Promoting organizational diversity and preserving socioemotional wealth: can family businesses balance the two?

PurposeA 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/approachDrawing 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.FindingsThe 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/valueThe results establish that family businesses' attempts to preserve socioemotional wealth may come at the cost of promoting organizational diversity.

Affective and Emotional Determinants of Entrepreneurial Orientation Within Family Firms

As a predominant form of business organization, family firms have attracted increasing attention by scholars, and especially by those researching entrepreneurial orientation with the aim of better understanding of entrepreneurial activities pursued by enterprises. However, the literature on the confluence of entrepreneurial orientation and family firms has paid scant attention to the influence of affective and emotional factors. To cover this research gap, the authors analyze the impact of affective commitment and concern for socioemotional wealth preservation on entrepreneurial orientation. To do so, they performed an empirical study using the data collected from 342 small and mid-sized family firms from Portugal, a country where family firms are under-researched even though they make up the backbone of the economy. Results show that both affective commitment and socioemotional wealth positively impact entrepreneurial orientation, pointing to the need to further research the relationships between such factors and strategic behaviors in the family business context.

Influence of socioemotional wealth on non-family managers’ risk taking and product innovation in family businesses

PurposeThere is a growing interest in understanding family firms’ strategic behavior using the socioemotional wealth (SEW) perspective. This study explores how family SEW dimensions influence non-family managers’ attitudes toward risk in the context of product innovation. This study also examines whether managerial risk-taking mediates the relationship between SEW and product innovation.Design/methodology/approachThe study uses a sample of 150 family firms in the United Arab Emirates and collects data from family owners and non-family managers via self-administered questionnaires. The study uses SmartPLS structural equation modeling to test the conceptual model and the proposed hypotheses.FindingsThe results indicate that multidimensional SEW influences non-family managers’ risk-taking behavior in different magnitudes and directions, thus impacting firms’ product innovation. Moreover, risk-taking partially mediates the relationship between SEW dimensions and product innovation.Originality/valueWhile product innovation could be seen as a loss scenario for family firms due to the potential loss of SEW, growth, continuity and reputation outweighed the desire to maintain control for the firms in this sample. Thus, these firms encourage non-family managers to take risks in product innovation.

Willing and Able? The Screening and Adoption of Habitual Family Venture Opportunities

This article develops a two-part theoretical framework synthesizing the socioemotional wealth (SEW) perspective with image theory to explain the ways in which family decision makers screen and potentially adopt habitual new venture opportunities. The model theorizes that opportunities are initially screened according to their ability to preserve SEW and fit with the family’s value images and subsequently explains how SEW willingness interacts with the family entrepreneur’s trajectory and strategic images to predict whether the venture will be pursued as a serial or portfolio opportunity. Theoretical implications and directions for future research are also discussed.

How Does Family Involvement Affect Environmental Innovation? A Socioemotional Wealth Perspective

The purpose of this study was to examine how family involvement affects the environmental innovation of firms. While prior studies have shown that family involvement can enhance environmental performance, these environmental performances have been portrayed as firm activities to prevent environmental issues, such as air pollution, CO2 emissions, etc. We maintain that environmental performance should be more proactive and enable firms to transform their activities more fundamentally towards environmental protection. In this sense, we consider environmental innovation, i.e., technological development to address environmental issues, as a proactive measure enacting firm activities to address environmental issues. Furthermore, we determine whether and how family involvement can motivate firms to develop technologies for environmental performance. To illuminate this relation, we utilized a socioemotional wealth perspective, which provides useful insights into how family-controlled firms behave differently in comparison to non-family firms. Building on this socioemotional wealth approach, we suggest that family involvement helps firms engage in environmental innovation. In this study, we also explore how the positive link between family involvement and environmental innovation is dependent on family interlocks—the circumstance wherein a firm’s family directors are affiliated with the boards of directors of other firms. Specifically, we suggest that an increase in a firm’s family interlocks would strengthen the positive relationship between family involvement and environmental innovation. To test our ideas, we used a sample of 623 US public firms ranging from 1996 to 2010, which yielded 5047 firm-year observations. We find that family involvement facilitates the environmental innovation of firms. We also find that family interlocks intensify the positive effect of family involvement on environmental innovation. Finally, we discuss the theoretical and empirical implications of our results.