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Business Review
Socioemotional Wealth in Family Firms : Theoretical Dimensions, Assessment Approaches, and
Agenda for Future Research
Pascual Berrone, Cristina Cruz and Luis R. Gomez-Mejia
Family Business Review 2012 25: 258 originally published online 15 February 2012
DOI: 10.1177/0894486511435355
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Socioemotional Wealth in Family
Firms: Theoretical Dimensions,
Assessment Approaches, and Agenda
for Future Research
Family Business Review
25(3) 258­–279
© The Author(s) 2012
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sagepub.com/journalsPermissions.nav
DOI: 10.1177/0894486511435355
http://fbr.sagepub.com
Pascual Berrone1, Cristina Cruz2, and Luis R. Gomez-Mejia3
Abstract
This article makes the case for the socioemotional wealth (SEW) approach as the potential dominant paradigm in
the family business field. The authors argue that SEW is the most important differentiator of the family firm as a
unique entity and, as such, helps explain why family firms behave distinctively. In doing so, the authors review the
concept of SEW, its different dimensions, and its links with other theoretical approaches. The authors also address
the issue of how to measure this construct and offer various alternatives for operationalizing it. Finally, they offer a
set of topics that can be pursued in future studies using the SEW approach.
Keywords
family firms, socioemotional wealth, theoretical review
Introduction
Early studies in the family business field suffered from
significant methodological problems and were largely
descriptive and atheoretical. But as the field evolved and
responded collectively to unceasing calls for theoretical
rigor (Chrisman, Chua, & Sharma, 2005; Chrisman,
Steier, & Chua, 2008), scholars suggested a battery of
paradigms for examining issues that were idiosyncratic
to family-controlled firms. These paradigms were borrowed from other domains, primarily financial economics and strategic management, where the primary focus
of attention was large publicly owned corporations with
highly dispersed ownership. These included agency theory (Morck & Yeung, 2003; Schulze, Lubatkin, Dino, &
Buchholz, 2001), stewardship theory (Miller & Le BretonMiller, 2006a), and the resource-based view of the firm
(Habbershon & Williams, 1999; Habbershon, Williams,
& MacMillan, 2003).
Although important insights have been derived from
extensions and adaptations of these imported formulations to explain the behavior of family-controlled firms,
much remains to be done, and the core issues that are
unique to family firms (most of which are nonfinancial
in nature) are at best tangential in these formulations. It
is fair to say that the field lacks paradigmatic coherence
and that much of the family business literature still
retains a strong phenomenological flavor. We believe
that “foreign” paradigms designed for organizations
where economic instrumentality is assumed fall short
of adequately dealing with the uniqueness of family
firms. For family business studies, this practice has
often led to contradictory empirical results, excessive reductionism, overlapping terminology, fragmented
1
University of Navarra, Madrid, Spain
Instituto de Empresa, Madrid, Spain
3
Texas A&M University, College Station, TX, USA
2
Corresponding Author:
Pascual Berrone, IESE Business School, University of Navarra,
Department of Strategic Management, Camino del Cerro del Águila,
3, 28023 Madrid, Spain
Email: [email protected]
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Berrone et al.
theoretical interpretations, and a forced application of
borrowed logic to explain descriptive findings.
In response to this need, Gomez-Mejia, Haynes,
Nuñez-Nickel, Jacobson, and Moyano-Fuentes (2007);
Gomez-Mejia, Makri, and Larraza Kintana (2010);
Berrone, Cruz, Gomez-Mejia, and Larraza-Kintana
(2010); and Gomez-Mejia, Cruz, Berrone, and De Castro
(2011) suggested a new “homegrown” theoretical formulation within the family business field, which they
called the socioemotional wealth (SEW) model. This
model builds on the foundations of prior family firm
studies. However, at the same time, it is firmly anchored
in the behavioral tradition within the management field.
Simply put, the SEW model suggests that family firms
are typically motivated by, and committed to, the preservation of their SEW, referring to nonfinancial aspects or
“affective endowments” of family owners. In this formulation, gains or losses in SEW represent the pivotal
frame of reference that family-controlled firms use to
make major strategic choices and policy decisions.
As is commonly the case with new theoretical
approaches, the SEW model shows several benefits but
at the same time poses important challenges, especially
in its methodological application. Because of its recent
addition to the family business literature, empirical
studies using this model have relied on SEW as a latent
explanatory construct (e.g., Gomez-Mejia et al., 2010),
but the construct itself has not been directly measured.
This article represents an important step in this direction. We explore the content structure of SEW as a construct and describe approaches to measure it better and
capture its behavioral consequences. We also provide a
set of research questions pertaining to SEW that might
be used to guide future research.
We contribute to the current literature in three distinctive ways. First, we propose a set of dimensions of
SEW based on prior research. We have labeled these
dimensions as FIBER, which stands for Family control
and influence, Identification of family members with the
firm, Binding social ties, Emotional attachment of family members, and Renewal of family bonds to the firm
through dynastic succession. Second, from an empirical
perspective, we directly address what is perhaps the
greatest challenge that the SEW model faces, that is, the
operationalization of SEW, by proposing a set of items
to capture the distinct dimensions of SEW, and we discuss some alternative ways for measuring them. These
items are derived from the cross-disciplinary literature
that has addressed various aspects of SEW. Last, we outline a set of research questions where the SEW model
and the dimensions proposed here may be used as valuable analytical tools.
The Origin of the SEW Approach
There is general agreement in the field that family firms
are not simply a unique phenomenological setting but are
significantly different from nonfamily firms (for a recent
review of literature, see Gomez-Mejia, Cruz, et al.,
2011). There is a large body of empirical evidence consistent with this statement across many countries, including Ireland (e.g., Reid & Adams, 2001), Israel (e.g.,
Lauterbach & Vaninsky, 1999), the United States (e.g.,
Chrisman, Chua, & Litz, 2004), Germany and Switzerland
(e.g., Zellweger, Kellermanns, Chrisman, & Chua, 2011),
and Spain (e.g., Gomez-Mejia, Nuñez-Nickel, & Gutierrez,
2001), among others.
Gomez-Mejia et al. (2007) developed a general
“socioemotional wealth” model to explain many of
these diverse findings. This model was created as a
general extension of behavioral agency theory, formulated years earlier by Wiseman and Gomez-Mejia
(1998) and Gomez-Mejia, Welbourne, and Wiseman
(2000)Behavioral agency theory integrates elements of
prospect theory, behavioral theory of the firm, and
agency theory. Fundamental to this theory is the notion
that firms make choices depending on the reference
point of the firm’s dominant principals. These principals will make decisions in such a way that they preserve accumulated endowment in the firm. In the case
of family principals, the emphasis on preserving SEW
becomes critical. Hence, family owners frame problems in terms of assessing how actions will affect socioemotional endowment. When there is a threat to that
endowment, the family is willing to make decisions that
are not driven by an economic logic, and in fact the family would be willing to put the firm at risk if this is what
it would take to preserve that endowment.
The socioemotional endowment is conceptualized in
broad terms to capture the stock of affect-related value
that a family derives from its controlling position in a
particular firm. It includes the unrestricted exercise of
personal authority vested in family members, the enjoyment of family influence over the business, and close
identification with the firm that usually carries the family’s name (Gomez-Mejia et al., 2007). Although nonfamily
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Family Business Review 25(3)
principals and managers might experience some of this,
“the value of socioemotional wealth to the family is
more intrinsic, its preservation becomes an end in itself,
and it is anchored at a deep psychological level among
family owners whose identity is inextricably tied to the
organization” (Berrone et al., 2010, p. 87).
According to the logic of behavioral agency theory,
given its pivotal utility to family principals, any threat to
SEW means that the family is in a “loss mode” and,
therefore, will make strategic choices that will avoid
these potential SEW losses even if achieving this objective might come at the expense of other principals (e.g.,
institutional investors) who do not share in these SEW
utilities. For the family principals, risk averseness to
socioemotional endowment takes priority over risk
averseness to financial losses. In contrast, agency arguments indicate that family principals would avoid strategic choices that carry a significant risk of financial losses
because the family’s patrimony is largely tied to one
firm. Hence, SEW preservation in a behavioral agency
context contradicts a basic agency prediction: Insofar as
SEW preservation is the primary reference point of family principals, and that strategic choices reducing the
firm’s financial risk jeopardize that SEW, the family will
opt for the SEW preservation alternative.
