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The Family Ties That Bind: How Emotion and Family Dynamics Preserve Socioemotional Wealth
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Author: David Scott Jiang, Georgia Southern U.
Author: Franz W. Kellermanns, U. of North Carolina, Charlotte
Author: Timothy P. Munyon, U. of Tennessee, Knoxville
Author: Michael Lane Morris, U. of Tennessee, Knoxville
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Family business researchers contend that family firms differ from nonfamily firms because they make unique strategic decisions that preserve socioemotional wealth (SEW). However, extant family firm scholarship focuses primarily on the distinct firm level consequences of SEW preservation decisions without understanding emotion or the family’s assumed causal roles behind them. In this paper we address these theoretical needs by articulating how emotion and family dynamics preserve SEW. We integrate affective events theory (AET) and emotional contagion process research with SEW theory to examine emotional dynamics and the moderating role of SEW salience in individual and family level processes leading to SEW preservation decisions. Collectively, our theorizing extends contextual research on emotion in organizational behavior while also offering theory that moves family business research beyond a dichotomous view of family firms vs. nonfamily firms to examining various affective events as the family’s sources of heterogeneity within and between family firms. Bringing these contributions together, we conclude by inviting scholars to build research that can further understand the psychological microfoundations of family firm behavior.
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Search Terms: Socioemotional Wealth | Emotion | Family Firms
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Paper is No Longer Available Online: Please contact the author(s).
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Preservation, Succession, and the Culture of Farming in Lancaster County, PA
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Author: Nancy B Kurland, Franklin & Marshall College
Author: Sara Jane McCaffrey, The Wharton School, U. of Pennsylvania
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This exploratory study contributes to research on socioemotional wealth (SEW) and succession in family firms. We argue that a desire to preserve SEW motivates owners of Lancaster County family farms to legally preserve them, but that this SEW moves beyond the nonfinancial aspects of family owners. Rather, we show that this select group of owners of family farms exhibit motivation and commitment to the preservation of the cultural tradition of farming in the region and, thereby, the preservation strategy acts as a proxy to ensure the emotional attachment of successors to the agricultural land. Moreover, this study contributes to the SEW and family firm literature by theorizing that an owner’s SEW should be studied in the cultural (systemic) context in which the family firm is embedded.
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Search Terms: socio-emotional wealth | farming | family business
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Paper is No Longer Available Online: Please contact the author(s).
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The IPO Pricing Dilemma in Family Firms: Socioemotional Wealth and Multiple Agency Conflicts
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Author: Josip Kotlar, Lancaster U.
Author: Andrea Signori, U. Cattolica del Sacro Cuore
Author: Alfredo De Massis, Lancaster U.
Author: Silvio Vismara, U. of Bergamo
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There are competing theoretical explanations and conflicting empirical evidence for the IPO underpricing phenomenon in family firms. The behavioral agency model suggests that family firms are willing to discount their shares more than nonfamily firms in order to avoid socioemotional losses for family members. However, this view contradicts the endowment effect in prospect theory indicating that socioemotional wealth inflates family owners’ perceptions of firm value. We reconcile these seemingly incompatible predictions by integrating the prospect theory notion of endowment effect in the behavioral agency model, and by further extending this view with insights from multiple agency theory to explain how socioemotional wealth elicits a complex set of divergent goals and investment time horizons among the multiple actors involved in the IPO. Accordingly, our analysis of 1,807 IPOs in seven European countries between 1995 and 2011 supports a contingency model in which the relationship between family firm status and IPO underpricing changes depending on share retention by family owners, and is moderated by market momentum, underwriter reputation and venture capitalist backing. In so doing, we shed light on the conditions under which socioemotional wealth adds to or detracts from firm valuation, we clarify the rate at which financial and socioemotional wealth are substituted, and we advance understanding of trade-offs between the two.
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Search Terms: Family firms | IPO underpricing | Socioemotional wealth
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Paper is No Longer Available Online: Please contact the author(s).
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Socio-emotional Wealth: Disentangling Corporate Social Responsibility Performance of Family Firms
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Author: Josh Wei-Jun Hsueh, Bocconi U.
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Socio-emotional wealth (SEW) in family firms is a dominant decision logic premised on the controlling family’s non-economic goals. Non-economic goals can enhance stewardship practices of a family firm targeting a broad range of stakeholders beyond economic ones. This paper expands the existing SEW construct to examine a family firm’s stewardship practices in terms of corporate social responsibility (CSR) performance. It finds the positive mediating role of relational SEW (family identification and emotional attachment) for the negative relationship between structural SEW (family involvement, dynasty succession, and binding ties) and a family firm’s CSR performance. The additional SEW dimensions, personalized charismatic leadership and individualistic organization culture, show negative influences on relational SEW, which mediates the negative relation between leadership and CSR performance, but not for culture. This paper provides a more holistic SEW construct in explaining previous mixed evidence of family firms’ CSR performance.
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Search Terms: Family business | corporate social responsibility (CSR) | socio-emotional wealth (SEW)
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Paper is No Longer Available Online: Please contact the author(s).
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