Socioemotional Wealth in Family Firms: Theoretical Dimensions, Assessment Approaches,
and Agenda for Future Research
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 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
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., GomezMejia, 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 affectrelated 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 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, GomezMejia, 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. GomezMejia 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 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.
Management control and leadership styles in family business An Indonesian case study
Sujoko Efferin and Monika S. Hartono
Abstract
Purpose – This study aims to provide insight into the meaning and perceptions of leadership and
its subsequent management control system (MCS) practices in family business in less developed
countries. More specifically, the study attempts to understand the cultural context of family
business and its importance in developing its leadership and MCS, the production and reproduction
processes of the culture into the MCS and the resulting MCS.
Design/methodology/approach – We shared the view that organizational reality is negotiated and
constructed by collective participants’ consciousness. The study used interpretive case study.
Interviews, observation and documentary analysis were used to collect the data.
Findings – Leadership and MCS of family business is embedded in its societal culture. A leader–
owner is not a creator but a mere manager of organizational culture because he/she is also a product
of the societal culture. The owner and his/her inner circle (family and non-family members) may
collectively play crucial roles in producing and reproducing the legitimate MCS based on the
extended family concept. In this sense, cultural control based on shared family norms is the most
dominant one and simplifies process and result controls. However, business pragmatism may go
hand-in-hand with the culture in giving room for MCS transformations.
Research limitations/implications – The family business under study is still run by the family’s
first generation, has no subsidiaries and is embedded in Javanese paternalistic culture. Although
rich in details, the sample size of the study is a limitation.
Practical implications – This study encourages the owners of a family business to consider the use
of strong cultural control along with bureaucratic controls to create a sustainable organisation.
Originality/value – This study offers insight to help understand and explain how leadership and
MCS practices in family business are embedded in broader societal culture in less developed
countries.
Introduction
This interpretive study examines the implementation of leadership and management control system
(MCS) in the context of family business in less developed countries. Although leadership is
inherent in the design and implementation of MCS, very few studies have addressed this topic in
the past 20 years (Abernethy et al., 2010). Furthermore, despite extensive studies of management
styles, development, roles and importance of family business (e.g.: Cater III and Justis, 2010; Jiang
and Peng, 2011; Astrachan and Shanker, 2003;Klein, 2000; Corbetta, 1995), there are yet very few
studies on management control in family business (Tsamenyi et al., 2008). So far, there have only
been three studies in the relevant areas: one study examining leadership and MCS, and two studies
examining MCS in family business (Abernethy et al., 2010; Ansari et al., 1991; Tsamenyi et al.,
2008).
Abernethy et al. (2010) conducted a questionnaire-based study and proposed a model to assess
the effects of leadership styles on three elements of MCS, i.e. delegation choice, planning and
control systems and a performance measurement system. The study showed that leadership can
significantly predict the implementation of planning and control systems and of performance
measurement system. The context of their study was general and did not specifically address
family business. Ansari et al. (1991) and Tsamenyi et al. (2008) conducted in-depth interpretive
case studies examining the influence of societal culture on management control in a Pakistani
family business and a family-owned university in Indonesia, respectively. They revealed that
societal culture is at the very centre of MCS in these two family businesses. However, leadership
was not discussed explicitly in these studies. Given the importance of the roles of owner–leader in
the implementation of MCS, there is a need to add literature on family business’ management
control in relation to leadership issues.
This study attempts to provide further insight into the meaning and perceptions of leadership and
its subsequent MCS’s practices in family business in less developed countries. In doing so, this
study examines the cultural context of family business and the viewpoints of organizational
participants (owner–leader and employees)
Given the limited existing knowledge in the area and the need to get in-depth understanding, we
used interpretive case study (Hopper and Powell, 1985; Neuman, 2011). In-depth case study in
management control research can not only provide richer contextual understanding of a
phenomenon but also can avoid unduly predetermined causal chains/hypotheses, and embrace
more holistic issues relevant to less developed countries (Efferin and Hopper, 2007;
Wickramasinghe and Hopper, 2005; Uddin and Hopper, 2001; Bhimani, 1999; Hoque and Hopper,
1994).
The company under study here is a medium-sized Indonesian real estate developer that we will
call “DR” (disguised name). It was chosen for several reasons. Firstly, many members of the
founder– owner’s family participate in daily management activities. This gives a very strong
familial culture to the company, which is suitable for the purpose of this study. Secondly, the
founder of the company is still active as its Chief Executive Officer (CEO). Thirdly, the company
is growing rapidly. This enabled us to gain insight into how the company’s development
characterizes its organizational changes, including the design and implementation of its leadership
and MCS. Lastly, the company was very supportive to this study, allowing us to get the data
required.
MCS in less developed countries
Management control and leadership is inseparable. There is no leadership without management
control and vice-versa. Management control is defined as a system within social, cultural, political
and economic environments used by management to align employee behaviour with organizational
objectives and to manage internal and external interdependencies (Efferin and Hopper, 2007). It
consists of result, process and cultural controls (Merchant and Van der Stede, 2007; Efferin and
Soeherman, 2010). They are not mutually exclusive, but rather overlapping and reinforcing each
other in daily implementation. Result control defines the outputs expected from the employees
(also known as performance measurement). This type of control provides flexibility, requires
authority delegation and promotes creativity among employees to search for alternative actions to
reach a predefined set of targets. Process control focuses on the employees’ means/behaviours
rather than on the ends (results) to promote obedience towards a set of desired actions. Cultural
control promotes a strong and positive organizational culture, enabling organizational
members/actors to monitor each other and to have self-awareness in doing their best for their
organization.
Research on MCS in less developed countries is an emerging area, yet the number of related
published studies is still relatively low (Efferin and Hopper, 2007; Tsamenyi et al., 2008; Hoque
and Hopper, 1994; Ansari et al., 1991; Wickramasinghe and Hopper, 2005; Uddin and Hopper,
2001). All these studies use in-depth case study approaches to explore and understand the specific
contexts and grounded meanings of MCS in its corresponding environments. Although the
variations are high and contextual in nature, the results of the studies highlight several common
characteristics ofMCSinless developed countries. Firstly, the use of informal controls is more
prevalent in less developed countries than in developed countries. These controls include the ways
of communicating expectation/objectives, defining roles and expectations from individuals,
monitoring activities, setting job descriptions and designing rewards and punishments. Secondly,
the societal culture significantly characterizes the design and implementation of MCS. Although
culture does not operate exclusively, theinclusion of cultural perspective canlargely explain why
anMCS works in the way it appears to. Thirdly, local institutions (politics, history, level of
education and socio-cultural practices) inside a company’s business environment are, at least, as
important as technical–rational–economic factors in giving legitimation to an MCS. The
acceptance of an MCS rests not only on how rational it is but also on how well it reflects the
worldview of the participants. MCS, thus, becomes a social process rather than a mere calculative
economic process to cope with challenges confronting managers.
