IDEAS home Printed from https://ideas.repec.org/a/eee/fambus/v11y2020i4s1877858520300802.html
   My bibliography  Save this article

Reconsidering socioemotional wealth: A Smithian-inspired socio-economic theory of decision-making in the family firm

Author

Listed:
  • Craig, Justin B.
  • Newbert, Scott L.

Abstract

It is widely understood that business-owning families pursue socioemotional wealth (SEW) primarily to satisfy their desire for control over the firm. Unfortunately, due to the private nature of the gains SEW-based decisions are intended to generate, its pursuit is unlikely to serve the interests of those other stakeholders on which the business depends. In response, we draw upon Adam Smith’s classic arguments from An inquiry into the nature and causes of the wealth of nations and The theory of the moral sentiments to develop a normative theory of decision-making in family business that balances the pursuit of self- and other-regarding interests. We propose that only those families that strive to generate socio-economic (rather than socioemotional) wealth are likely to survive in the long-run.

Suggested Citation

  • Craig, Justin B. & Newbert, Scott L., 2020. "Reconsidering socioemotional wealth: A Smithian-inspired socio-economic theory of decision-making in the family firm," Journal of Family Business Strategy, Elsevier, vol. 11(4).
    • Handle: RePEc:eee:fambus:v:11:y:2020:i:4:s1877858520300802
    DOI: 10.1016/j.jfbs.2020.100353
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1877858520300802
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfbs.2020.100353?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Time orientation and asset prices," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 107-135, January.
    2. Scott L. Newbert & Ronald Paul Hill, 2014. "Setting the Stage for Paradigm Development: A 'Small-Tent' Approach to Social Entrepreneurship," Journal of Social Entrepreneurship, Taylor & Francis Journals, vol. 5(3), pages 243-269, November.
    3. Morela Hernandez, 2008. "Promoting Stewardship Behavior in Organizations: A Leadership Model," Journal of Business Ethics, Springer, vol. 80(1), pages 121-128, June.
    4. Carla D. Jones & Marianna Makri & Luis R. Gomez–Mejia, 2008. "Affiliate Directors and Perceived Risk Bearing in Publicly Traded, Family–Controlled Firms: The Case of Diversification," Entrepreneurship Theory and Practice, , vol. 32(6), pages 1007-1026, November.
    5. Carmelo Cennamo & Pascual Berrone & Cristina Cruz & Luis R. Gomez–Mejia, 2012. "Socioemotional Wealth and Proactive Stakeholder Engagement: Why Family–Controlled Firms Care More about their Stakeholders," Entrepreneurship Theory and Practice, , vol. 36(6), pages 1153-1173, November.
    6. Shaker A. Zahra & James C. Hayton & Carlo Salvato, 2004. "Entrepreneurship in Family vs. Non–Family Firms: A Resource–Based Analysis of the Effect of Organizational Culture," Entrepreneurship Theory and Practice, , vol. 28(4), pages 363-381, July.
    7. Deirdre McCloskey, 2008. "Adam Smith, the Last of the Former Virtue Ethicists," History of Political Economy, Duke University Press, vol. 40(1), pages 43-71, Spring.
    8. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, April.
    9. Wang, Mei & Rieger, Marc Oliver & Hens, Thorsten, 2016. "How time preferences differ: Evidence from 53 countries," Journal of Economic Psychology, Elsevier, vol. 52(C), pages 115-135.
    10. Zahra, Shaker A., 2016. "Developing theory-grounded family business research: Some suggestions," Journal of Family Business Strategy, Elsevier, vol. 7(1), pages 3-7.
    11. Tomer, John F., 2001. "Economic man vs. heterodox men: the concepts of human nature in schools of economic thought," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 30(4), pages 281-293.
    12. William S. Schulze & Franz W. Kellermanns, 2015. "Reifying Socioemotional Wealth," Entrepreneurship Theory and Practice, , vol. 39(3), pages 447-459, May.
    13. James M. Vardaman & Maria B. Gondo, 2014. "Socioemotional Wealth Conflict in Family Firms," Entrepreneurship Theory and Practice, , vol. 38(6), pages 1317-1322, November.
    14. Filipe Santos, 2012. "A Positive Theory of Social Entrepreneurship," Journal of Business Ethics, Springer, vol. 111(3), pages 335-351, December.
    15. Montes, Leonidas, 2003. "Das Adam Smith Problem: Its Origins, the Stages of the Current Debate, and One Implication for Our Understanding of Sympathy," Journal of the History of Economic Thought, Cambridge University Press, vol. 25(1), pages 63-90, March.
    16. Freeman, R. Edward, 1994. "The Politics of Stakeholder Theory: Some Future Directions1," Business Ethics Quarterly, Cambridge University Press, vol. 4(4), pages 409-421, October.
    17. Lisa Hill, 2001. "The hidden theology of Adam Smith," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 8(1), pages 1-29.
