Does socioemotional wealth matter for competitive advantage? A case of Polish family businesses.

• Author: Bratnicka-Mysliwiec, Katarzyna

INTRODUCTION

In recent years, a growing interest in family entrepreneurship can be observed. The popularity of family businesses is a consequence of the significant role they play in the economy, but also the fact that they have coped relatively well with the effects of the economic crisis. The reasons for that are associated with the specific culture of family entrepreneurship, expressed in the sphere of values, and reflected in the relationship within teams and the ways of managing these entities. Therefore, efforts made by both management theoreticians and practitioners, aimed at identifying the determinants of family firms' competitiveness and understanding the determinants of their functioning, are not surprising. Nowadays, researchers still face theoretical and empirical challenges stemming from the intensive interpersonal relations between different stakeholders and those pursuing non-financial goals, which are not typically found in non-family businesses (Evert, Martin, McLeod, & Payne, 2015; Reilly & Jones III, 2017). The nuanced insights into the complexity of the dynamics, due to the blurred boundaries between family and business, are relatively underdeveloped. Indeed, we need both family business specific theories, as well as valid measurement instruments relevant to family business research.

This study aims at complementing and extending existing research on family firm competitive advantage by taking a (SEW) perspective. It is based on the idea that family firms can be competitive while still maintaining a strong family character (Chrisman & Patel, 2012). Based on these premises, this study attempts to extend current theory on family firms in two major respects. First, the study complements prior empirical studies on how family firms achieve competitive advantage. In particular, this study aims at extending and refining existing theory as to how family firms can best accommodate and leverage their attributes (SEW), in particular in order to achieve competitive advantage. Secondly, our study attempts to extend current theory on SEW as a construct that is linked to competitive advantage in family business settings. This is important because of wired-in family forces for SEW maintenance.

LITERATURE BACKGROUND

(SEW) and competitive advantage

This study is drawn up in the convention of strategic management, which focuses on the organization (in particular on the enterprise) as the basic level of analysis and recognizes the diversity of the organization in terms of efficiency, that is in the area of creating and capturing values (Durand, Grant, & Madsen, 2017). From among a variety of possible approaches, a resource-based approach was chosen that puts emphasis on the strategically valuable resources and abilities of the enterprise being a source of competitive advantage. Research attention was focused on the (SEW), which is an important strategic resource.

Family businesses are defined as those in which many members of the same family are involved as owners or managers, either now and in time (Miller, Le Breton-Miller, Lester, & Cannella, 2007). The family is a specific social group related to marriage, biology or adoption, including people also connected with affection, commitment, dependence and cooperation (Rothausen, 1999).

Unlike the non-family firms, family businesses have some unique qualities that can lead to competitive advantage. We argue that the (SEW) theory is suited to examining deeply the kind of strategic consequences of specific features of family firms. In our paper, we define that (SEW) (hereafter, SEW) refers to an "all-encompassing approach that captures the affective endowment of family owners" (Berrone, Cruz, & Gomez-Mejia, 2012). In other words, SEW is concerned with attributes of the firm that bear the family's affective endowments (Gomez-Mejia, Hynes, Nunez-Nickel, & Moyano-Fuentes, 2007).

