Socioemotional Wealth Research Articles

Entrepreneurial orientation and socioemotional wealth as enablers of the impact of digital transformation in family firms

PurposeThe research aims to investigate how digital transformation (DT), entrepreneurial orientation (EO) and socioemotional wealth (SEW) impact the financial performance of family firms in uncertain business environments. Drawing from existing literature, we propose that DT and EO drive firm performance. Additionally, we suggest a new role for SEW, which positively moderates this relationship in family firms, especially in terms of risk behavior and innovation for survival.Design/methodology/approachWe used the STEP Consortium’s 2020–2021 database, derived from a global survey that explored how family businesses responded to environmental shocks. Following STEP’s definitions, we proposed three hypotheses and tested two models using structural equation modeling.FindingsThe findings show that EO significantly enhances the impact of DT on family firm performance. Family businesses exhibit a notable willingness to take strategic venture risks to protect their SEW. These findings align with conclusions drawn in related literature, supporting all hypothesized relationships proposed.Practical implicationsThe study has made an applied contribution by challenging the misconception that family firms are outdated and provides insights into supporting their approach to entrepreneurship, innovation and transgenerational entrepreneurship. Furthermore, it provides business families and consultants with a new view of SEW as a strategic asset.Originality/valueOur study adds to the literature by showing how entrepreneurial orientation catalyzes the positive impact of digital transformation on firm financial performance. We also highlight the contextual influence on family firm decision-makers' risk propensity, which affects SEW development and firm outcomes. This context dependency of SEW can hinder or enhance performance, offering new research and support avenues for family firms.

Laissez-faire leadership, trust in subordinates and problem-solving conflict management: A multigroup analysis across family and non-family businesses

Laissez faire leadership (LFL) has been linked to non-constructive approaches to conflict management, yet if and how LFL can explain the use of more constructive approaches (e.g., problem-solving) has not been studied. This is surprising given that trust in subordinates is characteristic of LFL, which is also key to cooperative relationships where the use of problem-solving is involved. Furthermore, compared to non-family businesses (NFBs), the socioemotional wealth that governs family businesses' (FBs) decision-making should make LFL, the trust placed in subordinates and the use of problem-solving more likely among the latter. In this study, we compare the use of LFL in FBs versus NFBs and analyze whether trust in subordinates lies behind a positive link between LFL and the use of this approach, and whether the distinctive socioemotional wealth of FBs accounts for differences in this relationship. Using a sample of 326 general managers of small and medium-sized enterprises (SMEs) in Ecuador, two complementary methods, partial least squares (PLS) and fuzzy-set qualitative comparative analysis (fs/QCA), yielded robust findings. As expected, differences in the strength of this relationship were found across FBs and NFBs, with LFL and both affective and cognitive trust being critical for the use of problem-solving in FBs but with cognitive trust playing this principal role in NFBs. Our findings link the largely separate FB literature on leadership and conflict management.

Emotional Compass: Exploring the Socio-Emotional Wealth's Role in Guiding Change Implementation in Family Enterprises!

This research delves into the intricate impact of socio-emotional wealth (SEW) on the behavioral patterns of family firms during the implementation of organizational change. Employing the ambidexterity theory as a conceptual framework, the study scrutinizes 200 responses from proprietors and managers of family firms through a vignette-based investigation. The outcomes illuminate SEW as a pivotal guiding principle and determinant in the decision-making processes related to change. SEW is identified not only as an originating factor but also as a resultant outcome of change dynamics. Family firms demonstrate a propensity to embrace change in anticipation of potential advantages in terms of SEW, juxtaposed with a hesitancy when confronted with perceived risks. Furthermore, the study underscores a continuous reciprocal influence that characterizes the dynamic interplay between SEW and change. This influence extends beyond specific stages, permeating strategic and operational realms within the organizational context.