Although SEW may not be unique to an organizational context where family ties are present, for family
principals and employees the firm becomes an integral
and inescapable part of their lives. This contrasts with
nonfamily shareholders or hired managers and employees for whom the relationship with the firm is more distant, transitory, individualistic, and utilitarian (Block,
2011; Chua, Chrisman, & Sharma, 2003). In other words,
as we argue next, SEW is the single most important feature of a family firm’s essence that separates it from other
organizational forms.
Empirical Evidence in Support
of the SEW Approach
In recent years, research by Gomez-Mejia and colleagues has provided overwhelming evidence that when
issues are framed negatively by the family in terms of
SEW losses, family principals tend to choose risky economic actions that preserve SEW. Gomez-Mejia et al.
(2007) reported that family-owned olive oil mills prefer
to remain independent and not join cooperatives even
though the cooperative offers many financial benefits to
the firm and greatly reduces firm risk. Jones, Makri, and
Gomez-Mejia (2008) showed that family-controlled
firms prefer to appoint affiliate directors to the board
(those with business ties with the firm), even if this
constrains the board’s ability to monitor management
and provide independent advice. In the same vein, Cruz,
Gomez-Mejia, and Becerra (2010) showed that family
principals tend to create agency contracts for the top
management team (TMT) that are more protective of
their welfare when the team is composed of family
members, even though this action is decoupled from
firm performance.
Another set of empirical papers shows how SEW
predicts distinctive strategic choices. Gomez-Mejia et al.
(2010) reported that family-controlled firms tend to
diversify less even though this implies greater business
risk. The reason given is that diversification reduces the
family’s SEW by having to appoint nonfamily members
to various business units, reducing family influence over
the units, decreasing centralization of decision making,
and the like. Similar findings and arguments are given
by Gomez-Mejia, Hoskisson, Makri, Sirmon, and Campbell
(2011) for family firms operating in high-technology
sectors when facing technological diversification decisions. The study shows that family-controlled firms are
less likely to diversify technologically, even though this
reduces firm risk. The reason is that technological diversification is framed negatively by the family principal in
terms of SEW losses, because it usually forces the family to cede some ownership to parties outside the firm,
such as venture capitalists or institutional investors.
Last, Berrone et al. (2010) reported that familycontrolled firms in polluting industries tend to contaminate less in order to enhance the family’s image
(i.e., to protect their SEW), particularly if the plants
are geographically congregated in a particular community. They do so even when there are no obvious economic rewards derived from adopting such behavior.
Recently, the SEW has started taking hold in the
field as some scholars adopted it as the main framework for their empirical studies. For instance, Zellweger,
Kellermanns, et al. (2011), using a sample of Swiss and
German family businesses, showed that as families’
intentions for transgenerational control increases, family owners will demand a higher price for selling the
company to nonfamily actors. The authors argue that
intentions for transgenerational control suggest that
family owners count the future benefits of control as
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Berrone et al.
part of their socioemotional endowment. Consequently,
selling the firm is an option only if family owners are
commensurably compensated for the loss in SEW.
Miller, Le Breton-Miller, and Lester (2012) use the
SEW approach to investigate whether or not the pursuit of
SEW objectives leads to greater strategic conformity
among large and publicly listed family firms. Their findings suggest that the more the family is implicated in
ownership and management, the more likely is strategic
conformity to occur. Following an SEW reasoning, they
argue that family involvement is a signal to external stakeholders of family priorities on preserving SEW and requires
family firms to put more efforts on achieving legitimacy by
showing strategic conformity to industry norms.
The common theme across the studies noted above,
consistent with the logic of the behavioral agency theory, is that in family-controlled organizations, the preservation of SEW represents a key noneconomic reference
point for decision making, which might drive the firm to
make strategic choices that cannot be explained by
applying an economic reference point or a risk-averse
financial logic (Zellweger, Kellermanns, et al., 2011).
As an extension of behavioral agency theory, some of
the studies listed above allow for the existence among
family principals of different reference points that might
change depending on the external threats facing the firm
(e.g., Gomez-Mejia et al., 2007; Gomez-Mejia, Cruz,
et al., 2011). Although SEW preservation is the “higher
order” reference point for the family principal, poor performance acts as an informational clue that alters the
family owners’ loss framing. Poor performance raises the
specter of a dual threat: the prospect of severe financial
hardship to the family’s standard of living (because the
family has most of its patrimony deposited in one organization) and the possibility of SEW extinction (because
the firm might have to be sold, merge with another firm,
be taken over by another firm, go bankrupt, be liquidated,
and the like). Empirical results are consistent with a
shifting reference point in family-controlled firms but
only when the family is forced to reconsider SEW as the
primary reference point.
Advantages of the SEW Model
Because of its breadth and depth, the SEW construct has
proven to be a good analytical lens for interpreting a
wide variety of family firm phenomena. However, the
SEW model is still in its infancy, and as it matures, it can
be particularly advantageous for pursuing future research
in the family business area. There are several interrelated reasons for this belief. First, as noted earlier, the
SEW approach is firmly rooted in the behavioral agency
theory, and hence, it has a strong conceptual base.
Second, the SEW preservation notion does not reject the
main argument of the agency perspective that indicates
that family members can occasionally behave opportunistically. SEW suggests, however, that they do so to
protect their socioemotional endowment even when this
has a financial cost. As mentioned, the study by GomezMejia et al. (2007) found that family-controlled mills
were 3 times less likely to join a cooperative (a rather
lucrative option) than the non–family-controlled mills
because doing so implied the loss of the family’s SEW.
The SEW model also helps explain anomalous results
inconsistent with agency theory predictions by allowing
differential risk preferences to family members. For
instance, contrary to the conventional agency-based view
(see Anderson & Reeb, 2003b), Gomez-Mejia et al.
(2010), applying the SEW approach, argue that family
firms are willing to incur significant business risks if necessary by diversifying less in order to preserve SEW.
The SEW model also addresses one of the main flaws
of agency theory, that is, it accounts for the collaborative
behaviors (Sundaramurthy & Lewis, 2003) and the
emotional aspects (Baron, 2008) of family firms. In this
regard, the SEW model is in line with some of the basic
tenets of stewardship theory (Donaldson & Davis,
1991). Unlike stewardship theory, however, the SEW
model rejects the naïve assumption that family members
do not pursue selfish objectives. As Berrone et al. (2010)
warned us, the SEW approach does not imply that family firms are self-sacrificial and/or ignore financial issues.
The main point of SEW is that when there is high family
involvement, firms are more likely to bear the cost and
uncertainty involved in pursuing certain actions, driven
by a belief that the risks that such actions entail are counterbalanced by noneconomic benefits rather than potential financial gains. It is also in line with recent studies
that propose both (agency and stewardship) views to
have an application to the family business context but
under different circumstances, depending on the degree
of embeddedness of family actors in the family and in
the business (Le Breton-Miller, Miller, & Lester, 2011).
Last, since the SEW explains the behaviors in the
decision-making process, it is informative regarding the
seemingly mixed arguments suggesting that “familiness”
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Family Business Review 25(3)
can have both negative and positive impacts on firm outcomes (Habbershon & Williams, 1999). However, most
important of all for family business scholars is the fact
that the SEW model largely relies on and is developed
from the body of research in family business. This is
relevant because, in contrast with other approaches that
struggle to adjust their rationales to the context of family
firms, the SEW model naturally stems from the reality
of family businesses that suggest the existence of multiple salient goals that are driven by the values of the
family and that change over time (e.g., Chua, Chrisman,
& Sharma, 1999; Sorenson, Goodpaster, Hedberg, &
Yu, 2009; Zellweger, Nason, Nordqvist, & Brush, 2011).