Two of the above-mentioned studies specifically address family business in less developed
countries (Ansari et al., 1991; Tsamenyi et al., 2008). The case study of Ansari et al. (1991) was
conducted in a Pakistani family business. This study finds that formal MCS is mainly applied to
non-family members. By contrast, informal control is mainly applied to family members because
their personal ties and trusts have preceded the formation of the company. However, later
introduction of a technical–rational control system clashed with the cultural controls, causing the
organization to dissolve. MCS is legitimate if it fits with the value and belief systems within which
it operates. Thus, there must be a cultural congruence between formal MCS and family values of
the owners as a prerequisite for successful implementation of MCS in family business. The lack
of it may cause partial or decoupling implementation of formal MCS.
Tsamenyi et al. (2008) conducted a study of MCS in a family-owned university in Indonesia. It
concluded that although some technical–rational controls (including budgeting, performance
measurement, incentive systems and administrative controls) exist, they are subservient to controls
based on culture and social relationships. The informal controls stem from the personal values of
the owners and the societal culture of the surrounding society, mainly consisting of three Javanese
values: bapakism (paternalism and patronage), rukun (collective decision-making, unanimous
decisions and co-operation) and ewuh pakewuh (reluctance among non-family superiors to punish
subordinates with ties to the family). Consequently, these values become the ideology with highest
legitimation shared by all organizational members overcoming the management control tools
implemented in the organization.
The work of Tsamenyi et al. has revealed the theoretical usefulness of culture in explaining MCS
in less developed countries’ family business. However, the organization under study is a university
which, to some extent, has certain arrangements to meet the requirements of external bodies (e.g.
Indonesian Ministry of National Education and National Accreditation Body). The existence of
those bodies requires the university to have certain mechanisms in relation to management control
that limits the freedom of the owner to implement the MCS. By contrast, the organization in our
study is a company which has no external regulatory bodies to follow. Hence, the study may offer
additional insights into management control practices in family business where its owner–leader
has greater flexibility to translate his/her personal values into the practices. Consequently, different
pictures of the dynamics of control activities and the roles of all participants involved in the process
can be captured.
Management control system, leadership and gender ideology
Abstract
Purpose – The purpose of this paper is to reveal the relations between management control system
(MCS), leadership style and gender ideology. It investigates how a female leader’s gendered
personal values are formed, translated, produced, and reproduced in her leadership style, the
subsequent MCS and organisational life.
Design/methodology/approach – This is an interpretive case study that uses the anthropological
lens of emic and etic views. The emic view is derived from the interpretation of the company’s
subjects. The etic view refers to the interpretation of outsiders (the researchers and previous
literatures). The combination of these two views enables an in-depth understanding of the case.
Interviews, observation and documentary analysis were used to collect the data.
Findings – In a gendered society, a female leader will gain full respect if she demonstrates
leadership behaviours that fit her subordinates’ gendered expectations. The leader’s and followers’
common gendered cultural background will result in leadership and followership that support each
other. Gendered leadership produces gendered MCS. Gendered MCS is based on gendered cultural
values that direct the behaviour of organisational members to focus on certain competencies based
on a single gender perspective. In turn, the gendered MCS sustains and reinforces the gendered
leadership.
Research limitations/implications – The study does not focus on the potential value of including
feminine measures in MCS. In the future, MCS literatures need to explore the strategic advantages
of introducing measures into the system in order to develop feminine competencies in organisation.
Furthermore, the processes by which MCS reinforces gendered practices in a society are not
explored in the study. Therefore, another important next step is to examine the patterns of the
reinforcement processes and their magnitude in strengthening the biases beyond organisational
boundaries (e.g. in professional and industrial practices).
Practical implications – This study encourages leaders to consider the use of masculine and
feminine characters in MCS to increase organisational effectiveness, build a more humane
organisational atmosphere, establish organisational cohesion and harmonise different personal
aspirations.
Originality/value – MCS literatures tend to hide gender bias in the system. This study offers insight
on how MCS translates, produces and reproduces societal gendered practices in organisational life.
Gender issues have become one of the main trends in accounting and management studies. Parker
(2008) conducted a comprehensive mapping of the extent of gender research in
accounting/management and identified areas that require further development. Accounting
research has so far mostly focussed on the implication of gender for accounting employment and
careers, public accounting, the accounting profession, job satisfaction, social responsibilities and
accounting ethics. Parker underlines that there is a need to study the impact of gender on strategic
management accounting, management control and decision making, and how gender discourses
are being produced and reproduced in organisational processes. Parker stresses that such study
should investigate gender beyond a narrow structural perspective (position, rank and role).
2. Theoretical background and hypotheses
The literature shows a divergence of opinions on the outcomes of SEW in family firms. Some
studies have argued that family firms are unprofessionally managed and are vulnerable to nepotism
and entrenchment, which can affect financial performance (Rutherford, Kuratko, & Holt,
2008; Schulze, Lubatkin, Dino, & Buchholtz, 2001). Other studies have noted a high level of
commitment in family firms along with trustworthiness, prudent financial management, resilience,
and deep, firm-specific tacit knowledge (Alonso-Dos-Santos & Llanos-Contreras, 2018; GómezMejía, Cruz, Berrone, & De Castro, 2011; Sirmon & Hitt, 2003). Although they used dimensions
that differed slightly from the FIBER dimensions, recent research by Debicki et al. (2017) found
that different dimensions of SEW can either align or conflict with financial performance,
suggesting there may be a missing mediator in the SEW–performance relationship. Lack of
managerial capability appears to be a main factor in small business failures (Rubio & Aragón,
2009). When SEW is a primary reference point for managerial decisions, it may lead to competitive
outcomes through management processes and capabilities.
A capability is the power of an individual or organization to perform a particular activity with a
specific purpose and an intended outcome (Helfat & Winter, 2011). In family SMEs, capabilities
are embedded in the organization and are business-specific. Managerial capabilities can be difficult
to acquire, since they are deeply rooted in organizational processes. In some cases, they are nonimitable (Carmeli & Tishler, 2004). Helfat and Martin (2015) noted that performance variations
among firms may arise from heterogeneity in managerial abilities to create, extend, and modify
company assets. There is a direct link between managerial capabilities and performance, but an
overemphasis on SEW and on protecting the family endowment could detract from managerial
performance and therefore, affect the overall business performance of the firm. The multidimensional nature of SEW further complicates these relationships. These unresolved debates and
issues in the current literature illustrate the need for a more comprehensive perspective on how
SEW affects competitive advantage.
This study examines the influence of each dimension of SEW on managerial capabilities and the
ways these interactions affect the performance of family firms. We use the FIBER scale (Berrone
et al., 2012) to capture the multidimensional nature of SEW in family firms.
The FIBER dimensions, originally proposed by Berrone et al. (2012), have often been used for
measuring SEW and have been validated in numerous studies on family firms (Filser, De Massis,
Gast, Kraus, & Niemand, 2018; Gast et al., 2018; Hauck et al., 2016; Laffranchini et al., 2018).
FIBER is an acronym that represents the following: family control and influence; identification of
family members with firm; binding social ties; emotional attachment of family members; and
renewal of family bonds through dynastic succession. The following sections expand on each
dimension and present the corresponding research hypotheses.
