Socioemotional Wealth and Family Firm Performance: A Stakeholder Approach

Family firms are globally ubiquitous and prominent across all industries and competitive environments (Gersick et al, 1997). While performance differences between family and non-family firms are widely studied within the domain of family business research, extant findings pertaining to the effects of underlying family-specific phenomena on family firm performance have been mixed (Habbershon et al, 2003; Jimenez et al, 2015; O'Boyle et al., 2012; Wagner et al., 2015). Thus, the question whether family ownership and management are favorable or detrimental to firm performance, as well as the debate pertaining to the increasingly ambiguous nature of firm performance itself in family firm contexts (Chrisman et al., 2012), are pervasive and central to the understanding of the intricacies of family firms and the determinants of their performance. To aid in identifying the distinct characteristics of family firms, the concept of socioemotional wealth (SEW) has been used to identify and explain the unique bundle of motivations and familial obligations that may direct the strategy of family firms towards prioritizing family-centered goals (Berrone et al, 2010; Gomez-Mejia et al, 2007). This concept includes primarily family-oriented affective endowments, pursued through operating a family business, that serve the collective needs of the owning family (Chrisman et al., 2012; Gomez-Mejia et al, 2007). Thus, SEW goals have hitherto mostly been considered an alternative, and sometimes an impediment, to the financial performance of family firms (Banalieva and Eddleston, 2011). While the SEW construct, its dimensions, and influence on firm outcomes, have been explored conceptually, there is a dearth of empirical research on how the pursuit of particular SEW-related objectives may influence performance in family enterprises. The present research addresses this gap by considering the effect that particular dimensions of SEW may have on family firm performance. Building on ongoing theoretical development of SEW models, which consider SEW to be a multidimensional construct (e.g., Berrone et al., 2012; Debicki et al., 2016), this study considers the importance of three SEW dimensions--family prominence, family continuity, and family enrichment--that reflect the motivations and goals of family firm leaders and consequently lead to specific strategic actions. In doing so, it addresses standing calls for the empirical exploration of SEW dimensions and their "... favorable or unfavorable impact on the achievement of financial objectives" (Berrone et al., 2012: 273). Thus, the main research questions of this study are as follows: could the multi-dimensionality of the SEW construct be the cause of inconsistent conclusions with respect to its relationship with firm performance in extant literature? And if so, what aspects of SEW can potentially aid family firms in achieving better performance, and what aspects of SEW are likely to have detrimental consequences for performance? The arguments are grounded in a broad stakeholder approach (Zellweger and Nason, 2008) that considers the various stakeholder groups in family firms, as well as the relationships between different outcomes of pursuing SEW-related objectives for these stakeholder units. To answer these questions, this paper develops and tests a model illustrating the unique influence of the above three SEW dimensions on the performance of family firms. THEORY DEVELOPMENT The pursuit and preservation of SEW is a primary distinguishing factor of family firms and encompasses the non-financial benefits that the family derives from their owned business (Gomez-Mejia et al, 2007). Since SEW is predominantly related to the pursuit of benefits beyond the financial gains derived from operating a business, theoretical inquiries usually consider SEW to be detrimental or unrelated to financial performance (e.g., O'Boyle et al., 2012). On the other hand, empirical evidence, confirmed by a recent meta-analysis, suggests that family firms generally achieve better performance than their non-family counterparts (Wagner et al. …