It also gathers insights and understanding from the large
volume of research that has been created over the past
three decades in the family business arena. From a disciplinary perspective, having a “homegrown” theoretical
framework provides legitimacy and positions the area of
family business studies as a rigorous, distinctive, and
solid field. Together, all these benefits position the SEW
approach as a potential dominant paradigm in the field.
Dimensions of SEW
As noted earlier, SEW is an all-encompassing approach
that captures the “affective endowment” of family owners, including the family’s desire to exercise authority,
enjoyment of family influence, maintenance of clan
membership within the firm, appointment of trusted
family members to important posts, retention of a strong
family identity, continuation of the family dynasty, and
so on (Gomez-Mejia et al., 2007). Therefore, by its very
nature, the concept of SEW is multidimensional.
Because most prior research on SEW relied on archival
data sources, secondary univariate measures (e.g., ownership distribution, percentage of family members in
board, and CEO family status) have generally been used
as proxies for the purported importance of SEW. Hence,
prior research has not explored the dimensions of the
SEW construct in detail. Based on the family business
literature and basic social science disciplines that support it, our next task is to unravel and disentangle the
various dimensions of SEW. We propose that there are
five major dimensions of SEW that may be derived
from prior research. We will collectively label these five
dimensions as FIBER. We describe them below.
Family control and influence. The first dimension refers
to the control and influence of family members. One key
characteristic that distinguishes family firms is that family members exert control over strategic decisions (Chua
et al., 1999; Schulze, Lubatkin, & Dino, 2003b). The
power to control can be exerted directly, such as being
CEO or chairman of the board, or more subtly by, for
instance, appointing the TMT members. The control can
be exerted by the original founder or by a dominant family coalition. The ability to exercise authority vested in
family members can emanate from a strong ownership
position, from an ascribed status, or from personal charisma. It is not uncommon to see family owners assuming multiple roles in the firms as a way of exerting
formal and informal control (Mustakallio, Autio, &
Zahra, 2002). In any case, control and influence are an
integral part of SEW and highly desired by family
members (Zellweger, Kellermanns, et al., 2011). Put
differently, to achieve the goal of preserving SEW, the
family members require continued control of the firm.
Therefore, family firms are more likely to perpetuate
owners’ direct or indirect control and influence over the
firm’s affairs regardless of financial considerations
(Gomez-Mejia et al., 2007).
Family members’ identification with the firm. The second dimension addresses the close identification of the
family with the firm. Numerous family business scholars contend that the intermeshing of family and business
gives rise to an inherently unique identity within family
firms (e.g., Berrone et al., 2010; Dyer & Whetten, 2006).
The identity of a family firm’s owner is inextricably tied
to the organization that usually carries the family’s
name. This causes the firm to be seen both by internal
and external stakeholders as an extension of the family
itself. Internally, this is likely to have a significant influence on the attitudes not only toward employees, for
instance, but also toward other internal process and on
the quality of the services and products they provide
(Carrigan & Buckley, 2008; Teal, Upton, & Seaman,
2003). Externally, this makes family members quite sensitive about the external image they project to their customers, suppliers, and other external stakeholders (Micelotta
& Raynard, 2011).
Consistent empirical evidence is now available that
suggests that because of the strong identification with
the firm’s name and because public condemnation could
be emotionally devastating for family members (Westhead,
Cowling, & Howorth, 2001), family firms exhibit higher
levels of corporate social responsibility and community
citizenship (Berrone et al., 2010; Craig & Dibrell, 2006;
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Berrone et al.
Dyer & Whetten, 2006; Post, 1993) and take particular
care to perpetuate a positive family image and reputation (P. Sharma & Manikuti, 2005; Westhead et al.,
2001).
Binding social ties. The third dimension refers to family firms’ social relationships. Recent research by Cruz,
Justo, and De Castro (2012) argues that SEW provides
kinship ties with some of the same collective benefits
that arise in closed networks, including collective social
capital, relational trust (Coleman, 1990), and feelings of
closeness and interpersonal solidarity (Uzzi, 1997).
The reciprocal bonds seen within family business are
not exclusively between family members but are likely
to be extended to a wide set of constituencies (Miller,
Jangwoo, Sooduck, & Le Breton-Miller, 2009). For
instance, family firms often have time-honored vendors
and suppliers, who may be viewed as, or might actually
be, members of the family (Uhlaner, 2006). The family
firms’ sense of belonging, self, and identity are often
shared by nonfamily employees, promoting a sense of
stability and commitment to the firm (Miller & Le
Breton-Miller, 2005).
Kin ties among members of the extended family are
likely to engender strong social bonds with the community at large as well. As Brickson (2005, 2007) argued,
given these reciprocal bonds in family businesses, one
would expect these firms to pursue the welfare of those
who surround them, even if there were no obvious transactional economic gains in doing so. Berrone et al.
(2010) argued that family firms are deeply embedded in
their communities and often sponsor associations and
activities that are valued in the community, such as
United Way, YMCA, charities, special events, and local
sports teams. They might do this for altruistic reasons,
for the enjoyment of receiving recognition for generous
actions (Schulze et al., 2003b), or for both.
Emotional attachment. The fourth dimension deals
with the affective content of SEW and refers to the role
of emotions in the family business context. Although
emotions are an “integral and inseparable part of everyday organizational work” (Ashforth & Humphrey, 1998,
p. 98), in organizations where family relationships dominate, there is a longer history and knowledge of shared
experiences and past events that converge to influence
and shape current activities, events, and relationships.
Indeed, many scholars see the intermingling of emotional factors originating from family involvement with
business factors as a distinctive attribute of family firms
(Eddleston & Kellermanns, 2007; Taguiri & Davis,
1996). By their own nature, families are characterized
by a wide range of emotions, some of them positive,
such as warmth, tenderness, love, consolation, and happiness, and others that are negative, such as anger, fear,
loneliness, anxiety, sadness, disappointment, and
depression (Epstein, Bishop, Ryan, Miller, & Keitner,
1993). These emotions result from daily situations and
are not static, as they emerge and evolve through more
or less critical events in each family business system
(succession, divorce, illness, family or business loss,
economic downturn, etc.; Dunn, 1999; Gersick, Davis,
Hampton, & Lansberg, 1997; Shepherd, Wiklund, &
Haynie, 2009).
Because the boundaries between family and corporation are rather blurred in family businesses (Berrone
et al., 2010), emotions permeate the organization, influencing the family business’s decision-making process
(Baron, 2008). At the same time, emotional attachment
also refers to psychological appropriation of the firm by
the family in order to maintain a positive self-concept.
Because of the type of social links that family members
have within and outside their firms (see next point),
companies become the place where the needs for belonging, affect, and intimacy are satisfied (Kepner, 1983). In
other words, the family’s emotional attachment to the
firm can “facilitate self-continuity by connecting a person with a desirable past self (e.g., memories), a present self (me now), or a future self (who I am becoming)”
(S. S. Kleine, Kleine, & Allen, 1995, p. 328). It also fosters the family’s sense of legacy, since the loss of the
firm represents a highly emotional event for most owners (P. Sharma & Manikuti, 2005; Shepherd et al., 2009).
Unfortunately, despite the relevance of emotions for
SEW and their prevalence in the family business setting,
emotions and sentiments in family business research
have been largely understudied. As noted by Labaki,
Michael-Tsabari, and Zachary (in press), emotions in
the context of family firms are often discussed indirectly
referring to issues that impact businesses, such as family
conflicts (Beehr, Drexler & Faulkner, 1997; Danes,
Zuiker, Kean & Arbuthnot, 1999; Kellermanns &
Eddleston, 2006; Lee & Rogoff, 1996), personal relationships (Kaye, 1996) and family culture (Danes, Lee,
Stafford & Heck, 2008; Dyer, 1986).” Labaki et al. (in
press) also identified authors who proposed their own
emotional constructs specific to the family business,
such as emotional returns and costs (Astrachan &
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Family Business Review 25(3)
Jaskiewicz, 2008), emotional capital (P. Sharma, 2004)
and emotional value (Zellweger & Astrachan, 2008).