2.1. FIBER dimensions and managerial capabilities
The first FIBER dimension is family control and influence. This dimension has been widely used
in empirical research to measure the degree of family involvement in a firm (Chrisman et al.,
2012; González-Cruz & Cruz-Ros, 2016). Higher percentages of family ownership correlate with
a stronger inclination to preserve the family endowment (Gómez-Mejía, Haynes, Núñez-Nickel,
Jacobson, & Moyano-Fuentes, 2007; Pukall & Calabrò, 2014; Randolph, Alexander, Debicki, &
Zajkowski, 2019). This dimension is a central feature of the SEW perspective represents the extent
of family member control over strategic decision-making. For example, family owners may be
more likely to appoint family members to key positions to maintain control and influence and may
be unwilling to delegate authority to non-family managers, even when they are clearly competent
(De Massis, Kotlar, Campopiano, & Cassia, 2015; Gómez-Mejía et al., 2011). This behavior is
prevalent in family SMEs, in which family employees tend to have considerable influence (Cruz
et al., 2012). A firm that has a preference for hiring family members may cultivate a workforce
that is highly committed, with firm-specific managerial capabilities, but nepotism can occur when
key appointments are based on kinship rather than abilities (Jaskiewicz, Uhlenbruck, Balkin, &
Reay, 2013). This can breed employee resentment and limit the utilization of external talent (Dyer,
2006; Firfiray et al., 2018). Moreover, serious governance issues—such as exploitation of business
resources for personal use and benefit—can sometimes arise in family businesses. In one of the
few studies that investigated managerial capabilities in family firms, Garcés-Galdeano, García-
Olaverri, and Huerta (2016) found that family ownership and management were negatively
associated with managerial capabilities.
We hypothesize that family control and influence will have more negative than positive effects on
managerial capabilities. Family SMEs suffer as a result of their small size, which limits resources
and capabilities. Furthermore, when protection of family interests is paramount in a firm, it can
constrain the firm's growth and competitiveness. Thus, we propose the following:
Hypothesis 1a
Family control and influence have a negative effect on managerial capabilities.
The second FIBER dimension is identification of family members with the firm. Family members
realize close ties with a firm through their formal or informal participation in it (Deephouse &
Jaskiewicz, 2013). Awareness of belonging to a family firm can emerge at a young age and
strengthen over time, as family members grow up hearing stories about the business and learning
firm-related identity cues that become important to their personal identities (Zellweger, Nason,
Nordqvist, & Brush, 2013). Understandably, the sense of belonging to a family firm is stronger in
family members than in non-family members. In the Arab world, many businesses use the family
name as the business name, which can impart stability and invoke deeper commitment to the firm.
Family members desire to be recognized as belonging to the firm, and this generates collective
social capital (Chirico & Salvato, 2016; Dyer, 2006), relational trust (Cennamo et al., 2012), and
feelings of interpersonal closeness and solidarity among employees (Pieper, 2010). Loyalty to the
family firm encourages the conscientious management of its assets. Managers of family firms may
provide more development opportunities for employees and strive to promptly resolve conflicts
and differences of opinion. These behaviors help the firm to be viewed more favorably by nonfamily stakeholders. When hiring outsiders, family SMEs tend to select from a small pool of
candidates who share the family's values and culture (Gómez-Mejía et al., 2011), a practice that
facilitates the development of managerial capabilities. Moreover, the relationships of family
members to their firm have the potential to positively affect internal processes and the quality of
the firm's services and products (Carrigan & Buckley, 2008). Strong identification with the firm
ensures employee commitment and collective self-esteem. It also facilitates constructive
management practices and a positive attitude toward capacity building (Chirico & Salvato, 2016).
Family members play active roles in enhancing managerial capabilities and thus generating greater
value for the firm. Therefore, we propose the following:
Hypothesis 1b
Identification of family members with the firm has a positive effect on managerial capabilities.
The third dimension is binding social ties, which is the interaction between the family firm and
non-family stakeholders such as employees, suppliers, customers, and communities or social
networks. Interactions with these stakeholders can strongly influence a firm's organizational social
capital. The long-term orientation of a family firm drives long-term sustained relationships with
outside parties such as customers, suppliers, alliance partners, and the community. In this way,
family firms are found to be better at fostering strong social ties with stakeholders than non-family
firms (Arregle, Hitt, Sirmon, & Very, 2007; Herrero, 2018). Previous studies have shown that
family firms have a stronger desire for acceptance in their communities. They pollute less, are
more socially responsible, and have greater concern for their reputations than non-family firms
(Berrone, Cruz, Gomez-Mejia, & Larraza-Kintana, 2010; Campopiano, De Massis, & Chirico,
2014; Dayan, Ng, & Ndubisi, 2019). The interplay between internal and external social ties helps
family firms to remain viable across generations. It encourages positive management of
stakeholders, thoughtfully constructed employment contracts for external recruits, stable
employment for all employees, and an enhanced ability to obtain information and resources.
Networking activities inside and outside family firms has been shown to have positive effects,
especially on the development of managerial capabilities (Chung, Wang, Huang, & Yang,
2016; Collins & Clark, 2003). Hence, the managerial capabilities of family firms become stronger
due to the reciprocal bonds between internal and external stakeholders. We hypothesize:
Hypothesis 1c
Binding social ties have a positive effect on managerial capabilities.
The fourth FIBER dimension, emotional attachment, refers to the emotions that foster a sense of
“togetherness” in the family business context. Emotions are feelings that can give rise to thoughts,
motivations and behaviors (Morris, Allen, Kuratko, & Brannon, 2010). They can sometimes
outweigh rational considerations in decision making and other cognitive processes (Baron,
2008; Basco, 2013). Emotional attachments in family firms have been found to influence business
processes, behavior, group dynamics, and performance in positive ways (Astrachan & Jaskiewicz,
2008; Kellermanns & Eddleston, 2007; Pieper, 2010). Similarly, emotional attachment can
amplify concerns about a firm's future and, therefore, lead to more responsible decision-making
(Dayan et al., 2019; Miller & Le Breton-Miller, 2006). Managers with strong emotional attachment
to a firm usually exhibit greater capabilities and management practices. Culture strongly influences
emotions (Matsumoto, 1993), and culture's role in family businesses has also been discussed in the
literature (Chrisman, Chua, & Sharma, 2005; Sharma & Manikutty, 2005). Collectivistic cultures
(such as the United Arab Emirates and other primarily Arab regions) tend to avoid expression of
negative emotions. They emphasize consensus, loyalty, harmony, and sympathy, and individuals
are urged to exercise control over personal desires and emotions (Labaki, Michael-Tsabari, &
Zachary, 2013; Yan & Sorenson, 2006). This emotional censoring has the potential to negate
individual voices and thus, undermine collaborative processes (Guillaume, Dawson, Otaye-Ebede,
Woods, & West, 2017). However, this negative impact is manageable in the context of family
SMEs, in which close-knit relationships are the norm. Frequent interactions in family SMEs set
the stage for continuous collaboration and discussion. This in turn can facilitate managerial
processes, cohesion, and the efficient use of resources (Pieper, 2010). Thus, we propose the
following:
Hypothesis 1d
The emotional attachment of family members in family firms has a positive effect on managerial
capabilities.
