaders ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Business Sustainability ◽  
Talent Pool ◽  
The Future

<p>Using qualitative interviews to understand the mindset of family business leaders in succession, this study proposes that attitude toward conflict is an important decision making element. A collective case studies uncover how attitude toward conflict predicts decision making during succession and influence optimism on the future of the firms. Findings of the study suggest that predecessors who welcome conflicts as a part of family firms take a more relaxed attitude toward succession, with a wider talent pool. This group are also more egalitarian in strategic decision making and optimistic toward the future of the firms. Predecessors who avoid conflict have smaller talent pool, making decisions to nominate few for the position. They is cautious, making decisions for the successors, and are pessimistic about the future of the firms. Contributions from this study are threefold. First, we introduce the use of attitude toward conflict to measure predecessors' behaviors during succession. Second, through identification of attitude toward conflict, we contribute to the literature by predicting predecessors' optimisms toward the future of the firms in the hands of the next generations. Third, this study contributes another dimension to reciprocal nepotism through discovery that family businesses upholding reciprocal nepotism behave differently.</p>

scholarly journals The Psychological Foundations of Management in Family Firms: Emotions, Memories, and Experiences

2021 ◽  
Vol 34 (2) ◽  
pp. 122-131
Author(s):  
Ronald H. Humphrey ◽  
Alfredo De Massis ◽  
Pasquale Massimo Picone ◽  
Yi Tang ◽  
Ronald F. Piccolo
Keyword(s):  
Decision Making ◽  
Conceptual Framework ◽  
Family Business ◽  
Family Firms ◽  
Firm Behavior ◽  
Family Firm ◽  
Strategic Decision ◽  
Strategic Decision Making ◽  
Firm Outcomes ◽  
Biases And Heuristics

Exploring the psychological foundations of management in family firms is necessary to understand why they formulate and implement strategies differently from nonfamily firms, and why and how family firm behavior varies across different family firms. Picone et al. (2021. The psychological foundations of management in family firms: Values, biases, and heuristics. Family Business Review, 34(1), 12-32) have proposed a conceptual framework for the psychological foundations of management in family business, examining how the values, biases, and heuristics of family firm members affect strategic decision-making and family firm outcomes. Drawing on this framework, we examine emotions, memories, and experiences in family firms, disentangling “what we know” from “what we should know”, and offering some relevant questions to advance the field.

scholarly journals Location Preferences of Family Firms: Strategic Decision Making or “Home Sweet Home”?

1992 ◽  
Vol 5 (3) ◽  
pp. 271-282 ◽  
Author(s):  
Joel A. Kahn ◽  
Douglas A. Henderson
Keyword(s):  
Decision Making ◽  
Family Firms ◽  
Strategic Decision ◽  
Family Influence ◽  
Strategic Decision Making ◽  
Strategic Decisions ◽  
Business Location ◽  
The Family ◽  
Insight Into

Selecting a business location is among the most important strategic decisions for family firms. Yet the separate demands of the family and the business often prove difficult to balance. A comparison of location preferences in family and nonfamily firms provides insight into the family influence on strategic decision making.

An image theory of strategic decision-making in family businesses

2019 ◽  
Vol 9 (4) ◽  
pp. 451-467
Author(s):  
Christopher Penney ◽  
James Vardaman ◽  
Laura Marler ◽  
Victoria Antin-Yates
Keyword(s):  
Decision Making ◽  
Family Firms ◽  
Family Firm ◽  
Family Businesses ◽  
Strategic Decision ◽  
Image Theory ◽  
Strategic Decision Making ◽  
Screening Criteria ◽  
Business Decision ◽  
Content Type

Purpose Research suggests family businesses often pursue risky or aggressive strategies despite the desire to preserve socioemotional wealth (SEW), which is thought to lead to conservativism in family firm strategic decision making. The purpose of this paper is to resolve this apparent contradiction by presenting a model that describes the screening criteria used by family business decision-makers when evaluating strategic opportunities. Design/methodology/approach The conceptual model relies on insights derived from image theory to resolve apparent contradictions inherent in the SEW perspective’s implications for family firms’ risky strategic decisions. Findings The proposed model suggests new strategic opportunities in family firms are evaluated through an unconscious, schema-driven decision process and that the preservation of SEW does not preclude risky strategic directions, but instead serves as an unconscious screening criteria for strategic opportunities. Originality/value This paper contributes to the literature by expanding the understanding of family-firm strategic decision-making to include considerations of the decision’s fit with the family’s principles, goals and strategic plan rather than solely to overall risk to SEW. Thus, the paper presents a detailed model of family-firm strategic decision-making that relies on insights from image theory.

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