Others have studied related constructs, such as trust
(Steier, 2001), altruism (Eddleston & Kellermanns,
2007; Zahra, 2003), and benevolence (Cruz et al., 2010).
This dimension is particularly useful in understanding why, under certain circumstances, family members
take the opportunity to be altruistic to each other (Schulze
et al., 2003b) or are more likely to consider family members as trustworthy (Cruz et al., 2010). However, sentiments can also have a negative effect, making kin
relations dysfunctional. Unlike nonfamily firms, however, where dysfunctional relationships and persistent
conflicts often end with termination of the employment
contract of the parties involved, in family firms, where
the emotional attachment is high, conflictive relationships are preserved, perhaps involuntarily and in the
hope that they will eventually return to a harmonious
condition. As Fletcher (2000) states, “The interpersonal
linkages, emotional bondings and affectionate ties that
characterize all firms are possibly more complex and
embedded in family firms” (p. 164).
Renewal of family bonds to the firm through dynastic
succession. The fifth and last dimension of SEW refers to
the intention of handing the business down to future
generations. Indeed, Zellweger and Astrachan (2008),
and Zellweger, Kellermanns, et al. (2011) suggest this
transgenerational sustainability as one of the central
aspects of SEW.
This sense of dynasty has important implications for
the time horizons in the decision-making process. From
the perspective of a family shareholder, the firm is not just
an asset that may be easily sold, since the firm symbolizes
the family’s heritage and tradition (Casson, 1999; Tagiuri
& Davis, 1992). Consequently, family members view the
firm as a long-term family investment to be bequeathed to
descendants (Berrone et al., 2010). Evidence shows that
maintaining the business for future generations is commonly seen as a key goal for family firms (Kets de Vries,
1993; Zellweger, Kellermanns, et al., 2011) and that many
family firms exhibit longer term planning horizons (Miller
& Le Breton-Miller, 2006b; Miller, Le Breton-Miller, &
Scholnick, 2008; Sirmon & Hitt, 2003).
Although the long-term view might foster some undesirable consequences, such as managerial entrenchment
or conflicts over succession, it is well established in the
family business literature that the preservation of the family
dynasty, the perpetuation of family values through the business, and the intention to pass the business to subsequent
generation foster a “generational investment strategy that
creates patient capital” (Sirmon & Hitt, 2003, p. 343),
commitment to building capabilities, and learning.
Measuring Fiber
Dimensions of SEW
Despite the demonstrated value of the SEW model, prior
studies left out an important element for research,
namely, mapping out the domain of SEW and developing instruments to assess its various dimensions. Either
explicitly or implicitly, SEW has been used as a broad
yet unitary explanatory construct without measuring it
directly. The most common proxy used to capture the
intensity of SEW in prior studies is rather coarse,
namely, stock ownership in the hands of family members.
There are good reasons to expect that the family’s SEW
is enhanced as ownership increases. Different studies
have shown that as concentration of firm ownership in
family hands increases, the family has greater influence
over the firm’s strategic decisions (Anderson & Reeb,
2003a; Miller et al., 2012), reinforcing the control
dimension of SEW (Gomez-Mejia et al., 2007), personal
financial dependence, and the level of personal attachment, identification, and emotional bonds between family members and the firm (French & Rosenstein, 1984).
Although use of secondary proxies (e.g., percentage
of shares owned by a family) may be a valid first-degree
approximation to SEW, and perhaps the only available
alternative when using large archival databases, they are
unlikely to capture its full spectrum. For instance, sentiments, emotions, and relationships within the family
controlling a firm may vary from one firm to another
and, within the firm, from one point in time to another
(Hoy & Sharma, 2010), even with the same level of
ownership. In other words, family firms are not a monolithic or homogeneous group of people with congruent
interests, nor are all family businesses identical with
respect to organizational characteristics and behaviors.
Therefore, the issue of how to measure SEW deserves a
closer look and a better assessment. Next, we discuss
different approaches to addressing this methodological
gap, namely, surveys, content analysis, laboratory
experiments, and case studies.
Surveys
Although studies analyzing publicly traded family firms
tend to rely mainly on archival data (Anderson & Reeb,
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Berrone et al.
2003a, 2003b, 2004; Berrone et al., 2010; Gomez-Mejia
et al., 2010; Miller et al., 2012), questionnaires and
surveys are widely used when studying privately held
family firms (e.g., Beck, Debruyne, Janssens, & Lommelen,
2011; Bettinelli, 2011; Zellweger & Dehlen, 2012).
At a theoretical level, among the drivers of noneconomic goals, scholars have proposed concepts such as
altruism, fairness, justice, and generosity (e.g., Eaton,
Yuan, & Wu, 2002; Schulze et al., 2001). Using surveys,
empirical evidence has tried to measure the importance
that family owners attach to noneconomic goals (vs.
financial goals; Lee & Rogoff, 1996; Taguiri & Davis,
1996). To date, however, no attempt has been made to
grasp the SEW construct using psychometric instruments. We believe that surveys can be appropriate tools
for measuring SEW, given the extensive experience and
knowledge that scholars in the field have gained over
the past few years.
As a first approximation, Table 1 presents a set of items
that will be a useful base for conducting questionnaires
and that are designed to capture the different dimensions
of SEW. We generated 30 items thought to represent the
five proposed FIBER dimensions of SEW drawn from
previous studies. For each set of items, we indicate in
Table 1 a representative literature on which these proposed
items are based. For instance, to build some of the items of
our dimensions of emotional attachment and family identity, we used a modified version of some of the items
included in the studies by O’Reilly and Chatman (1986),
to reflect identification with the organization, and Allen
and Meyer (1990), for organizational commitment.
Moreover, we also draw on scales from the family business literature, such as the Family Business Commitment
Questionnaire developed by Carlock and Ward (2001), the
F-PEC Scale for Family Businesses (S. B. Klein, Astrachan,
& Smyrnios, 2005), the Caring Contract scale used by Cruz
et al. (2010), and the items to capture intentions for transgenerational control (Zellweger, Kellermanns, et al., 2011).
Thus, the FIBER scale is eclectic in its sources but soundly
based on previous literature.
Items were formulated at the individual level as we
consider the individual family member as the appropriate unit of analysis on which to collect data. However, as
mentioned before, the SEW construct is defined on the
basis of a collective family identity, so questions were in
most cases designed to capture individual perceptions
about group (family) attitudes regarding the five dimensions described above.
Although the items proposed in Table 1 are based on
prior research, they still need to be tested and to pass
standard psychometric procedures (e.g., exploratory and
confirmatory factor analyses) to verify the hypothesized
content structure of SEW and ensure the items’ internal
consistency and interrater reliability. This is an important agenda for future research since as stated by Pearson
and Lumpkin (2011): “Without progress in developing
psychometrically sound constructs and measures, we
risk the credibility of the field as a whole” (p. 290).
Although survey instruments can be powerful tools,
they can also have certain shortcomings. For instance,
the responses to these questionnaires might be seriously
biased, as respondents tend to present a socially desirable image of themselves or their firms (Golden, 1992).
Also, family business research often relies on convenient samples when conducting surveys, rather than
purely random ones (Sonfield & Lussie, 2004). This is
problematic, as random samples are needed to properly
perform factor analyses. Moreover, convenient samples
can lead to problems of endogeneity, self-selection,
omitted variables, and other such problems that tend to
be quite common in the field (Villalonga & Amit, 2006)
and that only a few exceptions have fully addressed
(e.g., Berrone et al., 2010). Scholars should be aware of
these drawbacks and take the necessary steps to account
for them. However, of necessity, family researchers
often rely on convenient samples (Sonfield & Lussie,
2004), and therefore, efforts should be made to justify
the selection on theoretical grounds rather than on statistical aptness, finding alternatives to surveys in those
cases where questionnaires are unsuitable.
Content Analysis
Another potential approach is to use content analysis
techniques to capture the FIBER dimensions of SEW.