The last dimension is the desire to hand the firm down to future generations, that is, renewal of
family bonds through dynastic succession. Founders or owners strive to preserve their legacy and
perpetuate family control through intergenerational succession. Many studies have described the
prevalence of business succession (Daspit, Holt, Chrisman, & Long, 2016). Well-planned
succession mechanisms are important; conflicts over succession can result in dysfunctional
relationships that precipitate more conservative behavior, limited aspirations for growth, and
ultimately, weak performance (Bennedsen, Nielsen, Pérez-González, & Wolfenzon, 2007; Zahra,
2005). Passing managerial control to family candidates may result in a failure to retain talent,
because employees may perceive limited potential for professional growth. In family SMEs,
selecting managers from a pool of family members can reduce investment in human capital; the
family firm may even pass over more qualified managers and hire suboptimal employees to protect
exclusive succession (Liu, Eubanks, & Chater, 2015; Sirmon & Hitt, 2003). This is the so-called
“dark” side of SEW preservation (Kellermanns, Eddleston, & Zellweger, 2012), where the family's
intention to preserve its legacy through succession has a negative impact on business. Prior studies
indicate that prioritizing dynastic succession and the family legacy can hinder development of
managerial capabilities. The option of hiring a more competent external manager is often
disregarded, especially in SMEs. Thus, we propose the following:
Hypothesis 1e
The renewal of family bonds through dynastic succession has a negative effect on managerial
capabilities.
2.2. Managerial capabilities and performance
Managerial capabilities refer to the power of management to consolidate skills and technologies
into the competencies of a business, which allow it to react swiftly to changing opportunities
(Prahalad & Hamel, 1990). They are one of the keys to competitive advantage. Managerial
capabilities include skills involved in motivating others, communicating with stakeholders,
making timely decisions, and resolving conflicts, as well as skills in aligning the firm's resources
to achieve organizational goals. These capabilities are generally tacit, and therefore, difficult to
imitate in the short run. The relationship between managerial capabilities and performance has
long been recognized (Barney & Clark, 2007; Habbershon & Williams, 1999). Managerial
capabilities enable top managers to evaluate internal and external environments, improve
organizational performance, and create competitive advantage. Capable managers assign and
distribute the firms' resources in ways that lead to organizational success (Sirmon, Hitt, & Ireland,
2007). Managerial capabilities are also important determinants in the growth of SMEs (Barbero et
al., 2011), and this relationship has also been established in the context of family businesses
(Agyapong, Ellis, & Domeher, 2016; Miller, Lee, Chang, & Le Breton-Miller, 2009). Pearson,
Carr, and Shaw (2008) proposed that family involvement in firms could lead to the development
of family-specific capabilities, resulting in better performance. Family businesses generally focus
on reputation building and maintaining stable relationships with external providers. The long-term
development of core competencies, resources, and capabilities positively affect business
performance (Kim & Gao, 2013). This visionary and purposeful investment approach builds on
path dependencies that enable a firm's capabilities to grow cumulatively, and it is difficult for rivals
to imitate this path. In the aforementioned ways, family SMEs achieve both economic and noneconomic goals and increase their overall value. We hypothesize the following:
H2
Managerial capability has a positive effect on financial performance.
2.3. SEW and performance
Family owners or managers who emphasize SEW may work against the interests of non-family
owners. For example, family owners may avoid profitable ventures that threaten their control. In
the context of family SMEs, family members usually receive higher remuneration and have longer
tenures than nonfamily employees regardless of the organization's performance (Gómez-Mejía,
Núñez-Nickel, & Gutierrez, 2001). Nevertheless, not all strategic decisions to maximize SEW
endowment result in economic losses (Martin & Gómez-Mejía, 2016). Habbershon and Williams
(1999) argued that while “familiness” can constrain competitiveness, it also offers some
advantages in wealth creation. They modeled capability as a mediator between familiness and
performance, since familiness affects performance through family goals, relationships, resources,
and processes (Madison, Daspit, Turner, & Kellermanns, 2018; Mazzi, 2011). Similarly, family
social capital can be mediated by internal capabilities such as knowledge internationalization to
positively impact product development (Chirico & Salvato, 2016). Solid managerial capabilities
can boost performance regardless of familiness or SEW orientation. One recent study (Fitz-Koch
& Nordqvist, 2017) related innovation capability to SEW dimensions and better financial
performance. However, this was a single case study, and the relationship between managerial
capabilities, SEW, and performance was not established. In this study, we propose that managerial
capabilities mediate the relationship between SEW dimensions and performance. This proposition
adopts “family firm research from a SEW preservation perspective” as presented by Gómez-Mejía
et al. (2011). Family involvement through SEW drives family-specific managerial capabilities,
leading to increased performance. Hence, we propose the following:
Hypothesis 3
A firm's managerial capabilities mediate the relationship between the FIBER dimensions of SEW
and financial performance.
3. Methodology
In this study, we define a small or medium-sized family business as a family-owned firm with at
least 51% of the shares owned by one family, with at least one member of the management team
from that family, and with 250 employees or fewer. Our study used a sample of 150 Emirati firms
that meet these criteria. Data were collected via a survey from the Khalifa Fund for Enterprise
Development (KFED) from family firms in a network of an innovation and entrepreneurship
research group at the United Arab Emirates University (UAEU). The sample frame comprised 238
family firms, of which 182 were associated with KFED and 56 were from the UAEU group
network. A total of 176 questionnaires were returned. Of these, 26 were not completed correctly
and were rejected. Therefore, the final sample comprised 150 firms, representing a response rate
of 63.02%. Table 1 lists the characteristics of the respondents sampled.
Respondents were first screened by phone to ensure membership in our target group. Then, survey
instruments were distributed and personally collected by research assistants. Two sets of hard copy
questionnaires were provided to each business: one to the family member owner-manager and the
other to a non-family manager. Managerial capabilities and SEW dimensions were measured using
data from family member owner-managers, as they were expected to provide more objective and
reliable data on these variables. Performance was measured using responses from both managers.
Data were collected from multiple respondents to avoid single-source bias (Zacca, Dayan, &
Ahrens, 2015, p. 7). A native Arabic speaker fluent in English translated the survey instrument
from English to Arabic, and a different bilingual speaker then back-translated the survey into
English. The research team and translators reconciled any discrepancies.
The survey instruments were pre-tested with four members of family businesses in the Abu Dhabi
Emirate, and these individuals were asked to provide feedback on the clarity and accuracy of the
instruments (Dayan, Zacca, & Di Benedetto, 2013; Zacca et al., 2015). Independent sample t-tests
were carried out on the two groups of data to identify any systematic differences in structural
criteria (e.g., industry type, age, and size of firm) and FIBER scales between the respective
subsamples. The tests showed no relevant significant differences. Our sample of 150 family
businesses was a relatively small sample compared with those used in similar regional studies
(Goel, Voordeckers, Van Gils, & van den Heuvel, 2013). Data collection in this region is more
restricted because of a conservative business environment in which Arab business owners are
reluctant to share opinions and firm information.