    18. Aard J. Groen, 2005. "Knowledge Intensive Entrepreneurship In Networks: Towards A Multi-Level/Multi Dimensional Approach," Journal of Enterprising Culture (JEC), World Scientific Publishing Co. Pte. Ltd., vol. 13(01), pages 69-88.
    19. Jacob Viner, 1927. "Adam Smith and Laissez Faire," Journal of Political Economy, University of Chicago Press, vol. 35(2), pages 198-198.
    20. Joseph LiPuma & Scott Newbert & Jonathan Doh, 2013. "The effect of institutional quality on firm export performance in emerging economies: a contingency model of firm age and size," Small Business Economics, Springer, vol. 40(4), pages 817-841, May.
    21. Joseph Lipuma & Scott L. Newbert & Jonathan P. Doh, 2013. "The effect of institutional quality on firm export performance in emerging economies : a contingency model of firm age and size," Post-Print hal-02312662, HAL.
    22. Michael P. Schlaile & Katharina Klein & Wolfgang Böck, 2018. "From Bounded Morality to Consumer Social Responsibility: A Transdisciplinary Approach to Socially Responsible Consumption and Its Obstacles," Journal of Business Ethics, Springer, vol. 149(3), pages 561-588, May.
    23. Donna Marie DeCarolis & David L. Deeds, 1999. "The impact of stocks and flows of organizational knowledge on firm performance: an empirical investigation of the biotechnology industry," Strategic Management Journal, Wiley Blackwell, vol. 20(10), pages 953-968, October.
    24. Klaus Uhlenbruck & Peter Rodriguez & Jonathan Doh & Lorraine Eden, 2006. "The Impact of Corruption on Entry Strategy: Evidence from Telecommunication Projects in Emerging Economies," Organization Science, INFORMS, vol. 17(3), pages 402-414, June.
    25. G.T. Lumpkin & Keith H. Brigham & Todd W. Moss, 2010. "Long-term orientation: Implications for the entrepreneurial orientation and performance of family businesses," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 22(3-4), pages 241-264, May.
    26. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    27. Cristina Cruz & Martin Larraza–Kintana & Lucía Garcés–Galdeano & Pascual Berrone, 2014. "Are Family Firms Really More Socially Responsible?," Entrepreneurship Theory and Practice, , vol. 38(6), pages 1295-1316, November.
    28. Danny Miller & Isabelle Le Breton–Miller, 2014. "Deconstructing Socioemotional Wealth," Entrepreneurship Theory and Practice, , vol. 38(4), pages 713-720, July.
    29. repec:bla:jfinan:v:58:y:2003:i:3:p:1301-1327 is not listed on IDEAS
    30. Sen, Amartya, 1997. "Economics, Business Principles and Moral Sentiments," Business Ethics Quarterly, Cambridge University Press, vol. 7(3), pages 5-15, July.
    31. Franz W. Kellermanns & Kimberly A. Eddleston & Thomas M. Zellweger, 2012. "Article Commentary: Extending the Socioemotional Wealth Perspective: A Look at the Dark Side," Entrepreneurship Theory and Practice, , vol. 36(6), pages 1175-1182, November.
    32. Ronald C. Anderson & David M. Reeb, 2003. "Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1328, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chaudhary, Sanjay & Dhir, Amandeep & Ferraris, Alberto & Bertoldi, Bernando, 2021. "Trust and reputation in family businesses: A systematic literature review of past achievements and future promises," Journal of Business Research, Elsevier, vol. 137(C), pages 143-161.
    2. Lambrechts, Frank & Gnan, Luca, 2022. "Human resources and mutual gains in family firms: New developments and possibilities on the horizon," Journal of Family Business Strategy, Elsevier, vol. 13(2).
    3. Craig, Justin B. & Newbert, Scott L., 2022. "Exploring the future of family enterprise research through a social science lens," Journal of Family Business Strategy, Elsevier, vol. 13(2).
    4. Fábio Frezatti & Diógenes Souza Bido & Daniel Magalhães Mucci & Franciele Beck & Ana Paula Capuano Cruz, 2023. "The Impact of the Management Control System on the Family Business’ Intention to Maintain the Organization for Future Generations," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 1145-1176, June.
    5. Szewczyk, Justin & Kurzhals, Christopher & Graf-Vlachy, Lorenz & Kammerlander, Nadine & König, Andreas, 2022. "The family innovator’s dilemma revisited: Examining the association between family influence and incumbents’ adoption of discontinuous technologies," Journal of Family Business Strategy, Elsevier, vol. 13(4).
    6. Cambrea, Domenico Rocco & Ponomareva, Yuliya & Pittino, Daniel & Minichilli, Alessandro, 2022. "Strings attached: Socioemotional wealth mixed gambles in the cash management choices of family firms," Journal of Family Business Strategy, Elsevier, vol. 13(3).
    7. Kammerlander, Nadine, 2022. "Family business and business family questions in the 21st century: Who develops SEW, how do family members create value, and who belongs to the family?," Journal of Family Business Strategy, Elsevier, vol. 13(2).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Davila, Jessenia & Duran, Patricio & Gómez-Mejía, Luis & Sanchez-Bueno, Maria J., 2023. "Socioemotional wealth and family firm performance: A meta-analytic integration," Journal of Family Business Strategy, Elsevier, vol. 14(2).
