Socioemotional Wealth Preservation in Family Firms

A Source of Value Destruction or Value Creation?

Authored by: Ionela Neacsu , Geoffrey Martin , Luis Gómez-Mejía

The Routledge Companion to Family Business

Print publication date:  September  2016
Online publication date:  September  2016

Print ISBN: 9781138919112
eBook ISBN: 9781315688053
Adobe ISBN: 9781317419990

10.4324/9781315688053.ch7

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Abstract

1 The role played by large family owners and minority shareholders in influencing firm strategic decisions has been widely analyzed in the management literature (e.g., Block 2010, 2012; Chrisman and Patel 2012; Deephouse and Jaskiewicz 2013; Feldman et al. 2014; Gómez-Mejía et al. 2010, 2014; Grossman and Hart 1986; Miller et al. 2010; Muñoz-Bullon and Sanchez-Bueno 2011; Patel and Chrisman 2014; Shleifer and Vishny 1986). According to the growing body of research exploring the interplay between family and non-family shareholders, family owners are prone to make strategic decisions that follow their own subjective rules—triggered by their own risk preference—rather than make choices based on objective financial criteria which presumably would be more beneficial to non-family shareholders (Anderson et al. 2012; Chua et al. 2015). Given this conflict of interests between family and non-family shareholders, powerful family owners may develop an “us-against-them” mentality (Kellermanns et al. 2012) that leads them to use their control and influence over the business to alter firm strategic decision-making in ways that advance their family interests. That is, family owners purportedly obtain private benefits from the firm at the expense of other firm stakeholders (Berkman et al. 2009; Fan and Wong 2002; Grossman and Hart 1986). In fact, family owners’ prioritization of family goals is likely to influence the future of the firm since it affects the allocation of internal resources, the relationship with non-family stakeholders, as well as the work environment (Hitt et al. 2009). For instance, senior executives of family firms may allocate considerable levels of resources and capabilities to achieve family goals, which may have negative consequences for firm performance (Shleifer and Vishny 1986).

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