3.1. Measures
3.1.1. SEW dimensions
To measure SEW, we adopted the five-dimensional FIBER scale, which was developed
by Berrone et al. (2012). Family member owner-managers responded to statements describing
their firm's SEW using a five-point Likert-type scale ranging from 1 (strongly disagree) to 5
(strongly agree).
For empirical validation of the FIBER scale, we conducted exploratory factor analysis (EFA)
based on principal axis analysis with oblique (promax) rotation, ĸ = 4 (Matsuno, Mentzer, & Rentz,
2000). Our results were quite similar to those in Hauck et al. (2016). Unidimensionality was not
observed for more than three dimensions at the same time for any of the iterations. For further
validation, we followed the suggestion of Hauck et al. (2016) and used three different approaches
to determine the number of factors. First, we conducted EFA based on principal axis analysis with
oblique (promax) rotation (ĸ = 4; Kuppelwieser & Sarstedt, 2014). We conducted parallel analysis
(Horn, 1965) as a second approach and the minimal average partial test (MAP test; Velicer, 1976)
as a third approach. The EFA resulted in an eight-factor solution in 76% of the iterations. The
parallel analysis consistently pointed to a four-factor solution for each of the iterations. Similarly,
in 50% of the iterations, the MAP test resulted in four factors. For the other 50%, we compared
the results of the Chi2 test, communalities, and factor loadings for the competing models resulting
from the MAP test and parallel analysis (Kuppelwieser & Sarstedt, 2014). We did not rely solely
on Chi2 differences as an appropriate model fit index due to the nested nature of the models; we
considered several other fit indices such as the comparative fit index (Gerbing & Anderson, 1988).
The results favored a four-dimensional solution in 76% of the iterations. The remaining iterations
were split between a five-factor solution (14% of iterations) and a six-factor solution (10% of
iterations).
Based on our findings and on Hauck et al. (2016), the unidimensionality of the FIBER dimensions
could not be confirmed. Following the suggestion of Hauck et al. (2016), we opted to maintain
different variables—one for each dimension, reflecting the hypothesis that these dimensions are
independent.
3.1.2. Managerial capabilities
Managerial capabilities were measured with a scale developed and validated by Hitt and Ireland
(1985) and validated again by Carmeli and Tishler (2004). This scale reflects a firm's ability to
perceive opportunities and threats and to develop and communicate its purpose, and it also reflects
the level of participation by top and intermediate managers in firm decision-making. Managerial
capabilities, measured by 12 items, showed a Cronbach's alpha of 0.82.
3.1.3. Performance
Performance was measured by return on assets (ROA) (a commonly used measure of financial
performance) and validated by prior research in management studies (Herrero, 2018; Minichilli,
Nordqvist, Corbetta, & Amore, 2014). Respondents rated their firm's ROA compared with key
competitors using a 5-point scale (1 = much worse than competitors to 5 = much better than
competitors). This approach is supported by previous studies demonstrating that assessing
subjective financial performance is useful in studies on family businesses (Alonso-Dos-Santos &
Llanos-Contreras, 2018; Rutherford et al., 2008). Other studies have described subjective financial
performance as part of a broader definition of performance (Wallace, Little, Hill, & Ridge, 2010).
3.1.4. Control variables
As in other SEW-performance studies, we used several control variables. Past studies have used
firm-level control variables such as the age and size of the firm, its life-cycle stage, and the number
and generations of family members in the firm; and sector-related variables such as industry type
and primary product. Past research (e.g., O'Boyle Jr, Rutherford, & Pollack, 2010; Schepers et al.,
2014) has shown that many of these variables are related to performance, but not all are directly
relevant to our hypotheses.
The controls used in this study were as follows: (1) firm age (Age) was calculated as the number
of years since a firm's foundation; (2) firm size (Size) was measured using the logarithm of the
number of employees; (3) venture life cycle (VLC) was measured through dummy variables
representing four venture life cycles (start-up, growing, mature, and declining); (4) number of
family members (NFM) was measured using the natural logarithm of the number of family
members currently working in the firm; and (5) generation (GEN) was measured with dummy
variables representing four generations (first, second, third, and fourth or higher generations).
3.2. Data analysis
This study employed partial least squares structural equation modeling (PLS-SEM) with
SmartPLS v.3.2 software (Ringle, Wende, & Becker, 2015). For several reasons, PLS-SEM was
selected to validate and test the conceptual model (Roldán & Sánchez-Franco, 2012). First, as a
component-based technique, PLS-SEM is preferable to covariance-based structural equationmodeling techniques (e.g., AMOS type) when the aims of a study are to understand individual
constructs and the cause–effect relationships among the constructs and also to conduct exploratory
research using a relatively complex model (Chin, 1998; Hair, Sarstedt, Ringle, & Mena,
2012; Sarstedt, Ringle, & Hair, 2014). Our research is exploratory and uses a relatively complex
model. It considers the impact of the FIBER dimensions on managerial capabilities as well as the
dimensions' mediating effects on performance, which has not been studied previously in the family
business context. Second, PLS is an appropriate technique when a sample size is small (Hair,
Black, Babin, & Anderson, 2010), which is an issue in this study. Third, PLS-SEM allows us to
analyze composites, whereas covariance-based SEM does not.
This study evaluates the research model in two steps: a step pertaining to the outer model
(measurement model) and a step pertaining to the inner model (structural model) (Hair, Hult,
Ringle, & Sarstedt, 2013). We then applied resampling procedures (i.e., bootstrapping) to 2000
resamples (Hair et al., 2012).
FAMILY BUSINESS PERFORMANCE IN A POST-DISASTER SCENARIO: THE
INFLUENCE OF SOCIOEMOTIONAL WEALTH IMPORTANCE AND
ENTREPRENEURIAL ORIENTATION
Abstract
Natural disasters are becoming more frequent and severe and pose a threat to family firms' survival.
It is important to address the rarely examined question of how the variables of socioemotional
wealth importance (SEWi) and entrepreneurial orientation (EO) interact to influence the
performance of family businesses in a post-disaster scenario. This study is based on a sample of
307 family businesses that suffered damage as a result of the 2010 earthquake in the Province of
Concepción, Chile. Comparative analysis was performed using partial least squares structural
equation modeling (PLS-SEM) and qualitative comparative analysis (QCA). The PLS-SEM
results support all study hypotheses. The QCA results yield five models that explain post-disaster
performance. The model with the greatest coverage includes the EO variables of competitive
aggressiveness, internal innovativeness, and external innovativeness. However, SEWi is relevant
in terms of its interaction with the rest of the variables in three of the five models.
Introduction
The survival of family businesses is an issue that has received widespread academic interest.
