The Impact of Socioemotional Wealth on Decline-Stemming Strategies of Family Firms

Laffranchini, Giacomo; Hadjimarcou, John; Kim, Si Hyun

doi:10.1177/1042258718784755

Cited by 34 publications

(39 citation statements)

References 74 publications

(200 reference statements)

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“…Family business literature acknowledges that family-owned businesses are distinct from business organizations not explicitly controlled by a family coalition, due to their pursuit of socioemotional wealth (SEW) goals in parallel with financial wealth goals (Chirico et al, 2018;Gomez-Mejia et al, 2011). SEW is a multi-dimensional construct that represents family-centered non-economic (FCNE) goals of family business owners (Gomez-Mejia et al, 2007;Laffranchini et al, 2018). However, the relationships between SEW and economic goals of family firms such as firm performance are still not linked in a clear and predictable pattern (Martin and Gomez-Mejia, 2016;De Castro et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

Socioemotional wealth and performance in private family firms

Razzak

Jassem

2019

JFBM

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Purpose Although family business literature acknowledges that family firms owners are motivated by a set of socioemotional wealth (SEW) goals along with firm-centric business goals, yet a consistently predictable pattern of relationship between SEW and financial wealth is yet to be discerned. The purpose of this paper is to propose a theoretical model based on the stakeholder approach to suggest that family commitment mediates the association between the dimensions of SEW and firm performance. Design/methodology/approach A set of hypotheses are proposed that are tested using structural equation modeling with data collected from 357 medium to large sized privately held family firms in Bangladesh. The data analysis is done with SmartPLS (v.3.2). Findings The results indicate that family commitment partially mediates the relationships between family control and influence, family identification, emotional attachment and renewal of family bonds through dynastic succession and firm performance. The only non-significant relationship was between binding social ties and firm performance. The results provide a more nuanced understanding of the link between SEW goals and firm performance, and present important implications for theory and practice. Research limitations/implications The cross-sectional nature of the study exposes it to the specter of common method bias despite the fact that procedural remedies were initiated to minimize the impact of such occurrence. A longitudinal study with data obtained from multiple individuals at different levels of the organization would possibly yield more robust findings. Furthermore, in the absence of a multi-country and multi-sector analysis, a broad generalization of the findings may not be feasible. Practical implications The knowledge that family identity, emotional attachment and renewal of family bonds through dynastic succession may be leveraged to enhance the commitment of subsequent generation of family firm owners to the firm that may be pertinent to incumbents who desire to see their successors more engaged in the family enterprise. Furthermore, knowing that excessive focus on family control over the firm leads to negative outcomes is also pertinent to family firm leaders. Social implications Survival of family businesses is vital to the global economy as one of the primary drivers of global GDP growth and source of new employment. Policy makers can benefit from the findings of this study to customize policies that take into cognizance the importance of SEW owners of family firms and the fact that some of these SEW goals actually benefit the firm in terms of enhanced commitment to the enterprise and consequently superior firm performance. Originality/value The role of family commitment as a mediator between SEW and firm performance has not been dominant in the literature. By providing a finer-grained understanding of how family commitment accounts for the relationship between family-centric non-economic goals such as SEW and firm-centric goals such as business performance, the study presents a theoretical link between sociomemotional wealth and financial wealth in the context of private family firms.

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Section: Introductionmentioning

confidence: 99%

Socioemotional wealth and performance in private family firms

Razzak

Jassem

2019

JFBM

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“…For example, in a recent study on human capital (HC), financial capital (FC), and social capital (SC, that is generally evolved from entrepreneurs’ stakeholder networks), Linder, Lechner, and Pelzel (2020) argued that we need novel insights into “how HC creates functional SC for founders (of new ventures), especially how multiple forms of HC might be used to create multiple forms of SC” (p. 925), as well as to explore “what type of SC investment is particularly relevant for new venture survival” (p. 925). In another recent study on the impact of socioemotional wealth (SEW) on family firms, researchers argued that we need to “delve deeper into SEW conflicts in FOBs (family-owned businesses) by investigating conditions under which the combination of (innovative) value ascribed to SEWr (restricted socioemotional wealth) and SEWe (extended socioemotional wealth) changes” ( Laffranchini, Hadjimarcou, & Kim, 2020, p. 205 ). In another study on signalling and social exchange for coachable entrepreneurs, Ciuchta, Letwin, Stevenson, McMahon, and Huvaj (2018) argued that “given that stakeholders often commit more than capital to a startup, they commonly stress how important it is for entrepreneurs to be ‘coachable.’ To date, however, coachability has received little attention in entrepreneurship research” (p. 860).…”

Section: Introductionmentioning

confidence: 99%

Stakeholder engagement for innovation management and entrepreneurial development: A meta-analysis