Nurturing family business resilience through strategic supply chain management

PurposeThe study aspires to enhance comprehension of the intricate interplay between supply chain management (SCM) and resilience in family businesses, thereby offering valuable insights to managers and policymakers endeavouring to foster resilience in uncertain environments.Design/methodology/approachCommencing from the premise that family businesses (FBs) prioritize the preservation of socio-emotional wealth (SEW) when formulating strategic decisions, this study endeavours to advance understanding of supply chain practices adopted by FBs and their direct impact on resilience during crisis situations or economically challenging periods. Through an exploratory case study of nine FBs, the present research reveals four pivotal strategies in SCM that contribute to their resilience: (i) reorganization of inventory management; (ii) cultivating close relationships with suppliers; (iii) emphasizing product quality and customer retention; and (iv) implementing cost reduction measures to bolster resilience. The aim of the study is to provide an in-depth understanding of the intricate interplay between SCM and resilience in FBs, thereby offering valuable insights to managers and policymakers endeavouring to foster resilience in uncertain environments.FindingsOur approach offers a theoretical framework for SCM aligned with prior research on the interplay between characteristics of family businesses and resilience strategies. Furthermore, this paper illustrates how factors such as the emphasis on high-quality products and services by family businesses contribute to achieving non-economic objectives that owners adopt to reconcile family and business needs, creating intrinsic added value for the company. It reveals various challenges in SCM, including inventory organization changes, supplier closures and the significance of customer retention. Family businesses are implementing product and technology enhancements and leveraging digitization to enhance supply chain processes.Originality/valueThis paper contributes significantly to the field of FBs by highlighting the crucial role of SCM in enhancing business resilience during crises. It empirically examines how the SEW characteristics of FBs influence the reconfiguration of their supply chains to enhance resilience, presenting a theoretical model for this context. Our theoretical framework employs an SEW perspective to elucidate how FBs respond to the challenges posed by the COVID-19 pandemic by adapting their SCM processes to safeguard their social and emotional legitimacy, organizational visibility and reputation. These adaptations gain particular relevance during crises or turbulent conditions, potentially leading to alterations in how FBs formulate their supply chain strategies and manage supply chain-related processes.

From “FIBER” to “FIRE”: construct validation and refinement of the socioemotional wealth scale in family firms

ABSTRACT The socio-emotional wealth perspective is a framework widely used to examine managerial decisions, particularly within the field of family business. We evaluate, refine, and validate the FIBER 27-item scale developed by Berrone et al. (2012) as a psychometric instrument to measure the socioemotional wealth construct (SEW), defined as affective endowment embedded by family owners in their business. The findings suggest that SEW is a superordinate multidimensional construct that captures socioemotional utilities in family firms and their impact on financial performance.

The veil of secrecy: Family firms’ approach to ESG transparency and the role of institutional investors

Our analysis explores the relationship between family ownership and ESG (Environmental, Social, Governance) transparency in Italian companies from 2016–2020, employing agency theory, stakeholder theory, and Socio Emotional Wealth (SEW). We find that family-owned firms typically exhibit lower ESG transparency, especially in social aspects, due to priorities like privacy and legacy. Institutional investors (IIs), however, play a crucial role in enhancing transparency, mitigating the usual opacity in these firms. This highlights the importance of IIs in advancing ESG disclosures, providing strategic insights for addressing the transparency challenges associated with family ownership and improving governance practices to narrow the corporate transparency gap.

Socioemotional Wealth and Family Firm Performance: The Moderating Role of CEO Tenure and Millennial CEO

AbstractThis study sheds light on how socioemotional wealth (SEW) theory functions in family firms. Focusing on the impact of the most highly appraised FIBER dimensions on the performance of such firms, we contextualize SEW by discussing the heterogeneity among family principals via the under‐researched role played by specific characteristics of family CEOs. Integrating arguments from SEW and generational theory, we test our theoretical hypotheses using global survey data from a sample of 1833 family firms from 33 countries. The main findings suggest that while family control and influence is not associated with performance, family members’ identification with the firm (FI) improves performance. Moreover, the positive impact of FI on family firm performance weakens in family firms with long‐tenured family CEOs. Finally, in family firms led by Millennial CEOs, the positive impact of FI on family firm performance is stronger. Our findings enrich both the theoretical insights into and practical comprehension of SEW priorities in relation to family firm performance, thereby underscoring the diverse performance outcomes associated with various types of family CEOs.

Managing a Gen-Z workforce – what family firms need to know: a perspectives article

PurposeThis paper highlights the opportunities and challenges for family firms in managing Generation Z (Gen-Z) employees. This perspective article explores several considerations for family firms in managing their Gen-Z employees and the potential implications for their socioemotional wealth (SEW).Design/methodology/approachThe authors provide a brief review of what is known about the values/work habits of Gen-Z employees and attracting, retaining and managing nonfamily employees in family firms.FindingsThe unique values, motivations and working styles of Gen-Z employees suggest the need for family business leaders to adopt a different approach to managing these employees. A focus on Gen-Z’s psychological contract, technological savviness and entrepreneurial orientation is provided with respect to how they can be managed.Originality/valueThe authors suggest the importance of approaching NFEs as a heterogenous group and offer avenues for future research with prospective research questions to better understand nonfamily Generation Z employees’ place in the family firm.

