Family Involvement and Sustainable Family Business: Analysing Their Effects on Diversification Strategies

Ines Herrero

doi:10.3390/su9112099

Abstract

Recent studies have noted that traditional agency theory and risk attitudes differ when firms are small and have a family character. In this work, we provide new insights with respect to the effect that the family role and the different types of risk exert on diversification strategies. We provide a different view on the effect that the number of generations and having a family manager exert on diversification attitudes and we analyse the concept of family involvement for small family firms and the moderating role it has in the relationship between the different types of risk and diversification decisions. By using a behavioural model analysis and a set of fishing firms to test our hypotheses, our results corroborate the importance of family variables on the behaviour of small family firms and how these firms avoid risk under certain stable conditions while take riskier decisions when sustainability and survivability is menaced by unstable environments. We not only provide theoretical reasons that help to the understanding of diversification decisions of small family firms but we also draw some specific conclusions that will help fishery managers to achieve more sustainable fisheries by a better understanding of fishers behaviours.

Highlights

Within-business diversification, understood as when firms extend product lines or expand into new ones, has been widely researched in the strategy literature [1]
We provide a different view on the effect that the number of generations and having a family manager exert on diversification attitudes and we analyse the concept of family involvement for small family firms and the moderating role it has in the relationship between the different types of risk and diversification decisions
Some scholars argue that, while diversification may be seen as a road to avoid risk when compared to the situation when the whole business is focused on one activity [12], in small family firms, it may bring about a high dose of risk in the sense that it requires raising additional capital and there is uncertainty about the potential success of the new activity, if the manager does not have the abilities and the knowledge necessary to carry out the new activity [11]

Summary

Introduction

Within-business diversification, understood as when firms extend product lines or expand into new ones, has been widely researched in the strategy literature [1]. Diversification often implies having to include outsiders and, a loss of SEW, making family firms reluctant to diversify [12] In this sense, some authors [5,13] claim that preserving the socioemotional wealth (SEW), understood as the non-financial aspects that meet the family affective needs [13], such as identification of the family with the firm, family influence, etc., plays a crucial role in the strategic behaviour of family firms in such a way that preservation of SEW may lead many family firms to avoid diversification

Methods

Results

Discussion

Conclusion