Shams

Vrontis

Chaudhuri

et al. 2020

Journal of Business Research

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This paper reviews contemporary studies in entrepreneurship literature related to innovation management (IM), stakeholder engagement (SE), and entrepreneurial development (ED), using bibliometric techniques and longitudinal statistical analysis of 1059 articles published in the Journal of Business Research (JBR) and other relevant business and management journals indexed in Scopus from 1974 until July 2020. We have employed a structured literature review and meta-analysis to explore the emerging research patterns in prospective observational studies encompassing the field of ED, SE, and IM. Our findings suggest that dynamics of the interaction of SE, IM, and ED are shaping the scholarship of academic research in entrepreneurship. Our meta-analysis reaffirms that contemporary research conducted at the intersection of SE, IM, and ED indicates the consolidation of these tenets in future research in entrepreneurship leading to an integrative view. Finally, we present future research directions at the intersection of SE, IM, and ED for entrepreneurship research.

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“…Ford Motor Company, Reliance Group-India, etc. ), the vast majority of family firms are challenged by the possibility of diminishing levels of commitment to the firm by subsequent generation of family members (Groysberg and Bell, 2014;Laffranchini et al, 2018). Collective family commitment to the business enterprise is likely a dynamic phenomenon and may decline as the control of the firm transitions from founders to the next generation (Shen, 2018).…”

Section: Introductionmentioning

confidence: 99%

“…The salience of family firm owners toward the pursuit of this SEW endowment has been found to affect the behavior of family members involved in management (i.e. family managers) (Martin and Gomez-Mejia, 2016;Laffranchini et al, 2018) and strategic decisions such as joining cooperatives, diversification, internationalization of the family firm, investment in R&D, etc. (Gomez-Mejia et al, 2011;Torchia et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

“…Furthermore, the knowledge, experiences and insights, related to the business, of the owners who started the firm will vary from that of the next generations, since businesses are usually created in industries, of which the founding entrepreneurs are the most knowledgeable (Duchesneau and Gartner, 1990). Finally, the first generation of owners tends to have deeper levels of firm commitment, not only because ownership is in the hands of a few individuals, but also due to the financial and reputational stakes that the founders invest in the firm during the start-up phase (Gersick et al, 1997;Laffranchini et al, 2018).…”

Section: Introductionmentioning

confidence: 99%

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Socioemotional wealth and family commitment

Razzak

Bakar

Mustamil

2019

JFBM

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Purpose The purpose of this paper is to determine the elements of family-centric non-economic goals, such as socioemotional wealth (SEW) of family business owners, that drive family commitment. The empirical study further tests whether such relationships are impacted by the aspect of ownership, that is, who controls the firm: founder generation or subsequent generation of owner managers. Design/methodology/approach Deploying the SEW and stakeholder theories, this study proposes a conceptual link between soecioemotional wealth dimensions and family commitment. The study is based on a survey of 357 private family firms in Bangladesh involved in manufacturing ready-made garments. The respondents are all in senior-level management positions in their respective firms and are members of the dominant owning family. Findings Prior to considering the moderating effect of controlling generation, the results indicate that four out of five FIBER dimensions of SEW affect family commitment, except for binding social ties. The study also finds that when a comparison is made between the founder generation and the subsequent generation of family firm managers, it is the latter that manifests significantly higher levels of family commitment when the focus is on the two FIBER dimensions of SEW: binding social ties and identification of family members with the firm. Research limitations/implications Although the cross-sectional nature of the study exposes the study to the specter of common method bias, procedural remedies were initiated to minimize the likelihood. Furthermore, data were collected from a single key informant in each organization. Therefore, both a longitudinal study and corroborating data from more than one individual in each firm would possibly provide a more robust picture. Practical implications Key decision makers from within the family who wish to see their subsequent generation remain engaged and committed to the family firm may find cues from the fact that focusing on binding social ties and identification of family members with the firm play an important role in ensuring continued commitment to the business by their successors. Social implications Family businesses are recognized to be vital contributors to most societies around the globe, both as employment generators as well as catalysts of economic activities. Hence, policy makers may derive pertinent information from the study in adopting policies to nurture and ensure survival and continuity of family-owned businesses, by understanding how family-centric non-economic goals impact family’s desire to commit resources, time and effort to the enterprise from generation to generation. Originality/value Determining the factors that drive continued engagement and commitment of family members to the business enterprise is a phenomenon that needs to be better understood in order to ensure continuity and survival of family enterprises across generations. This study attempts to provide a more nuanced understanding of how different components of family-centric goals, such as SEW, impact family commitment. The study contributes to theory building by providing a conceptual link that demonstrates the components of SEW that are most pertinent in terms of ensuring higher levels of family commitment to the family-owned business.

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The Impact of Socioemotional Wealth on Decline-Stemming Strategies of Family Firms

Cited by 34 publications

References 74 publications

Socioemotional wealth and performance in private family firms

Socioemotional wealth and performance in private family firms

Stakeholder engagement for innovation management and entrepreneurial development: A meta-analysis

Socioemotional wealth and family commitment

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