Corporate entrepreneurship and family businesses: a perspective article

PurposeFamily businesses play a pivotal role in the world’s economy, contributing to 70% of its GDP. Their success in the current environment demands the enactment of entrepreneurial and innovative competencies to catalyse organizational growth and performance. In this context, corporate entrepreneurship may help these organizations advance their competitive advantage. The systematic analysis of the past 50 years of research reveals that a broad range of variables may moderate relationships among antecedents, outcomes and corporate entrepreneurship. This article aims to explore future avenues of research that will contribute to a better understanding of corporate entrepreneurship in family firms.Design/methodology/approachThis paper is based on the systematic research.FindingsWhile the synergy between corporate entrepreneurship and family business has gained attention, the intricacies and nuances within this intersection remain largely unexplored due to the diverse nature of corporate entrepreneurship and family enterprises. Future research endeavours in this domain should aim to explore fundamental aspects, including refining the definition of corporate entrepreneurship, understanding its interplay with familiness, socioemotional wealth, national and organizational culture and other various family-related factors such as the composition of the top management team, organizational size, diversity and attitudes towards risk.Research limitations/implicationsBy outlining the key variables such as familiness, socioemotional wealth, generational involvement and cultural factors, the paper guides future research efforts. Researchers and practitioners can use these identified variables as focal points for deeper investigation and analysis when exploring the dynamics of corporate entrepreneurship within family businesses.Practical implicationsFamily firm managers may apply instruments like the Corporate Entrepreneurship Assessment Instrument together with other instruments like the Family Influence Familiness Scale (FIFS) and the FIBER instrument to obtain an indication of a firm’s likelihood of being able to successfully implement an entrepreneurial climate within the firm.Social implicationsFamily businesses represent 70% of the world’s GDP, therefore, improving the understanding of how corporate entrepreneurship augments their resilience and competitiveness, may contribute to the well-being of 60% of the global workforce.Originality/valueThe paper synthesizes the research in corporate entrepreneurship in family businesses and proposes a future perspective.

Exploring the Impact of Socioemotional Wealth on Moroccan Family Firms’ Global Expansion

This study delves into the pivotal role of socioemotional wealth (SEW) in shaping the global expansion strategies of Moroccan family businesses. By employing a quantitative approach, we scrutinize the intricate dynamics between SEW and internationalization decisions, focusing on control preferences during global ventures. Our investigation encompasses a comparative case study analysis of 51 Moroccan family enterprises, enriched by insights from semi-structured interviews and organizational data. Preliminary findings underscore the necessity of integrating SEW considerations in strategic planning for successful internationalization, highlighting a nuanced understanding of control mechanisms in family firms’ cross-border operations. This research contributes to the broader discourse on family business internationalization, offering a novel perspective on the interplay between emotional wealth and global market engagement.

Sustainability performance disclosure and family businesses: a perspective article

PurposeThe deeper understanding of the disclosure of external and internal dynamics of family firms necessarily places the issue of sustainability as one of the most pressing needs from both a research and managerial perspective. Therefore, this perspective article contributes to the debate of sustainability performance disclosure in family firms, proposing a research agenda.Design/methodology/approachThis study has organized the discussion around those elements that most significantly impact the propensity to disclose, with a specific focus on the interconnections and interrelations within them. The proposed research agenda is developed around three key elements: “how” firms disclose, “the reason why” they do it and “what” disclose of their performance(s).FindingsTo better understand “how” family firms should disclose their performance, it is suggested to engage in proactive stakeholder engagement to preserve long-term socioemotional wealth. “The reason why” for disclosure is still associated with the legitimization of family firms from an economic, social and environmental point of view. Finally, the “what” depends on several factors, such as the regulatory framework and the market involved.Practical implicationsThis paper contains suggestions for family firm managers, consultants and policymakers that are approaching corporate social responsibility (CSR) and non-financial reporting or sustainability disclosure overall, providing an overview of relevant factors influencing this transition process.Originality/valueThis paper suggests a logical framework to combine these three elements of the debate as strictly interrelated to foster the sustainability performance disclosure of family firms.