The use of content analysis implies the examination of
narrative texts such as press releases, annual reports,
mission statements, interview transcripts, shareholder
letters, speeches, transcripts from recorded meetings,
and other archival texts. Given that SEW is “anchored
at a deep psychological level among family owners”
(Berrone et al., 2010, p. 87), content analysis could be
used by family business scholars as it allows for the
study of mental models (Carley, 1997), perceptions, and
beliefs (D’Aveni & MacMillan, 1990) that are generally
difficult to obtain by other means. Although content
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Family Business Review 25(3)
Table 1. A Set of Proposed Survey Items to Measure Various SEW Dimensions
SEW dimensions and representative studies
Family Control and Influence: Lee and Rogoff (1996),
Klein, Astrachan, and Smyrnios (2005)
Identification of Family Members With the Firm: O’Reilly
and Chatman (1986), Allen and Meyer (1990), Carlock
and Ward (2001), Klein et al. (2005)
Binding Social Ties: Miller and Le Breton-Miller (2005),
Miller, Jangwoo, Sooduck, and Le Breton-Miller (2009),
Cruz et al. (2010)
Emotional Attachment of Family Members: O’Reilly and
Chatman (1986), Allen and Meyer (1990), Carlock and
Ward (2001), Eddleston and Kellermans (2007)
Proposed items
The majority of the shares in my family business are owned by
family members.
In my family business, family members exert control over the
company’s strategic decisions.
In my family business, most executive positions are occupied by
family members.
In my family business, nonfamily managers and directors are
named by family members.
The board of directors is mainly composed of family members.
Preservation of family control and independence are important
goals for my family business.
Family members have a strong sense of belonging to my family
business.
Family members feel that the family business’s success is their
own success.
My family business has a great deal of personal meaning for
family members.
Being a member of the family business helps define who we
are.
Family members are proud to tell others that we are part of
the family business.
Customers often associate the family name with the family
business’s products and services.
My family business is very active in promoting social activities
at the community level.
In my family business, nonfamily employees are treated as part
of the family.
In my family business, contractual relationships are mainly
based on trust and norms of reciprocity.
Building strong relationships with other institutions (i.e., other
companies, professional associations, government agents, etc.)
is important for my family business.
Contracts with suppliers are based on enduring long-term
relationships in my family business.
Emotions and sentiments often affect decision-making
processes in my family business.
Protecting the welfare of family members is critical to us, apart
from personal contributions to the business.
In my family business, the emotional bonds between family
members are very strong.
In my family business, affective considerations are often as
important as economic considerations.
Strong emotional ties among family members help us maintain
a positive self-concept.
In my family business, family members feel warmth for each
other.
(continued)
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Berrone et al.
Table 1. (continued)
SEW dimensions and representative studies
Renewal of Family Bonds Through Dynastic Succession:
Lee and Rogoff (1996), Zellweger, Kellermans,
Chrisman, and Chua (2011)
Proposed items
Continuing the family legacy and tradition is an important goal
for my family business.
Family owners are less likely to evaluate their investment on a
short-term basis.
Family members would be unlikely to consider selling the
family business.
Successful business transfer to the next generation is an
important goal for family members.
Note. SEW = socioemotional wealth.
analysis is increasingly used among organizational and
strategic management scholars (Barr, Stimpert, &
Huff, 1992; Berrone & Gomez-Mejia, 2009; Kabanoff,
Waldersee, & Cohen, 1995; Phillips, 1994), its use in
the family business context is just starting to grow
(McKenny, Short, Zachary, & Payne, 2012; Micelotta &
Raynard, 2011; Parmentier, 2011).
There are other associated benefits of this methodology. For instance, compared with other techniques such
as interviews, content analysis is recognized as a less
obtrusive technique for capturing managerial cognitions
(Phillips, 1994). In addition, content analysis tends to
avoid recall biases (Barr et al., 1992) and is a highly
used means of obtaining otherwise unavailable information (Kabanoff et al., 1995). Finally, gathering data
through content analysis of organizationally produced
texts has been encouraged because it allows for greater
reliability and replicability (Finkelstein & Hambrick,
1996).
Despite its benefits, content analysis may be arduous, and researchers must go to great lengths to ensure
reliability in data coding and subsequent analyses. To
ameliorate these concerns, researchers use computeraided content analysis for the coding of organizationally produced texts. As an illustration, we applied the
content analysis program DICTION (R. P. Hart, 2000)
to analyze proxy statements from 43 family-owned,
publicly traded U.S. companies and their corresponding
matched-pair sample of nonfamily firms (based on
industry affiliation and return on assets). Unlike other
content analysis software packages, DICTION not only
relies on word count but also contains 31 predefined dictionaries that are based on different linguistic theories
and applies artificial intelligence systems to understand
the context of words and sentences.
In Table 2, we indicate variables in our example for
which there are significant statistical differences
between family and nonfamily firms. We conducted
this statistical test via a Student’s t test for independent
samples, which is appropriate when the means for two
independent groups need to be compared (Wooldridge,
2000).
This illustration indicates that some DICTION variables may be useful for tapping the FIBER dimensions.
For instance, family firms highlight temporal aspects,
thereby signaling a concern for chronological matters.
This is in line with the renewal of family bonds to firm
through dynastic succession. Family firms also exhibit
greater values in variables such as human interest,
cooperation, and collectives. This is consistent with the
binding social ties dimension of FIBER since, for instance,
the human interest variable examines language involving
family members and relations (cousin, wife, grandchild,
uncle), and generic terms (friend, baby, human, people),
whereas the collectives variable includes aspects of
social groupings, task groups, and geographical entities
(R. P. Hart, 2000). Additionally, in agreement with the
identification of family members with the firm and emotional attachment, family firms score higher in variables such as praise (indicating affirmations of some
person, group, or abstract entity), denial (an important
element defining narcissism; see Brown, 1997), and
embellishment.
We did not find any relevant variables to account for
the family control and influence dimension. However,
we believe that content analysis in general and the use of
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Table 2. Comparison of Selected DICTION Variables Between Family Firms Versus Nonfamily Firms
Variable
Temporal terms
Present concern
Past concern
Human interest
Cooperation
Collectives
Spatial terms
Praise
Denial
Embellishment
Tenacity
Aggression
Blame
Complexity
Optimism
Realism
Dimension
Renewal of family bonds to firm
Binding social ties
Identification of family members with the firm
Emotional attachment
Various dimensions
the DICTION program in particular might be an alternative to survey instruments to capture the proposed
FIBER dimensions. The possibility of defining custom
dictionaries opens a great avenue for future research.
Scholars in family business research can further explore
this custom dictionary feature to check for the relative
frequency of words associated with the various proposed items under each of the FIBER dimensions.
Moreover, given that DICTION variables can be applied
to family and nonfamily firms, comparison of the five
FIBER dimensions could potentially be performed not
only within family firms but also relative to other organizational forms.
Other Alternatives
As argued before, the use of ownership as a proxy of
SEW requires the strong assumption that variables have
an isomorphic behavioral and emotional counterpart.
There is a second problem with traditional studies using
quantitative methods—which is that they use some
variation of correlational methods, limiting causal inferences. One way to overcome these problems is by conducting laboratory experiments, where researchers can
construct variables of interest and manipulate them in
ways that isolate their effects and permit stronger inferences about their causal effects. This methodological
Family firm
(Mean; N = 43)
Nonfamily firm
(Mean; N = 43)
Significance
11.253
9.537
4.843
8.183
15.362
13.120
3.251
2.156
2.770
0.381
16.540
1.050
0.073
4.946
50.041
45.296
10.598
7.478
3.484
6.456
13.302
11.528
2.594
1.735
2.501
0.305
14.306
1.503
0.044
4.806
50.337
44.363
.10
.05
.05
.05
.10
.05
.10
.05
.05
.10
.05
.01
.10
.05
.10
.05
choice may be particularly useful for testing and
expanding one of the basic tenets of the SEW perspective. This refers to the argument that when family firms
face the quandary of choosing between an action that
would confer economic gains (but a subsequent deficit
of SEW) and one that would protect SEW (but with
uncertain economic benefits), they tend to favor the latter (Berrone et al., 2010; Gomez-Mejia et al., 2010).
