BestAmong the Worst or Worst Among the Best? Socioemotional Wealth and Risk-Performance Returns for Family and Non-family Firms Under Financial Distress

Abstract

A firm’s proactive engagement in risk, which has been deeply intertwined with the entrepreneurship literature, is essential to sustaining a firm’s long-term competitive advantage. Drawing on BAM’s mixed gamble logic in a family firm context, the present study offers a theoretical framework examining how firm risk returns differ in the contexts of distressed (the worst) and nondistressed (the best) family and nonfamily firms. We predict that family control moderates the risk taking-performance relationship. That is, compared with nonfamily firms, a mixed gamble featuring the prospect of socioemotional and financial losses leads family firms to extract higher financial returns from risk taking when in financial distress, but lower financial returns when they are not in financial distress. Our theoretical expectations are supported using a matched sample of Swedish firms.

Examining Heterogeneous Configurations of Socioemotional Wealth in Family Firms Through the Formalization of Corporate Social Responsibility Strategy

“…Family business scholars have often used the socioemotional wealth (SEW) construct, defined as the nonfinancial value embedded in the family firm, to distinguish family from nonfamily firms (e.g., Gomez-Mejia et al, 2007, 2011, 2018, 2019, 2022). Compared with nonfamily firms that focus on maximizing the firm’s financial value, family businesses consider not only financial value but also SEW when making strategic decisions (Martin & Gomez-Mejia, 2016).…”

Are narcissistic CEOs good or bad for family firm innovation?

“…Hence, though they may potentially damage SEW, narcissistic CEOs might also be beneficial for family firms. Our study therefore brings light to the debate in the family business literature as to when the pursuit of SEW and financial wealth might be mutually reinforcing or counterbalance each other (Gomez-Mejia et al, 2021a; Kotlar et al, 2018; Martin and Gomez-Mejia, 2016).…”

Socio‐emotional Wealth Preservation and Alliance Success in Family Firms: The Role of Political Instability and Alliance Management Capability

“…This limitation is even more evident in the family business literature, where the idiosyncratic effect of the family on the possession of AMC is almost overlooked (Feranita et al, 2017). Therefore, in our study, we address this limitation by investigating the effect of family firms' concern to preserve their SEW (Gomez-Mejia et al, 2011) on the extent to which these firms would have the three prominent organizational skills that underpin AMC (namely proactiveness, coordination and learning). See Figure 1.…”

“…This is because the decision-making process can be compromised by conflicting agendas (e.g. to maintain control, family members may avoid profitable investments and initiatives that may be perceived as threatening their values and control) that can eventually undermine growth potential (Gomez-Mejia et al, 2017;Gómez-Mejia et al, 2022).…”