Timing the transition: gender diversity’s role in family IPOs

PurposeThis study investigates the relationship between board gender diversity (BGD) and the time to Initial Public Offering (IPO), which stands as an entrepreneurially risky choice, particularly challenging in family firms. We also investigate the moderating role of family ownership dispersion (FOD).Design/methodology/approachWe draw on an integrated theoretical framework bringing together the upper echelons theory and the socio-emotional wealth (SEW) perspective and on hand-collected data on a sample of Italian family IPOs that occurred in the period 2000–2020. We employ ordinary least squares (OLS) regression and alternative model estimations to test our hypotheses.FindingsBGD positively affects the time to IPO, thus, it increases the time required to go public. FOD negatively moderates this relationship. Our findings remain robust with different measures for BGD, FOD, and family business definition as well as with different econometric models.Originality/valueThe article develops literature on family firms and IPO and it enriches the academic debate about gender and IPOs in family firms. It adds to studies addressing the determinants of the time to IPO by incorporating gender diversity and the FOD into the discussion. Finally, it contributes to research on women and outcomes in family firms.

How does the heterogeneity of institutional investors influence corporate tax avoidance? The moderating role of family ownership

PurposeThis study provides new insights into the relationship between the heterogeneity of institutional investors (IIs) and corporate tax avoidance (CTA). It also investigates whether family ownership moderates this relationship.Design/methodology/approachBased on a sample of 200 French-listed firms from 2008 to 2017, we use the generalized method of moment (GMM) estimator proposed by Arellano and Bover (1995) and developed by Blundell and Bond (1998) to address endogeneity and omitted variable concerns.FindingsThe results show that passive IIs are associated with an increase in the level of tax avoidance. However, active ones significantly decrease the levels of tax avoidance practices. Moreover, we show that institutional activism is not sufficient to control managerial actions, particularly in the context of controlled family businesses. The results suggest that families may expropriate the rights of minority shareholders through a controlling coalition with passive IIs.Research limitations/implicationsThis study has several practical implications. First, the results are useful for policymakers who should constrain passive IIs to provide only one service (asset management). Second, this study may sensitize family owners to the need to cooperate with active IIs that are effective in monitoring the firm. In particular, families should be willing to sacrifice some of their socioemotional wealth to promote a balanced ownership structure, which is important for responsible and effective corporate governance.Originality/valueThis paper extends previous research by investigating the heterogeneity of IIs in terms of horizon, ownership and control. In addition, this paper sheds a new light on how family firms behave regarding tax avoidance practices in the presence of active and passive IIs.

Religion in Family Firms: A Socioemotional Wealth Perspective on Top-Level Executives with Perceived Religiosity

The extent and mechanisms through which religion intertwines with decision-making processes in family firms remain inadequately understood. Family firm owners, driven by their commitment to ethical business practices and the safeguarding of their socioemotional wealth, actively seek cues to inform their decision-making processes. This research demonstrates that, among these guiding cues, top-level executives’ perceived religiosity emerges as a relevant factor. Building upon the socioemotional wealth perspective and conducting a longitudinal analysis based on listed family firms between 2009 and 2018, our findings reveal a positive association between family voting rights and the presence of board members perceived to be religious. Furthermore, this relationship is less pronounced if family firms operate in industries with high research and development intensity. Our study confirms that boards with high shares of religiously perceived directors are positively associated with the appointment of chief executive officers perceived to be religious during succession events. We thereby present a unique perspective that acknowledges perceived religiosity as a micro-level constituent shaping board membership and successor selection. This investigation captures the intricate interplay between religion and family firms under a socioemotional wealth umbrella, offering important insights to the family business ethics discourse. Our research also offers practical implications for board and leadership diversity management in family firms.

Life satisfaction of family business members: The role of socioemotional wealth goals and psychological functioning

ABSTRACT Family businesses offer affective benefits to family business owners and family members employed at their family’s businesses. However, little is known about whether the pursuit of “Socioemotional Wealth” (hereafter “SEW”) goals in family businesses relates to the psychological functioning and life satisfaction of family business owners/members. Utilizing a self-determination theory perspective, this study examines whether the pursuit of SEW goals is associated with life satisfaction of family business owners/members through intrinsic psychological needs fulfillment and positive psychological functioning in terms of purpose in life, personal growth, mastery, positive relations, and autonomy. Following a quantitative methodology, survey data was collected from 175 family business owners/family members employed in their family’s business in the United States. Results of PLS-SEM show that SEW goals have a significant positive association with subjective well-being and that psychological functioning fully mediates this relationship. This study adds to our understanding of mental health of family business owners/members and individual-level outcomes of SEW.

