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Research summary: Building on a unique data set with information on the nuclear structure of entrepreneurial families, we integrate leadership succession into a socioe-motional wealth (SEW) logic to test the antecedents and consequences of primogeniture vis-à-vis second- or subsequent-bom selection in family firm succession. Our findings suggest that appointing a family firstborn sibling is more likely when there is a high degree of SEW endowment and the family firm has pre-succession performance below aspiration levels. Next, we find that appointing a second- or subsequent-born sibling has a positive and significant effect on post-succession firm profitability, particularly when the firm is in its second generation or later. Managerial summary: What drives succession choices in family firms? What are the performance implications of each succession choice? These are questions of vital relevance for every business owner. Focusing on the pool of potential family heirs at the time of succession, our study adds to the debate on the drivers of succession choices by suggesting that having a family intensive governance structure fosters primogeniture as the main succession logic, even when the family firm is experiencing lower profitability. Our study informs business owners on the implications of different succession policies, suggesting that family firms that have the courage to disregard primogeniture and choose more wisely the family successor are also the ones experiencing higher post-succession performance.

This research proposes an explanation for the conflicting extant evidence about whether family ownership of a business promotes proactive environmental strategy (PES). Based on insights drawn from strategic reference point theory, organizational identity theory, and the socioemotional wealth preservation perspective, we propose that family ownership has a moderated-mediated relationship with PES, with commitment as a moderator and long-term orientation as a mediator. A test using 454 China private firms with different levels of family ownership supports the hypotheses. This shows that PES as a strategy related to business ethics does not happen without commitment and long-term orientation.

PurposeInvestigation of family firm radical innovation is burgeoning but far less prevalent than studies of family firm innovation in general. Concurrently, studies repeatedly report that family firms exhibit mostly conservative and incremental innovation rather than more radical ones. This is unfortunate because without radical innovation, family firms risk a competency trap in which long-term competitiveness is lost to more innovative rivals. This situation has led to urgent calls among scholars to explicitly acknowledge the heterogeneity of family firm innovation and to understand the conditions for family firm radical innovation.Design/methodology/approachA systematic review of 51 papers categorized into four scholarly conversations build the foundation for a critical discussion of each line of inquiry.FindingsThe authors analyze 51 leading articles and identify four persistent theoretical positions: (1) RBV and capabilities, (2) agency and stewardship, (3) behavioral agency and socioemotional wealth, and (4) the ability and willingness paradox. The authors identify key research problems and research questions needing urgent scholarly and present a framework that captures their complementary and competing assumptions to enable rigorous future research.Originality/valueTo galvanize and spearhead future research efforts, this paper provides a critical analysis of our understanding of family firm radical innovation with a specific emphasis on the theoretical assumptions at the core of existing investigations and the eight most important research questions in need of answers.

Family firms are thought to pursue nonfinancial goals that provide socioemotional wealth, but socioemotional wealth is feasible only with family control of the firm. Using prospect theory, we hypothesize that socioemotional wealth increases with the extent of current control, duration of control, and intentions for transgenerational control, thus adding to the price at which owners would be willing to sell their firms to nonfamily buyers. Findings from two countries show that current control has no impact, and duration of control has a mixed impact. However, intention for transgenerational control has a consistently positive impact on the perceived acceptable selling price.

Research summary: In family businesses, investment decisions often involve both socioemotional wealth and economic considerations. Focusing on new technology adoption, we argue that multiple dimensions of socioemotional wealth contribute to complex effects within different types of family firms—depending on the level of family control—as well as in contrast to non-family firms. Results based on cable TV operators from 1983 to 1987 confirm that family ownership correlates negatively with technology adoption, especially when family owners hold a minority rather than majority position. We also show contingencies based on performance improvements and competitive threats. Our arguments contribute new insights about the tensions between economic and socioemotional factors within minority family ownership that are absent from non-family firms and more pronounced than in majority family firms. Managerial summary: We find evidence of greater reluctance toward new technology adoption among firms with minority family influence than majority family influence. This suggests that goals related to socioemotional wealth only partly explain the cautious decision-making observed in family firms, with further caution arising from conflicting priorities between family and non-family owners. Recent performance improvements help offset the reluctance to adopt new technology, albeit to a lesser degree among firms with minority family ownership. High levels of competitive threats also offset the reduction in new technology adoption, and contrary to expectations, to a greater extent among minority family firms.