However, this preference for SEW goals instead of
financial objectives is unlikely to be monotonic and
constant under any situation. Cases may arise in which
a family firm’s attempts to protect and gain SEW could
cause the firm to make decisions that drastically reduce
firm economic value, even leading to the firm’s closure,
and they may ultimately threaten the very SEW that
such decisions are meant to preserve. In such extreme
situations, SEW preferences may not be as influential as
originally assumed and economic logic may take over
(Gomez-Mejia, Cruz, et al., 2011).
Although case studies are not a measurement technique per se, they can also be informative about the
nature of SEW. This methodology might be useful for
gaining a more profound understanding of certain situations involving SEW arguments. For instance, prior
research has shown that the family’s desire to protect its
SEW can lead to better environmental behaviors (Berrone
et al., 2010). For this to happen, however, the family
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needs sufficient unconstrained discretion to impose its
will on nonfamily shareholders (La Porta, Lopez-deSilanes, & Shleifer, 1999; Schulze, Lubatkin, & Dino,
2003a). At low levels of control, even if the family
were to have enough legitimacy and urgency to pursue
environment-friendly policies, it might not enjoy sufficient control vis-à-vis other (nonfamily) shareholders in
following this potentially riskier strategy. But as family
involvement increases, the family’s views are likely to
demand a greater deal of attention, and thus, the firm
should be able to enforce environment-friendly policies
with fewer constraints.
Additionally, because case studies recognize patterns
of relationships among constructs within and across
cases and their underlying logical arguments (Yin, 1994),
they can be constructive in understanding the links
between the different dimensions of SEW and how they
interact in the decision-making process. Case studies
also have certain advantages over other methodologies
such as laboratory experiments. Although laboratory
experiments isolate the phenomena from their context,
case studies highlight the rich, real-world environment
in which the phenomena take place (Eisenhardt &
Graebner, 2007). This is important for family research
using the SEW approach because the context in which
the firms operates is invariably intertwined, and boundaries between social environment, family, and business
are rather blurred (Berrone et al., 2010). Finally, because
of scholars’ frequent access restrictions to random or
stratified samples (Sonfield & Lussie, 2004), case studies might be a more appropriate option than the use of
convenient samples (and their undesirable consequences,
such as biases, overestimations, error inflation, etc.) as
case studies demand theoretical sampling; that is, cases
are selected because they are particularly appropriate for
understanding and extending relationships among constructs (Eisenhardt & Graebner, 2007).
Future Areas for Development
of the SEW Approach
Although recent family business studies have provided
new insights into family business and helped the field
gain momentum, several dimensions of family firms
remain unstudied. The SEW approach seems to be a
suitable perspective for advancing the field because it
depicts the uniqueness of the family firms’ identity through
the consideration of noneconomic factors. But more
research is needed to show the validity of this approach.
A straightforward path would be to test the extent to
which these five dimensions overlap although we
believe that they are not redundant. Based on the recent
review by Gomez-Mejia, Cruz, et al. (2011), below we
highlight those areas in which we believe devoting
more energy and resources may be favorable to advancing the SEW approach.
The Role of Emotions and SEW
As mentioned before, despite the relevance of emotions
for SEW, current family business literature is unable to
explain how feelings and emotions affect the formation
of SEW and how they affect the functioning of the family and the firm. Whereas the above studies are mainly
focused on discussing positive aspects of SEW’s emotional aspects, such as joy at the achievement of the
firm’s objectives or trust and harmony among family
members (Kets de Vries, 1993), family owners also
experience negative aspects related to their affective
experiences at the ownership level. For instance, family
businesses are especially exposed to relationship conflicts (Zellweger & Astrachan, 2008), which may have
severe implications for the survival of their organizations
(Davis & Harveston, 2001) by creating incentives to sell
out ownership stakes (Beckhard & Dyer, 1983; Levinson,
1971) and by negatively affecting firm performance
(Eddleston & Kellermanns, 2007).
At the same time, evidence suggests that the presence
of emotions may also lead to increased role conflict
among family employees. Unlike employees in nonfamily firms, family business members have the dual role of
being a family member and a family firm employee,
which may complicate the responsibilities of fulfilling
both family and business expectations (Gersick et al.,
1997). Moreover, the influence of psychodynamic effects
such as ownership dispersion, marital discord, sibling
rivalry, and identity conflict (Dyer, 1994; Schulze et al.,
2001) elevates the complexity of multiple roles and
multiple activities, thereby intensifying role conflict
among family business members. Researchers suggest
that role conflicts reduce job satisfaction and lower
employees’ commitment, leading over time to a desire
to leave the organization (Bedeian & Armenakis, 1981;
Senatra, 1980). In the family firm, however, the high
emotional attachment impedes family employees from
leaving (what Gomez-Mejia, Larraza-Kintana, & Makri,
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2003, called the “family handcuff”) and thereby preserves conflicting relationships.
The previous discussion suggests that the emotional
dimension of FIBER engenders both positive and negative aspects that may have important performance consequences that may be enduring, given the longer tenures
of employment contracts within family firms (Cruz
et al., 2010). Despite this evidence, we lack an understanding of how emotions translate into SEW gains or
losses or how they affect family and firm functioning.
Although economic wealth can eventually be recovered, SEW may be more difficult to restore, so more
research efforts should be devoted to understanding this
relationship. Formally, the above discussion can be
summarized in the following research questions:
Research Question 1: What types of emotions
have a positive influence on SEW formation?
Which ones have negative connotations?
Research Question 2: Can SEW be restored after
pervasive conflicts?
Research Question 3: How does the emotional
dimension of SEW temper or amplify relationship conflicts within the organization? How
does it affect family members’ role conflicts?
Family Firms’ Heterogeneity and SEW
Partly because of measurement challenges, most current
research treats family firms as homogeneous in their
emphasis of SEW considerations. Indeed, in most studies, family ownership is used as a proxy for the existence
of SEW (e.g., Berrone et al., 2010; Gomez-Mejia et al.,
2007). In contrast to this, the family business literature
has largely emphasized existing differences within family
firms (Zahra, Hayton, & Salvato, 2004). However, these
differences have not been linked to SEW issues. The
SEW literature must reach beyond this oversimplification and explain the factors behind the varying sources
and degrees of SEW.
For instance, it has been suggested that the family’s
attachment to the organization is highest when the firm
is owned and managed by the founding family and that
it tends to weaken as the firm transitions into subsequent
generations (Chua et al., 1999; Mishra & McConaughy,
1999; Schulze et al., 2003a). Based on that, GomezMejia et al. (2007) argue that, independently of financial
considerations, losses in SEW should weigh less heavily
on a family firm’s willingness to give up control as it
moves from a founding–family-controlled and -managed
firm to a firm that is owned by an extended family and
professionally managed. However, Miller et al. (2012)
suggest that although this reasoning appears to be valid
for small private firms, in large publicly held firms in
which legitimacy becomes more important, the trend
could be quite the opposite. Future research should
address the trend followed by SEW as firms pass through
generations.
Moreover, it is expected that the proposed FIBER
dimensions of SEW would have different weights depending on the owning family’s preferences. Although some
families might place a greater value on the sense of
dynasty and transgenerational vision, others might emphasize the protection of the family image as their main priority. Future research should examine which factors play a
role in determining the weight placed on the different
dimensions. If, as mentioned before, SEW evolves as
the firm passes through generations, it is also likely that
the weights of the different dimensions of SEW vary as
firms pass to the next generation. In particular, we would
expect control and influence, sense of dynasty, and emotional attachment to have a stronger weight in first generations, given these companies’ founder-centric orientation.
Similarly, we expect the family image to have an increasing importance as the firm moves through generations,
since, as the firm evolves, the family name becomes a
living symbol of multigenerational achievement
(Gomez-Mejia et al., 2003).