Researchers have made progress in understanding the determinants of family businesses' ability to
survive across generations (Zellweger, Nason, & Nordqvist, 2012). Studies have investigated how
family businesses manage to survive despite often having minimal financial returns (Glover &
Reay, 2015). Other studies have examined the decision-making process that occurs within family
businesses to determine whether they cease to develop their commercial activity (exit) or persist
in implementing actions that allow them to survive (DeTienne & Chirico, 2013). However,
research on the factors that determine family businesses' ability to survive external shocks such as
natural disasters is still scarce and highly fragmented. To fill this gap, we build on the
socioemotional wealth (SEW) perspective and the entrepreneurial orientation (EO) literature to
respond to the following question: How do the variables of socioemotional wealth importance
(SEWi) and EO interact to influence the performance of family businesses in a post-disaster
scenario?
Research on small and medium-sized enterprises (SMEs), among which family firms are
numerous, shows that approximately 20% of these enterprises close within five years following a
natural disaster (Schrank, Marshall, Hall-Phillips, Wiatt, & Jones, 2013). Other research indicates
that small businesses owned by women, minorities, and veterans have a higher probability of
demise, whereas businesses led by owners with more industry experience, disaster experiences, or
experience managing financial troubles are less likely to face closure (Marshall, Niehm, Sydnor,
& Schrank, 2015). It has been suggested that family businesses that mix family and business
resources and businesses that provide more income to the family are more likely to survive
(Haynes, Danes, & Stafford, 2011). Danes et al. (2009) found that federal disaster assistance was
relevant for explaining family firms' resilience to natural disasters. Previous research has made
important progress in identifying demographic variables and resource asymmetries that determine
firms' probability of surviving a natural disaster, but the roles of the motivations and priorities of
family enterprises after a disaster are not yet clear. The SEW perspective suggests that SEWi play
a role in defining family priorities and motivations and are central to explaining the family's
proactiveness, willingness to take risks, and motivation to take every possible measure to survive
when business continuity is under threat, such as when facing a natural disaster (Gomez-Mejia,
Cruz, Berrone, & De Castro, 2011; Llanos-Contreras & Jabri, 2019). This framework has not been
previously applied to understand the behavior of small and medium-sized family enterprises in a
post-disaster scenario.
The study performs a comparative analysis using both partial least squares structural equation
modeling (PLS-SEM) and qualitative comparative analysis (QCA). We contribute to the literature
on the influence of EO on the performance of family businesses and to the literature on the SEW
of family firms. Finally, we contribute by using non-linear methods that allow us to incorporate a
new perspective to understand family businesses' behavior.
2. Literature review
The SEW perspective indicates that family firms are willing to do everything possible to survive
when business continuity is at risk to preserve the non-economic wealth (or SEW) the business
provides to the family (Gomez-Mejia, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes,
2007). The importance of preserving this wealth (SEWi) depends on the target and on personal
and situational features (Zellweger & Dehlen, 2012). Accordingly, this theoretical perspective
maintains that family firms' priorities and decisions change depending on their point of reference
(situational features) at different moments in time. Empirical evidence confirms that the tendency
of these organizations to make riskier decisions and to engage in entrepreneurial actions (higher
EO) increases when their continuity is under threat (Berrone, Cruz, & Gomez-Mejia, 2012), which,
for family firms, occurs after a major shock, such as a natural disaster.
Recent research on SEW has indicated that family priorities, as an expression of the SEWi assigned
to their businesses, influence the EO of these firms (Llanos-Contreras & Alonso Dos Santos,
2018), and both factors are important in explaining firm performance (Binacci, Peruffo, Oriani, &
Minichilli, 2016; Lee & Chu, 2017). Research on how family businesses survive a natural disaster
has acknowledged the importance of the resources and capabilities of these firms to explain their
ability to adapt to external disruptions (Haynes et al., 2011; Olugbola, 2017; Stafford, Danes, &
Haynes, 2013). However, their motivation and ability to efficiently manage these resources and
transform them into better performance is at least partially determined by the SEW and EO
variables (Markin, Swab, & Marshall, 2017). While SEWi can be an expression of family business
owners' willingness to continue, EO variables demonstrate business owners' ability to manage the
crises generated by a natural disaster.
2.1. EO and family business disaster survival
EO, as an expression of corporate entrepreneurship, is considered critical for family businesses to
explore new business opportunities, support long-term stability, and develop a competitive
advantage (Covin, Slevin, & Heeley, 2000). Classically, EO has been defined in terms of
innovativeness, proactiveness, and risk taking (Covin & Slevin, 1989). However, other authors,
such as Lumpkin, Cogliser, and Schneider (2009), have added the dimensions of autonomy and
competitive aggressiveness. A more fine-grained description of this construct is proposed
by Zellweger and Sieger (2012), who not only acknowledge the previous dimensions but also
distinguish between internal and external innovativeness, between internal and external autonomy,
and among ownership risk, performance hazard risk, and control risk.
Many articles suggest that EO has a positive influence on firm performance (Engelen, Gupta,
Strenger, & Brettel, 2012; Lee & Chu, 2017). However, because of the wide range of dimensions
of this construct, Zellweger and Sieger (2012) note that high levels of all of its dimensions are not
a necessary condition to explain a dependent variable. Accordingly, understanding how EO
influences the performance of family firms in a post-disaster scenario requires an assessment of
the influence of the individual variables that form it. Thus, this study focuses on exploring the
dimensions of proactiveness and innovativeness, which are considered crucial in explaining family
firm performance (Nordqvist, Habbershon, & Melin, 2008). We also include competitive
aggressiveness because it is a good indicator of the availability of firms to do everything they can
to retain family control (Gomez-Mejia et al., 2007).
Proactiveness refers to an orientation toward anticipating, being a first mover, and taking
advantage of opportunities (Lumpkin & Dess, 1996). Because a natural disaster is an external
disruption that challenges family businesses' management routines and resources, highly proactive
family businesses increase their adaptive capacities, which in turn should give them a performance
advantage in such a scenario (Stafford et al., 2013). From a system perspective, facing a natural
disaster requires family businesses to make many complex decisions at the personal, family, and
business levels. These decisions are interconnected; accordingly, it is expected that a proactive
attitude in one part of the system positively influences the others, triggering a chain of decisions
that lead to restoration, rebuilding, and recovery (Marshall & Schrank, 2014). This would logically
have a positive influence on the performance of family businesses in a post-disaster scenario.
Accordingly, we present the following hypothesis:
H1
Proactiveness has a positive, significant impact on the performance of small and medium-sized
family enterprises in a post-disaster scenario.
Competitive aggressiveness is defined as a “firm's propensity to directly and intensely challenge
its competitors to achieve entry or improve position, that is, to outperform industry rivals in the
marketplace” (Lumpkin & Dess, 1996, p. 148). It has been suggested that competitive
aggressiveness is less relevant than proactiveness in assessing EO in family businesses (Nordqvist
et al., 2008). However, this is not the case when family businesses face external disruptions that
threaten their continuity. Several articles have proposed that these firms make decisions focused
primarily on preserving SEW (Cruz & Justo, 2017). Thus, family businesses owners seek to
preserve not only the economic perks provided by the businesses but also non-economic perks,
such as identity, reputation, and job stability. A natural disaster is a huge threat to a firm's ability
to remain under family control and thus implies losses in economic wealth and SEW. Accordingly,
it is expected that in a post-disaster scenario, family businesses will be especially open to
competitive aggressiveness because it will increase their probability of survival.
