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Affiliate Directors and Perceived Risk Bearing in Publicly Traded, Family–Controlled Firms: The Case of Diversification

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  • Carla D. Jones
  • Marianna Makri
  • Luis R. Gomez–Mejia

Abstract

The present study examines the influence exerted by affiliate directors in the diversification decisions of family–controlled, publicly traded firms. Using a relational view based on the development of social capital, we argue that affiliate directors play a different role in boards of family firms vis–à –vis nonfamily firms. Specifically, we develop a set of hypotheses proposing that affiliate directors stimulate family firms to pursue diversification strategies by sharing their knowledge and experience with family executives, and hence reducing the perceived risk that may be associated with growth strategies. Affiliates can play this advisory role without reducing the control of family owners, and this facilitates the firm's willingness to adopt growth–oriented strategies. Namely, affiliates who are business experts or support specialists would tend to encourage diversification. These effects are supported empirically.

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  • 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.
    • Handle: RePEc:sae:entthe:v:32:y:2008:i:6:p:1007-1026
    DOI: 10.1111/j.1540-6520.2008.00269.x
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    3. 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).
    4. Carney, Richard W. & Child, Travers Barclay & Li, Xiang, 2020. "Board connections and crisis performance: Family, state, and political networks," Journal of Corporate Finance, Elsevier, vol. 64(C).
    5. Britney Pisani & Peter J. Baldacchino & Norbert Tabone & Lauren Ellul & Simon Grima, 2023. "Board Diversity in Selected Large Maltese Family-Controlled Businesses and its Implications on Corporate Governance," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(3), pages 14-49.
    6. Justin R. Hall & Selen Savas-Hall & Eric H. Shaw, 2023. "A deductive approach to a systematic review of entrepreneurship literature," Management Review Quarterly, Springer, vol. 73(3), pages 987-1016, September.
    7. 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).
    8. Gomez-Mejia, Luis R. & Mendoza-Lopez, Anabel & Cruz, Cristina & Duran, Patricio & Aguinis, Herman, 2024. "Socioemotional wealth in volatile, uncertain, complex, and ambiguous contexts: The case of family firms in Latin America and the Caribbean," Journal of Family Business Strategy, Elsevier, vol. 15(1).
    9. Marco Pini, 2019. "Corporate social responsibility, family firms and territorial institutions in Italy: an empirical analysis," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 73(2), pages 99-110, April-Jun.
    10. Debicki, Bart J. & Ramírez-Solís, Edgar Rogelio & Baños-Monroy, Verónica Ilián & Gutiérrez-Patrón, Lilia Magali, 2020. "The impact of strategic focus on relational capital: A comparative study of family and non-family firms," Journal of Business Research, Elsevier, vol. 119(C), pages 585-598.
    11. Achbah, Rachid & Vitanova, Ivana & Fréchet, Marc, 2024. "Failure Escape: The role of advice seeking in CEOs’ awareness of financial difficulties and corporate restructuring," Journal of Business Research, Elsevier, vol. 175(C).
    12. 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).
    13. 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).

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