A Mixed Gamble Approach of the Impact of Family Management on Firm's Growth: A Longitudinal Analysis

Abstract

We draw upon the socioemotional wealth perspective and the mixed gamble approach to employ a five-year panel dataset of 223 Belgian private family firms to investigate the relationship between family management and growth, with family management ownership, generational involvement, and the CEO's family status moderating this link. We find an inverted U-shaped relationship, with growth reaching its maximum at intermediate levels of family management. Additionally, we demonstrate that family management ownership, generational involvement, and the presence of a family CEO hamper the family management-growth link: all these variables attenuate the positive effect of low to moderate family management, and accentuate the negative impact of high family management. Consequently, our research contributes to a deeper understanding of the relationship between family management and growth.

Family Versus Institutional Involvement in Restructuring: Evidence From the Communications Equipment Industry

“…Thus, our theoretical framework and findings may not hold for firms in low-technology industries or private firms where family involvement is more relevant and important (e.g., Chirico et al, 2019; Chrisman et al, 2012; Chua et al, 2004). We also kept our theoretical arguments to focus on the tensions between family and institutional investors in a parsimonious and manageable scope as new research is starting to explore nonlinear relationships for mixed-gamble situations (e.g., Bauweraerts et al, 2019).…”

“…A prospect for engaging in a restructuring can set up the different reference points set by family and institutional investors that will lead to discussions and potential conflicts within the board of directors. Thus, our hypothesized relationships may not hold for privately held firms where the family holds majority ownership and pursues noneconomic goals (e.g., Chrisman et al, 2012), the potential reference points set in a top management team that comprises family and nonfamily members (e.g., Bauweraerts et al, 2019), or when firms operate in stable and low-technology environments where restructuring may not be a viable strategic option to pursue.…”

“…First, firms that have family members in management likely do so because of valuable human capital that such ongoing involvement provides (e.g., Bauweraerts et al, 2019; Chang & Shim, 2014; Chrisman et al, 2012; Chrisman et al, 2013; Gedajlovic & Carney, 2010; Hoffmann et al, 2019). Thus, having the founder and/or descendants who possess critical knowledge about a firm’s resources and capabilities can facilitate value-enhancing strategic decisions.…”

“…In family business research, mixed-gambles logic has been used to frame dilemmas faced by family firms in research and development (R&D) investments (Gomez-Mejía et al, 2014), future entrepreneurial activity (Cruz & Justo, 2017), initial public offerings (IPOs; Kotlar et al, 2018), acquisitions (Gomez-Mejía et al, 2018), internationalization (Alessandri, Cerrato, et al, 2018), growth (Bauweraerts et al, 2019), performance (Hoffmann et al, 2019), or business exits (Chirico et al, 2019). These studies found that family firm owners confronted mixed-gamble situations that reduced or modified SEW endowments against changes in the family’s financial wealth.…”

How important is family involvement for small companies’ growth?

“…From the SEW perspective, we also study how family involvement weighs differently the balance between the economic and non-economic goals giving place to the mixed gamble approach (Gómez-Mejía et al , 2014). Thus, we suggest that family firms differently balance the value of business growth’s benefits and costs depending on the degree of family involvement (Bauweraerts et al , 2019; Alessandri et al , 2018). This induces either positive or negative consequences for firm growth.…”