Founder-Controlled Family Firms, Overconfidence, and Corporate Social Responsibility Engagement: Evidence From Survey Data

Abstract

Drawing on (mostly) medium-sized and unlisted Polish firms, this study explores the influence of the interaction between founder-controlled family firms and managerial overconfidence on corporate social responsibility (CSR). We demonstrate that founder-controlled family firms show low levels of CSR engagement. This suggests that families try to limit CSR activities that could challenge their control and thus their socioemotional endowment. Moreover, overconfident executives in these firms tend to exhibit superior CSR performance. Consequently, the family’s preference for control can be mitigated by overconfident executives who underestimate the family’s control risk and focus on building reputation by acting socially responsible.

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

“…Tsai et al (2018) show that the effect of generational diversity in family business decision-making may be contingent on the overconfidence of executives. Dick et al (2020) join the debate by exploring how overconfidence in founder-controlled family firms affects corporate social responsibility activities. They demonstrate that founder-controlled family firms are likely to launch corporate social responsibility initiatives that boost their reputation.…”

“…Third, linking Dick et al (2020) and Chandler et al (2020), another fertile research line is the role of psychological heuristics and biases, disentangling the effects in the short and long term, and comparing family firms and nonfamily firms (Neubaum et al, 2019). Dick et al (2020) state that overconfidence stimulates corporate social responsibility activities that increase the decision-maker’s reputation. In this circumstance, we can expect a positive effect only in the short term.…”

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

“…Heeding this call, Picone, De Massis, Tang and Piccolo (2021) built a conceptual framework linking the psychological foundations of management in family business, strategic decision-making, and firm performance. The first issue of the Family Business Review special issue discusses some of Picone et al’s (2021) key constructs: decision comprehensiveness (Carr, Vardaman, Marler, McLarty, & Blettner, 2020), values (Ruf, Graffius, Wolff, Moog, & Felden, 2020), overconfidence (Dick, Wagner, & Pernsteiner, 2020), and Machiavellism (Chandler, Petrenko, Hill, & Hayes, 2020).…”

The CSR–CFP relationship in the presence of institutional voids and the moderating role of family ownership

“…Finally, this study contributes to the family business literature in emerging Asian economies. Though most studies argue that family firms aim at accruing SEW by investing in CSR (Cruz et al, 2014;Ye & Li, 2021), there is still an open debate on whether family firms engage more or less in CSR than non-family firms (Dick et al, 2020;Yu et al, 2015). Some scholars argue that families have self-serving behaviors that result in nepotism, entrenchment and cronyism (Kellermanns et al, 2012) and that these behaviors lead them to be more focused on their own needs than those of stakeholders, especially employees and governance (Cruz et al, 2014).…”