Incentive or Disincentive? A Socioemotional Wealth Explanation of New Industry Entry in Family Business Groups

Abstract

We examine how controlling owners’ family considerations affect their new industry entry decisions in family business groups in emerging economies. Drawing on the socioemotional wealth (SEW) approach, we conceive the new industry entry decision as controlling owners’ response to pursue various family interests. In particular, we distinguish two aspects of SEW, focused SEW and broad SEW, and theorize their opposing effects on the new industry entry decision. We propose that controlling owners’ likelihood to pursue new industry entry is negatively influenced by the exercise of family influence (a representative of the focused SEW) but is positively associated with the succession of family dynasty (a typical form of the broad SEW). Furthermore, we argue that the effects of SEW preservation on such decisions are contingent on controlling owners’ generation, with the effects to be stronger when the founder generation is in control. We test these hypotheses with a sample of Taiwanese family business groups and find general support for our predictions.