By definition, competitive aggressiveness leads family businesses to deploy non-traditional
methods of competition, such as developing new distribution and communication channels, to
outperform their competitors (Wincent, Thorgren, & Anokhin, 2014). Thus, in a post-disaster
context, competitive aggressiveness is a threat response that increases family businesses' chances
of survival. This aggressiveness triggers behaviors that support these firms' recovery and thereby
enhance their performance. Thus, we propose Hypothesis H2:
H2
Competitive aggressiveness has a positive, significant impact on the performance of small and
medium-sized family enterprises in a post-disaster scenario.
Innovativeness is defined as firms' ability and willingness to engage in new ideas, novelty,
experimentation, and creative processes to develop new products, services, or technological
processes (Lumpkin & Dess, 1996, p. 142). Zellweger and Sieger (2012) distinguish between
internal and external innovativeness. The former refers to implementing new processes,
technologies, systems, and management structures; the latter refers to pioneering the introduction
of new products or services and developing new markets.
Family business research provides empirical evidence that family firms are less innovative than
non-family firms (Block, Miller, Jaskiewicz, & Spiegel, 2013). Innovativeness is considered a
potential threat to the family's priority of preserving SEW because it increases the performance
hazard risk. However, when their performance is below expectations, family businesses are able
to adopt a more innovative orientation and make riskier decisions (Patel & Chrisman, 2014). Thus,
we believe that in a scenario of low economic returns (as in a post-disaster scenario), family
businesses will have a high innovativeness orientation and that this orientation will positively
influence their performance. We thus propose the following two hypotheses:
H3
Internal innovativeness has a positive, significant impact on the performance of small and mediumsized family enterprises in a post-disaster scenario.
H4
External innovativeness has a positive, significant impact on the performance of small and
medium-sized family enterprises in a post-disaster scenario.
2.2. SEWi and family firm survival
SEW has been defined as the “non-financial aspects of the firm that meet the family's affective
needs, such as identity, the ability to exercise family influence and the perpetuation of the family
dynasty” (Gomez-Mejia et al., 2007, p. 106). The most well-known description of this construct is
FIBER, which is defined by five dimensions: family control and influence, identification of the
family members, binding social ties, emotional attachment of the family members, and renewal of
the family bond through dynastic succession. This construct was assembled on the basis of 30
items from previous scales used to assess each of these dimensions. Recently, however, researchers
have proposed a finer-grained measure called SEWi (Debicki, Kellermanns, Chrisman, Pearson,
& Spencer, 2016) to assess family businesses owners and manage preferences with regard to an
array of non-financial perks related to SEW. This construct assesses not only the factors that drive
SEW but also the level of importance given by owners and managers to these factors. This study
suggests that SEWi can be assessed in terms of the importance given to family prominence, family
continuity, and family enrichment.
SEW is related to the non-financial perks that owner families gain from their firms, and it is
reflected in their perception of firm value (Cruz & Justo, 2017). This perspective proposes that
family businesses avoid losses of SEW and seek to keep the business under family control to avoid
losing all of their wealth (Gomez-Mejia et al., 2007). Recent studies indicate that family business
owners assess their economic and SEW (current and prospective) when making decisions (GomezMejia, Patel, & Zellweger, 2018). It has been proposed that the decision to take actions to keep
running the business is defined by a threshold of performance, which in turn is explained by the
level of SEWi (DeTienne & Chirico, 2013). Thus, higher socioemotional attachment (or higher
SEWi) increases the family benefits of continuing to run the business, which lowers the
performance threshold (Llanos-Contreras & Alonso Dos Santos, 2018). Hence, it is expected that
when SEWi is higher, family businesses are more willing to take actions to face the economic
losses that result from a natural disaster. This increased willingness increases their adaptive and
resilience capabilities and thereby improves their performance in a post-disaster scenario. The
above analysis supports the following hypothesis, and Fig. 1 summarizes the complete model:
H5
SEWi has a positive, significant impact on the performance of small and medium-sized family
enterprises in a post-disaster scenario.
3. Methods
3.1. Data collection and sample
The sample was chosen in November 2017. We surveyed 401 family businesses that suffered
damage as a result of the 2010 earthquake in Concepción, Chile. There is no census to identify or
quantify the number of companies affected by the earthquake. A quota sampling system was
chosen as the sampling method. Each group represents a geographic area affected by the
earthquake. The number of companies in each area was determined according to the size of the
area.
Missing data and outliers were deleted according to the listwise method and the Mahalanobis
(1936) distance, respectively. The final sample included 307 family businesses affected by the
earthquake. Half of the companies suffered major damage, and the other half suffered minor
damage. In 80% of the companies, >80% of the company's ownership was controlled by the main
owner. Forty-six percent of companies had one generation currently working in the company, 43%
had two, and the rest had three or more. Restaurants represented the most common type of business
in the sample, at approximately 10%. The other business types did not have significant
representation in the sample.
3.2. Scales
Regarding the scales used in the questionnaire, external innovativeness (2 items), internal
innovativeness (3 items), proactiveness (3 items), and competitive aggressiveness (3 items) were
adapted from Zellweger and Sieger (2012). The SEWi scale was adapted from Debicki et al.
(2016) and consisted of three subscales: family prominence (3 items), family continuity (3 items),
and family enrichment (3 items). The scale to measure small firms' economic performance was
adapted from Hernández-Carrión, Camarero-Izquierdo, and Gutiérrez-Cillán (2017). The
adaptation of the scales consisted of their translation and adaptation to the local context due to
linguistic differences. The questionnaire was translated into Spanish by Chilean natives and later
revised by several family entrepreneurs. The questionnaire applied five-point Likert scales ranging
from 1 = “strongly disagree” to 5 = “strongly agree.”
3.3. Analysis procedure
First, PLS-SEM was used to verify the validity and reliability of the instrument using SmartPLS
software (Ringle, Wende, & Becker, 2015). This method also allows hypotheses to be validated
under a linear model. Subsequently, fuzzy-set QCA (fsQCA) was used to consider all logically
possible combinations of the conditions that produce the expected results using fsQCA software
(Ragin & Davey, 2014). Each method allows for an analysis of the behavior of the dependent
variable under different perspectives. PLS-SEM is based on a sequence of regressions to identify
symmetrical relationships, and QCA captures the asymmetry of relationships with a limited
number of cases (Mendel & Korjani, 2012). QCA allows for an explanation of which combinations
of independent variables determine firm performance. Therefore, the combined effect of the
relationships rather than the net effect was the focus of this methodology (Lisboa, Skarmeas, &
Saridakis, 2016).