Although the previous discussion has emphasized the
role of generations in explaining changes in the importance given to SEW preservation and its different dimensions, future research should also investigate how other
factors that account for family business heterogeneity
(e.g., industry, environmental conditions, and TMT composition) affect SEW. Similarly, given the popularity of
the stakeholder management approach, more research
effort should be devoted to investigating how the way
family firms identify, respond, and prioritize different
interest groups and their claims affect the emphasis they
put on SEW preservation and the weight given to its
dimensions (Berrone, Gomez-Mejia, Cruz, & Cennamo,
in press) The following research questions might shed
some light on these issues:
Research Question 4: Why are some family firms
guided more strongly by SEW than others?
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Research Question 5: How does SEW evolve over
time and generations?
Research Question 6: How are weights of SEW
affected by family generations and the number
of controlling firms?
Research Question 7: What is the role of stakeholder pressures in establishing priorities in
terms of the different dimensions of SEW?
Research Question 8: What other factors play a
role in determining the different weights given
to the dimensions of SEW?
Family Firm Governance and SEW
Although the review conducted so far has demonstrated
the importance of SEW in guiding family firms’ strategic decision making, scholars also recognize that family
owners need to have enough discretion within the organization to impose their goals of SEW preservation.
This is why studies have tried to link family governance
variables with socioemotional aspects. For instance,
Berrone et al. (2010) argue that SEW will be more salient
when the CEO belongs to the family and also when the
CEO doubles as the board chair. In a similar vein,
Gomez-Mejia, Hoskisson, et al. (2011) propose that the
presence of other owners, such as institutional investors, with different problems or strategic frame would
diminish the emphasis on SEW preservation. Empirical
evidence is mixed, since, although the study of GomezMejia, Hoskisson, et al. (2011) confirms a weak effect
for institutional investors, Berrone et al. (2010) found
no support for the proposed relationships. This opens an
interesting avenue for future research on the governance
structures that really facilitate or inhibit family power
and discretion within the organization and, therefore, a
family’s ability to protect its SEW.
Related with corporate governance issues, a growing
area of interest is the study of family enterprise groups
or portfolios of firms run by a family. There is some
evidence indicating that most families run a portfolio of
firms and not just one firm, as the great majority of literature has thus far assumed (Zellweger, Nason, &
Nordqvist, 2011). This has important implications in
terms of governance issues as well as how SEW considerations are affected by these arrangements.
Another area that deserves greater attention is the
role of the board of directors, and other related family
governance bodies such as family councils, in fostering
SEW preservation within family firms. To date, much of
the literature on boards has concentrated on sociopolitical aspects, in which the emphasis is put on how parties
with a contractual relationship struggle for power and
pursue self-serving activities aimed at promoting personal agendas at the expense of other stakeholders.
However, as argued by the SEW approach, family owners are likely to be guided by a very different set of
motives, namely, the stock of affect-related value that
the family has invested in the firm. These aspects, however, have not been explored in boards of family firms.
Together, the foregoing paragraphs suggest the following
research questions:
Research Question 9: What is the discretion
threshold that family members need to enjoy to
impose their SEW goals ahead of other nonfamily shareholders?
Research Question 10: Which of the FIBER
dimensions seems to play a larger role when
it comes to establishing SEW goals relative to
nonfamily shareholders?
Research Question 11: How do the FIBER dimensions change and interact when the family runs
a solo firm vis-à-vis a portfolio of enterprises?
Research Question 12: How do boards and family
councils participate in the formation of SEW?
SEW and Financial Outcomes
As mentioned before, rooted in behavioral agency theory, an implicit assumption in the SEW model’s reasoning is that family principals may respond to claims that
protect and enhance their SEW even if they are not
financially rewarding. However, this assumption does
not necessarily imply that all decisions driven by the
maximization of socioemotional endowments will lead
to economic loss. Although it might not be intentional,
certain decisions, especially those that are long term,
based on socioemotional aspects, have the potential of
becoming the source of a competitive advantage. For
instance, Berrone et al. (2010) empirically demonstrated that family firms pollute less than their nonfamily counterparts to preserve their SEW. Although the
authors do not establish performance implications, as
shown by a substantial amount of research, such care
for the environment can contribute to building up a
competitive advantage (Bansal, 2005; S. L. Hart, 1995;
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Russo & Fouts, 1997; S. Sharma & Vredenburg, 1998)
and have a positive impact on financial performance in
the long run (S. L. Hart & Ahuja, 1996; King & Lenox,
2002; Klassen & McLaughlin, 1996; Russo & Fouts,
1997). The study by Miller et al. (2012) analyses the
impact of family firm’s strategic conformity on firm
performance, but their results were mixed: Although
strategic conformity was related to superior return on
assets, it did not enhance market valuation. According to
the authors, the results appear to mirror the ambiguity in
the SEW (and institutional) literature regarding whether
or not the preservation of SEW (and the attainment of
legitimacy) is an end in itself that goes beyond any economic reward.
Indeed, some authors have tried to establish a direct
link between SEW and firm performance. In this regard,
Zellweger, Kellermanns, Chrisman, and Chua (2011)
provide direct evidence that socioemotional aspects
related to organizational ownership can have a monetary
value in themselves by showing how transgenerational
sustainability intentions increase acceptable sales prices
indicated by family firm owners. The study by Cruz et al.
(2010) also shows how the socioemotional aspects
implicit in family ties imprint family employment with
a performance advantage in the case of micro and small
firms. Similarly, a study of 58 enduring cases of family
firms with a median age of 104 years revealed that the
interplay of strong ties within the internal community
and the connection with external stakeholders enable
these firms to sustain their viability across generations
(Miller & Le Breton-Miller, 2005).
Despite these potential performance benefits, unlike
other theoretical approaches, the SEW perspective allows
for negative aspects, such as managerial entrenchment,
succession conflicts, and dysfunctional relationships. In
the study of Cruz et al. (2010), following the social capital literature, the authors also recognize the negative
aspects of this SEW implicit in family employment. For
instance, too much collective capital can limit access to
information and new ways of doing things (Coleman,
1988). It could also lead to “relational inertia” (Gargiulo
& Benassi, 1999), which impedes the development of
knowledge and leads to the depreciation of human capital (Granovetter, 1985). Similarly, control desires could
promote efforts to increase the family’s power both
inside and outside the firm, with the deleterious consequences noted by authors such as Morck and Yeung
(2003). Desires to maintain transgenerational control
could also lead family firms to behave more conservatively and myopically (Zahra, 2005).
In conclusion, despite the richness demonstrated by
the SEW approach so far, much remains to be done in
understanding the SEW–financial performance relationship. First of all, future research should investigate
whether family firms make strategic choices using SEW
as the only reference point or, on the contrary, strategic
outcomes are chosen with the intention of maximizing
an utility function with two main components (SEW and
financial outcomes). Evidence so far suggests that as
economic conditions become more salient, the emphasis
on SEW concerns is reduced in favor of financial considerations. For instance, Gomez-Mejia, Hoskisson,
et al. (2011) show that family firms’ willingness to invest
in R&D increases as performance indicators deteriorate.
Similarly, Gomez-Mejia et al. (2010) demonstrate that
family firms are more likely to diversify as the firm faces
greater performance hazards.
Following the above arguments, it would be interesting to determine whether there is any threshold beyond
which the frame of reference changes from SEW to
financial considerations and whether or not this threshold varies across family firms.
Moreover, it would be interesting to determine under
which conditions the emphasis on SEW may be beneficial or detrimental to firm performance. Anecdotal evidence suggests that, for instance, when there is a high
need for patient capital, or when tacit knowledge is
important, SEW can enhance firm value.
Similarly, a related important research question would
be to determine which particular type of stakeholders
might benefit from the family principals’ emphasis on
strategic actions aimed at SEW preservation.
Last, future research should also investigate how
SEW evolution affects performance outcomes. For
instance, Villalonga and Amit (2006) found that family
ownership creates value only when the founder serves as
CEO or as chairman with a hired CEO. Their results also
show that when the founder’s descendants serve as CEO,
firm value is destroyed. How this value creation/destruction relates to the evolution of SEW remains unanswered. Therefore, the following research questions may
constitute important avenues for future research:
Research Question 13: Under what conditions
do economic objectives become preferable to
SEW-related goals?