    2. Cambrea, Domenico Rocco & Ponomareva, Yuliya & Pittino, Daniel & Minichilli, Alessandro, 2022. "Strings attached: Socioemotional wealth mixed gambles in the cash management choices of family firms," Journal of Family Business Strategy, Elsevier, vol. 13(3).
    3. Francesco Aiello & Paola Cardamone & Lidia Mannarino & Valeria Pupo, 2021. "Green patenting and corporate social responsibility: Does family involvement in business matter?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(4), pages 1386-1396, July.
    4. Andrea Stübner & Svenja Jarchow, 2023. "Family oblige: the link between CSR and succession intention in small and medium family firms," Journal of Business Economics, Springer, vol. 93(3), pages 389-431, April.
    5. Heino, Noora & Tuominen, Pasi & Jussila, Iiro, 2020. "Listed Family Firm Stakeholder Orientations: The Critical Role of Value-creating Family Factors," Journal of Family Business Strategy, Elsevier, vol. 11(4).
    6. Kihun Kim & Zulfiquer Ali Haider & Zhenyu Wu & Junsheng Dou, 2020. "Corporate Social Performance of Family Firms: A Place-Based Perspective in the Context of Layoffs," Journal of Business Ethics, Springer, vol. 167(2), pages 235-252, November.
    7. Schierstedt, Bennet & Henn, Marisa & Lutz, Eva, 2020. "Diversified acquisitions in family firms: Restricted vs. extended family priorities," Journal of Family Business Strategy, Elsevier, vol. 11(2).
    8. Moreno-Menéndez, Ana M. & Casillas, José C., 2021. "How do family businesses grow? Differences in growth patterns between family and non-family firms," Journal of Family Business Strategy, Elsevier, vol. 12(3).
    9. Rehman, Atiqa & Gonenc, Halit & Hermes, Niels, 2023. "Corporate social performance of family firms and shareholder protection: An international analysis," Journal of Family Business Strategy, Elsevier, vol. 14(2).
    10. Lin, Hsing-Er & Yu, Andy & Stambaugh, Jeff & Tsao, Chiung-Wen & Wang, Rebecca Jen-Hui & Hsu, I-Chieh, 2023. "Family CEO duality and research and development intensity in public family enterprises: Temporality as a model boundary," Journal of Business Research, Elsevier, vol. 158(C).
    11. Herdhayinta, Heyvon & Lau, James & Shen, Carl Hsin-han, 2023. "Cash holdings of minority family businesses in Indonesia," Emerging Markets Review, Elsevier, vol. 55(C).
    12. Christensen-Salem, Amanda & Mesquita, Luiz F. & Hashimoto, Marcos & Hom, Peter W. & Gomez-Mejia, Luis R., 2021. "Family firms are indeed better places to work than non-family firms! Socioemotional wealth and employees’ perceived organizational caring," Journal of Family Business Strategy, Elsevier, vol. 12(1).
    13. Lumpkin, G.T. & Bacq, Sophie, 2022. "Family business, community embeddedness, and civic wealth creation," Journal of Family Business Strategy, Elsevier, vol. 13(2).
    14. Giacomo Laffranchini & John S Hadjimarcou & Si Hyun Kim, 2020. "The Impact of Socioemotional Wealth on Decline-Stemming Strategies of Family Firms," Entrepreneurship Theory and Practice, , vol. 44(2), pages 185-210, March.
    15. James J. Cordeiro & Giorgia Profumo & Ilaria Tutore, 2021. "Family ownership and stockholder reactions to environmental performance disclosure: A test of secondary agency relationships," Business Strategy and the Environment, Wiley Blackwell, vol. 30(4), pages 2091-2107, May.
    16. Melanie Richards, 2023. "When do Non-financial Goals Benefit Stakeholders? Theorizing on Care and Power in Family Firms," Journal of Business Ethics, Springer, vol. 184(2), pages 333-351, May.
    17. Nhat Minh Tran & Thu Thuy Nguyen & Thi Phuong Linh Nguyen & Anh Trong Vu & Thi Thanh Hoa Phan & Thi Hong Tham Nguyen & Ngoc Diep Do & Anh Tuan Phan, 2022. "Female Managers and Corruption in SMEs: A Comparison Between Family and Nonfamily SMEs in Vietnam," SAGE Open, , vol. 12(1), pages 21582440221, March.
    18. Cristina Cruz & Martin Larraza–Kintana & Lucía Garcés–Galdeano & Pascual Berrone, 2014. "Are Family Firms Really More Socially Responsible?," Entrepreneurship Theory and Practice, , vol. 38(6), pages 1295-1316, November.
    19. Kosmidou, Vasiliki & Holt, Daniel T., 2022. "The relationship between family management and performance: A configurational approach in exploring the role of socioemotional wealth and generational stage," Journal of Family Business Strategy, Elsevier, vol. 13(4).
    20. Claudia Arena & Giovanna Michelon, 2018. "A matter of control or identity? Family firms' environmental reporting decisions along the corporate life cycle," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1596-1608, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:fambus:v:11:y:2020:i:4:s1877858520300802. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/719791/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.