This study investigates the engagement of family firms in corporate social responsibility. We first compare their corporate social performance (CSP) to non-family firms. Then, following recent evidence on the heterogeneity of family firms, we examine two factors that may influence CSP within family firms: the level of family control and the governance orientation of the country in which they operate. This research is based on a theoretical framework which considers both agency and socioemotional wealth (SEW) influences on family firms CSR engagements. Overall, we find that family firms exhibit lower CSP than non-family firms. But when focusing on family firms, our analyses show a curvilinear relationship between family control and CSP. At lower levels of control, family owners invest more in social initiatives to protect their SEW. Beyond a threshold level of control that we estimate at 36 % in our sample, economic considerations prevail over SEW and social performance starts decreasing. We also find that family firms operating in stakeholder-oriented countries are more attentive to social concerns than those operating in more shareholder-oriented countries.

Family firms are one of the most ubiquitous forms of business organizations worldwide. Their survival and growth are thus not only crucial for the firms themselves but also for the overall economy. One of the factors that influence their survival and development are their financing decisions. These decisions are generally described through the pecking order theory. However, not much is known about the applicability of this theory in private family firms. Given the shortcomings (both theoretically and empirically) of the current literature, we analyze 1087 incremental financing decisions from 277 family firms to develop and test a specific family firm pecking order. We integrate the elements of the socioemotional wealth perspective to theoretically explain the preferred order and introduce family capital into the pecking order model. Our findings indicate that family firms first prefer internal financing, next debt financing, followed by family capital, and last external capital. We also find that SEW considerations play a role in this financing decision. Especially the retention of control over the firm and the aim to pass the firm to the next generation appear to play an important role in determining this order. These dimensions ensure that family firms try to avoid extra capital. However, when it is needed, they will opt for family capital over external capital. This paper thus provides more insight into the reasoning behind financing decisions in private family firms.Plain English SummaryHow do family firms finance their investments? When looking for ways to finance their investments, firms have several options. According to traditional finance theories, they generally follow a so-called pecking order: they prefer to first use their internal funds, before turning to external financing. For family firms, the most ubiquitous form of business organization worldwide, two important aspects have been ignored in this research until now. First, socioemotional aspects influence decision-making in family firms and thus probably also financing decisions. Next, the business family itself can act as an external source of finance, which is not yet accounted for in the current pecking order model. In this research, we take these issues into account in order to develop—theoretically and empirically—a family firm pecking order. We investigate over a thousand financing decisions of 277 privately held family firms. Our results show that they prefer internal financing, followed by bank debt, family capital, and external capital. Especially the retention of control over the firm and the aim to pass the firm to the next generation appear to play an important role in determining this order. Our research thus indicates that future research should pay attention to the peculiarities of family firms when investigating their financing decision.

During family firm succession, parent-incumbents are often caught up in a paradox of both empowering and dominating their child-successors. To understand this recurring phenomenon, we draw from socioemotional wealth literature and a philosophical account of the power-transfer paradox in ancient patriarchal monarchies to hypothesize that parent-incumbents tend to exert generational coercive control when their child-successors are seen as very unwilling and incapable or very willing and capable of taking over patriarchal family organizations. We test our hypotheses in three studies. In Study 1, we coded data from succession cases in Chinese patriarchal monarchies (403 BC to 959 AD) and found support for the predicted non-linear effects of successor-princes’ willingness (63 cases) and capability (80 cases) on their father-kings’ coercive control (persecuting or murdering the princes). In Study 2, based on survey data from parent–child dyads of 157 family firms in Taiwan and mainland China, again, we found U-shaped effects of child-successors’ willingness and capability on parent-incumbents’ coercive control (restraining successors’ power). Moreover, parent-incumbents’ highly narcissistic personality attenuated these U-shaped relationships because they tend to devalue their child-successors’ willingness and capability. In Study 3, we conducted a survey of 103 parent–child dyads in family firms in mainland China and found a U-shaped relationship between capability and coercive control only when incumbents’ roles in the family and at work were highly intertwined.

Socioemotional wealth (SEW), i.e., the noneconomic utility a family derives from its ownership position in a firm, is the primary reference point for family firms. Family firms are willing to sacrifice economic gains in order to preserve their noneconomic utility. Thus, we argue that family firms sacrifice IPO proceeds by choosing higher IPO underpricing than nonfamily firms if underpricing helps them protect their SEW. Our empirical results, based on a sample of 153 German IPOs, support our hypothesis. On average, family firms have 10 percentage points more IPO underpricing than nonfamily firms.