Discussion and conclusions
This article makes progress in understanding how SEWi and EO variables interact to influence the
performance of small and medium-sized family businesses in a post-disaster scenario. This
understanding is important for several reasons. First, these types of events are becoming
increasingly frequent and severe and pose a real threat to the survival of businesses in affected
areas (Linnenluecke & McKnight, 2017). Second, family businesses are considered a predominant
organizational structure (Poza & Dauguerty, 2014). Finally, recent studies suggest that the
establishment (embeddedness) and linkage of family businesses with the productive structures of
the territory in which they operate play a fundamental role in local economic development (Basco,
2015). Thus, family businesses' survival of these events is important not only for the firms
themselves but also for the community as a whole.
The results demonstrate that the scales are viable and trustworthy. The PLS-SEM results support
the five hypotheses. Thus, they corroborate the presumptions of Marshall and Schrank
(2014) and Stafford et al. (2013), who indicate that proactiveness increases the adaptive
capabilities of family businesses and gives them the ability to use their resources to benefit their
performance in a post-disaster scenario. Along the same lines, in contrast with the general
suggestion that competitive aggressiveness is a less relevant variable for EO assessment than the
proactiveness variable, the results demonstrate that it is important and that it has a positive and
significant impact on the performance of small and medium-sized family enterprises in a postdisaster scenario. This finding shows, in alignment with the SEW perspective, that these
organizations are able to do everything possible to keep running their businesses (Gomez-Mejia et
al., 2007). Thus, competitive aggressiveness can be considered an antecedent of proactiveness and
innovativeness, which leads family firms to implement strategies and actions with the aim of
outperforming their competitors (Zellweger & Sieger, 2012). Regarding innovativeness, the results
also support previous findings in family business research, indicating that in a scenario of low
economic returns, such as a post-disaster scenario, a high innovativeness orientation will lead to
positive results in terms of performance (Patel & Chrisman, 2014).
The results from the fuzzy-set QCA yield five models that explain post-disaster performance. The
causal combination with the highest relevance was competitive aggressiveness × internal
innovativeness × external innovativeness. This finding supports the idea that competitive
aggressiveness leads to innovation in deploying non-traditional process and market strategies,
which in turn has a positive influence on firm performance (Wincent et al., 2014). The two bestperforming
models,
in
order
of
importance,
were
~SEWi × proactiveness × external
innovativeness and SEWi × competitive aggressiveness × external innovativeness. This finding
aligns with the idea that family enterprises assess the gains and losses of both economic wealth
and SEW (Cruz & Justo, 2017); accordingly, SEWi can be present or absent. Model 3 indicates
that when SEWi is present and combined with competitive aggressiveness and external
innovativeness, the family firm's performance in a post-disaster scenario improves. This result
suggests that when the continuity of a family business is threatened, the priority of preserving
SEW (presence of SEWi) could be an antecedent that triggers competitive aggressiveness and
external innovativeness and supports firm performance. This conclusion aligns with the finding
of Patel and Chrisman (2014) that when performance is lower than expected, family businesses
make riskier research and development investments. Model 2 indicates that the absence of SEWi
combined with proactiveness and external innovativeness leads to better performance in our
sample. Family firms' priority of preserving SEW is related to lower innovativeness and
proactiveness (Block et al., 2013). This result leads us to believe that the absence of SEWi
enhances proactiveness and external innovativeness and in turn enhances firm performance.
Although previous evidence shows that EO positively influences firm performance (e.g., Lee &
Chu, 2017), the QCA results confirm the relevance of assessing the influence of the specific
variables that form this construct. The analysis indicates that none of the variables is a necessary
condition, providing further support to Zellweger and Sieger (2012). Furthermore, the QCA
provides several models showing how EO variables interact to influence the performance of family
businesses. It also reveals the interaction between EO variables and SEWi, which allows the
(indirect) assessment of the ability of family firms to manage their resources in a post-disaster
context (Yunis, El-Kassar, & Tarhini, 2017) and their priority of maintaining the firm under family
control when its continuity is threatened (Llanos-Contreras & Alonso Dos Santos, 2018) — in this
case, as a consequence of a natural disaster.
This article contributes to the almost non-existent literature regarding how family businesses cope
with natural disasters and to the few studies on small and medium-sized family businesses in Latin
American countries. From a theoretical point of view, this study makes at least three important
contributions. First, it elucidates the influence of four specific variables of the EO construct on
small and medium-sized family enterprises in a post-disaster scenario (Schepers, Voordeckers,
Steijvers, & Laveren, 2014). This result confirms the prediction that in a post-disaster scenario
when business continuity is threatened (meaning a total loss of the family business), attributing
greater importance to SEW increases the performance of family businesses (Gomez-Mejia et al.,
2007). Finally, this research contributes by using non-linear methods, which have rarely been used
in the analysis of family business behavior (Llanos-Contreras & Alonso Dos Santos, 2018). The
combination of the PLS-SEM and QCA methods widens the understanding of the study
phenomenon by broadening the capacity to explain variance: the conditional causal model
explained 69% of the variance in firm performance, whereas the PLS-SEM method explained 44%.
PLS-SEM validated the scales used and confirmed that all variables were significant in explaining
the variation in the variance of the firm performance construct. However, the asymmetric vision
of the QCA method captured the complexity of the interaction of the variables, exposing a more
complex scenario than the one shown through PLS-SEM (the QCA indicated that any variable was
a sufficient condition). This enables the understanding of how SEWi interacts with the
entrepreneurial behavior variables, increasing the performance of companies when they face the
consequences of a natural disaster.
All of these contributions indicate that willingness (assessed as SEWi) and ability (assessed as EO)
are critical factors in the post-disaster performance of family firms. Accordingly, they are central
in determining these firms' ability to recover. Theoretically, this research shows that the way these
variables interact (their presence and absence) is also central for attaining higher levels of
performance when business continuity is threatened. Thus, this research provides further insight
into a central aspect of the SEW perspective and of the EO literature: the value creation dynamic
when continuity is threatened.
Managers can benefit from this study to develop or strengthen the resilience of family business
culture by enhancing the factors that increase firm performance after a disaster, which can also
enhance firms' ability to face external shocks other than natural disasters. Because family firms
are embedded in the territories in which they operate (Basco, 2015), they can become a critical
echelon for enhancing community resilience. Accordingly, policy makers can learn by identifying
firms with a strong willingness and ability to continue, which can lead to community recovery.
The government could develop financial support programs that are particularly oriented to firms
that are likely to pursue innovativeness in developing new products, opening new markets
(external innovativeness), and/or introducing new technologies that lead to the improvement of
their processes, management structures, and information systems (internal innovativeness).
This study is not without limitations, both geographical and cultural. The institutional context and
government support may differ between regions and limit the generalizability of our results
(Kedmenec & Strašek, 2017). The possibility that EO and SEW priorities influence firm
performance in a post-disaster scenario depends on the resources available to be mobilized from
these attitudinal elements. Additionally, future research can focus on directly determining the
factors that favor family firms' resilience and recovery. Qualitative research would be useful to
better explain the social and emotional processes that shape EO and adaptive capacities that lead
to recovery. Understanding the interaction between the community, the government, and family
businesses is also a stream of research that can be developed more deeply.