Employee layoffs in times of crisis: do family firms differ?

ABSTRACT In this study, we seek to understand firm behaviour during times of crisis, with a particular focus on family firms in different contexts. We theorize that family control mitigates (i.e. negatively moderates) the relationship between economic crisis and the layoff of employees, resulting in a higher propensity of family firms to retain their employees during a crisis compared to their nonfamily counterparts. Furthermore, taking a closer look at family firms, based on their location, we argue that family firms in rural regions are more likely to adopt measures leading to involuntary job turnover than family firms in urban areas due to a higher sensitivity to the loss of socioemotional wealth following a business closure. Relying on a panel dataset of Swedish private firms active in the period 2004–2012, our study contributes to a better understanding of family firms as employers in different contexts.

Socioemotional Wealth and Tax Aggressiveness in Private Family Firms: The Role of the CEO’s Characteristics

Building on recent works calling for more tax research in the family business context, this study draws on the distinction between restricted and extended socioemotional wealth (SEW) to analyze how both SEW dimensions affect tax aggressiveness. Based on a sample of 201 private Belgian family firms, consistent findings from multiple regression analyses indicate that restricted SEW is positively related to tax aggressiveness, whereas extended SEW exerts a negative influence on tax aggressiveness. Our results also indicate that the family status of the CEO, CEO gender and CEO tenure moderate the relationship between both SEW dimensions and tax aggressiveness.

One more piece of the family firm debt puzzle: the influence of socioemotional wealth dimensions

The literature on debt financing in family firms is still inconclusive. Initial studies have usually focused on the influence of family involvement on firm’s debt levels by using the explanations of traditional economic theories. More recent studies have begun to focus on the role of family goals in family firm debt levels, particularly drawing on socioemotional wealth (SEW), which has helped in the development of financial theories of family business. Nevertheless, existing arguments have usually not considered SEW as a multidimensional construct that covers diverse family goals. In addition, literature has usually drawn on arguments considering SEW as a stock, but have not considered the importance given to SEW (SEWi), which specifically acknowledges SEW as a goal. Our paper responds to recent calls to extend theoretical arguments on the effect of diverse dimensions of SEWi on family firm behavior and to focus on the role of SEWi on the family firms’ debt. Specifically, we test how the CEOs’ assessment of the importance that their family attaches to the continuity, prominence, and enrichment dimensions of SEWi influences the level of debt. To do so, we use a sample of 126 Spanish unlisted family businesses. Our results show that the continuity dimension of SEWi leads family businesses to increase their debt level being a key determinant of this financing decision.

Does The Governance Model of Husband-and-Wife Shareholding Lead to Underinvestment?

This paper explores the extent to which joint shareholding by husband and wife affects underinvestment in family firms by establishing a multiple regression model based on the family firm-specific socio-emotional wealth theory perspective. It is found that joint spousal shareholding can alleviate the underinvestment of family firms to a certain extent, and it is also found that the underinvestment can be further alleviated when the important positions in family firms have technical backgrounds as well as when the family firms actively undertake social responsibilities. The results of this paper suggest that family firms should utilize the advantages of joint ownership in the future, which is conducive to the long-term development of the enterprise

Ownership structure and carbon emissions reduction

This study investigates the relationship between ownership structure and reductions in carbon emissions. The Taiwan government passed the Greenhouse Gas Reduction and Management Act in July 2015, requiring carbon-intensive firms to disclose their annual direct and indirect carbon emissions. To mitigate endogeneity concerns, we use Taiwan's inheritance and estate tax reform in 2017 as an exogenous shock to a firm's ownership structure to conduct two-stage least squares analyses. We find that the higher the controlling shareholder's cash flow rights, the more a firm's direct carbon emissions will be reduced, consistent with the positive incentive effect, long-term decision-making, and socio-emotional wealth argument. Furthermore, we also find that when the controlling shareholder's board seat ratio highly deviates from their cash flow rights, the controlling shareholder is less concerned about carbon risk and even increases direct carbon emissions, consistent with the negative entrenchment effect.