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Berrone et al.
Research Question 14: Which of the FIBER
dimensions individually or in combination
seem to have the most favorable or unfavorable impact on the achievement of financial
objectives?
Research Question 15: What are the minimum
financial levels that a company needs to reach
to be able to neglect SEW objectives?
Research Question 16: Under which conditions is
an emphasis on SEW preservation beneficial
for firm performance?
Research Question 17: Under which conditions
might the preservation of SEW by controlling
families be beneficial for other shareholders?
Research Question 18: What is the relationship
between SEW and financial performance over
time?
SEW and Privately Held Family Firms
Because of the difficulties in gaining access to privately held family firms’ data, most of the existing
evidence on the impact of SEW in family firms’ decision making have been conducted on publicly traded
firms. In these studies, a firm is classified as a family
company if the family holds more than 5% of the
shares (see review by Miller, Le Breton-Miller, Lester,
& Cannella, 2007). The percentage of family ownership in privately held companies is much greater, with
a large majority of companies in which the family
owns more than 50% of the equity and even 100%
(Cruz et al., 2010). Under these circumstances, it is
expected that personal attachment to the firm, as well
as discretionary power, will be extremely high, so SEW
concerns will be more evident than in publicly listed
companies. At the same time, unlike publicly traded
firms, privately held family businesses are less visible
to external stakeholders and the community at large, so
their need to gain legitimacy and status (and therefore
the existing trade-off between socioemotional and
financial rewards) is lower (Miller et al., 2012). This
may have implications in terms of the scrutiny level
experienced by private firms and their consequent
responses to external and institutional pressures.
Analyzing SEW concerns in private companies provides an interesting opportunity for future research as
well as a challenge, given that it is very difficult to
obtain data from a large sample of these firms. The following research questions could guide future research:
Research Question 19: Does the intensity of
various FIBER dimensions differ between privately held and publicly traded family firms?
Research Question 20: Do different FIBER
dimensions differentially affect responses to
external forces in privately held family firms?
Research Question 21: How do different FIBER
dimensions affect strategic choices in privately
held family firms?
Family Entrepreneurship and SEW
Last, since entrepreneurship has been recognized as a
key factor contributing to firm success, increasing a firm’s
profitability, revenue streams, and growth (Lumpkin &
Dess, 2001; Zahra, 1996; Zahra, Neubaum, & Huse,
2000), an interesting avenue of research relates to the
influence of SEW concerns in fostering entrepreneurship
in the family business. The entrepreneurship literature
has already linked some of the proposed SEW dimensions to entrepreneurial outcomes, although with inconclusive results. Some argue that kinship ties, unique to
family firms, have a positive effect on entrepreneurial
opportunity recognition (Aldrich & Cliff, 2003) and that
the long-term nature of family firms’ ownership fosters
entrepreneurship (Zahra et al., 2004). Others maintain
that the desire to protect family wealth leads family firm
owners and managers to become too conservative in taking the risks associated with entrepreneurship (Naldi,
Nordqvist, Sjöberg, & Wiklund, 2007; Zahra, 2005).
In addition to this, existing evidence suggests that the
links between entrepreneurial orientation (EO) and performance, which are quite strongly established in the literature (see Rauch, Wiklund, Lumpkin, & Frese, 2009,
for a review), may not be as straightforward in the context
of family firms (Short, Payne, Brigham, Lumpkin, &
Broberg, 2009). Naldi et al. (2007), for instance, found
risk taking to be not only a distinct dimension of EO in
family firms but also negatively associated with a firm’s
performance. Considering that in most family firms, the
desired performance outcomes are based on a mix of
financial and nonfinancial goals (P. Sharma, 2004), future
research should investigate to what extent SEW influences this relationship. These research questions review
the previous ideas:
Research Question 22: How do the different SEW
dimensions intervene in the entrepreneurial
process?
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Research Question 23: How do risk preferences
affect SEW preservation in entrepreneurial
contexts?
Research Question 24: How do the different SEW
dimensions affect EO in family firms?
Discussion and Conclusion
Gomez-Mejia, Cruz, et al. (2011) made a persuasive call
to family researchers to build new theories that capitalize
on the unique context of family business research in order
to gain academic legitimacy for the field. And although
some attempts have been conducted in this regard (e.g.,
Carney, 2005; Gedajlovic & Carney, 2010; Lubatkin,
Ling, & Schulze, 2007; Schulze et al., 2003b), none has
gained enough traction to become the prevailing framework. As argued in this article, the SEW perspective has
the potential of becoming a dominant perspective in the
family business field as it is solidly anchored in the family
business literature, it allows for differential risk preferences, it accounts for nonfinancial aspects, and it contemplates both positive and negative consequences of these
noneconomic aspects. Therefore, we propose the SEW
approach as an umbrella under which it is possible to
group all existing theories and evidence related to explaining why family firms behave in a distinctive fashion.
The studies cited in this review have contributed to this
objective, but much interesting research remains to be
done. The infancy of the SEW approach posses several
challenges. We have focused on two: its dimensions and its
measurement. But others remain, such as the strength of
the SEW approach as the dominant paradigm for the field.
We believe that the limits of a theoretical approach are
learnt by applying it and seeing how the boundaries progress. We need to obtain a better understanding of the conditions under which the positive forces of family involvement
can be unleashed and directed toward economic, as well as
noneconomic, objectives. On the other hand, we also need
to understand why, when, or how the pursuit of noneconomic goals might lead to positive performance outcomes.
In this regard, we presented 24 research questions that will
enhance our understanding of how family firms are created
and how they operate and evolve over time. We believe
that answering these questions might shed light on
claims that family presence can influence firms’ overall
performance, by showing how socioemotional elements
influence either strategic choices or the implementation
of those choices and, consequently, performance outcomes, providing an alternative explanation to seemingly
contradictory results in the field. We hope we were able to
chart a road map for researchers who are excited by the
prospects of the SEW perspective, yet are unsure about
how to incorporate it into their own research agendas.
Finally, the SEW approach offers benefits and
nuances. It has the potential of advancing a more unified view of the field that relies on its own theorybased research. Moreover, it can enhance the shared
identity, a quality necessary for developing a strong
scientific community. However, measuring the influence of this noneconomic endowment poses major
challenges. We have provided both theoretical insights
as well as methodological practices that should help
enhance the validity of SEW measurement. In addition, family firms represent a highly heterogeneous
group with different levels of family involvement and
emotional attachments. Again, this poses not only
major challenges but also a great opportunity; clearly,
this is a good time to invest in examining how SEW
evolves and changes and how these changes contribute
to value creation.
Acknowledgments
We would like to thank the editor in chief Pramodita
Sharma and the two anonymous reviewers for their
insightful comments and suggestions during the review
process. Eric Gedajlovic and other participants at the
Montreal Family Business Research conference in
October 2010 provided useful feedback in early versions of the article.
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest
with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article:
The Spanish Ministry of Science and Innovation
(ECO2009-10891, ECO2009-08446, and ECO201009370-E) and the Generalitat de Catalunya (2009 SGR
919) provided financial support.
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Bios
Pascual Berrone is the vice president of the Ibero-American
Academy of Management and assistant professor of strategic
management at the IESE Business School. He received his
PhD from Carlos III University. His work focuses on corporate governance, family firms, sustainable innovation, and
corporate social responsibility. His studies have been published in the Academy of Management Journal, Administrative
Science Quarterly, Strategic Management Journal, and
Human Resource Management, among many others, and he
has received several prestigious “best paper” awards.
Cristina Cruz is an associate professor of entrepreneurship
and family business at the IE Business School in Madrid
(Spain). She also holds the Bancaja Chair of Young
Entrepreneurs at the IE University. She received her PhD from
Carlos III University. Her current research interests include
corporate governance issues and entrepreneurial activities in
the context of family-controlled firms.
Luis R. Gomez-Mejia holds the Benton Cocanougher Chair
in Business at Texas A&M University. Previously he was a
professor at the Arizona State University, University of
Colorado, and University of Florida. He received his doctorate
from the University of Minnesota.
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