Research has shown that the SEW perspective offers a conceptual framework to view the complex and dynamic interplay of economic and non-economic factors (Chrisman, Chua, De Massis, Frattini & Wright, 2015; Miller & Le Breton-Miller, 2014). From SEW considerations, which emphasize that they take precedence over the assessment of economic benefits and costs (Gomez-Mejia et al., 2007), changes in behavioral decision-making processes might result in declining power to pursue the family agenda (Leitterstorf & Rau, 2014). Similar dynamics have been documented in other settings such as avoiding acquisitions that threaten the preservation of existing stock of (SEW) (Miller, Le Breton-Miller, & Lester, 2010). Furthermore, the introduction of new ways of working and, probably, human resource, is perceived as a potential threat to family stability, specifically to affinity-related dimensions, namely family identity, social bonds, and emotional attachment (Gomez-Mejia, Makri, & Lazzara-Kitana, 2010). Meanwhile, in (SEW) case, developments with regards to new, discontinuous technology adoption are inhibited as a potential dilution of family control (Konig, Kammerlander, & Enders, 2013). Using similar, family-ownership logic, Souder, Zaheer, Sapienza, and Ranucci (2017) theorize and demonstrate a tendency to perceive new technology as potential erosion of (SEW), mainly from identity and family influence aspects. Drawing on this perspective, we argue that SEW may trigger or limit family firms' strategic initiatives that ultimately shape their competitive advantage. In general, findings indicate that the boundaries between business and family are blurred, ultimately affecting how family firms perform their strategic activity (Duran, Kammerlander, van Essen & Zellweger, 2016).

The consideration of (SEW) is important because forming (SEW) appears critical to firm performance--but it is not always so (Bettinelli, Sciascia, Randerson, & Fayolle, 2017). Berrone et al. (2012) significantly contribute to the SEW literature by showing that SEW, as a latent explanatory construct, has five dimensions, namely: (1) family control and influence, (2) identification of family members with the firm, (3) binding social ties, (4) emotional attachment of family members, and (5) renewal of family bonds to the firm through dynastic succession. According to such a conceptualization of (SEW), the first dimension refers to exercising current family control, which depends on family members' power to control key strategic decisions both formally (e.g., a family member being the CEO or owner) and informally influencing decision-making processes. The second dimension connotes a close linkage between the reputation of family and firm, which provides a sense of identity that is also visible in a broader social context. The next dimension relates to the social relationships of the family firm, its family members, its internal as well as external stakeholders, which create social capital as a potential for gaining access to desirable resources and experiences. The fourth dimension is associated with shared emotions, heritage, jointly experienced events, and responsibility for the long-term viability of family firms that become a source of affective needs satisfaction (e.g., belonging, security). The fifth dimension, in turn, characterizes a tendency to keep the family under the family's control over multiple generations, and therefore protect the family's wealth and value. These scholars have also labeled the operationalization of this set of dimensions as the FIBER scale, which is intended to measure socioemotional endowment across family firms. Additionally, they demonstrate how the tendency to preserve SEW as a decision criterion, strengthens strategic choices that carry a significant financial risk. Lastly, they explain why the studies with regards to effecting firm performance have been inconclusive and ambiguous.

The desire to preserve (SEW) potentially leads to specific strategic orientations (De Massis, Kotlar, Chua, & Chrisman, 2014). Duran et al. (2016) in their meta-analysis recognize that family firms engage in innovation less than their non-family counterparts. Other scholars have also examined SEW within entrepreneurship literature, recognizing that corporate entrepreneurship allows the firm to considerably improve its competitive advantage (Corbett, Covin, O'Connor, & Tucci, 2013). Similarly, innovations enhance their competitive advantage (Hayton & Kelley, 2006).

In terms of family control and influence, earlier findings focus on the indirect effects of this dimension on competitive advantage. In particular, a high proportion of family members in top management lead to a negative relationship between innovation orientation and new product portfolio performance (Kraiczy, Hack, & Kellermanns, 2014). Chrisman and Patel (2012) demonstrate that family ownership is negatively related to research and development spending. This is because family owners perceive such investments as risky and might threaten their influence in the firm. In contrast to these findings, Hauck and Prugl (2015) show that the effects of family involvement on a willingness to innovate are ambiguous and even conflicting. There is also evidence that family involvement in the board of directors influences entrepreneurial orientation according to an inverted U-shaped relationship (Bauweraerts & Colot, 2017). Lee and Chu (2017) have also documented that entrepreneurial orientation magnifies family firm performance when family control is very active.

Scholars have also highlighted how the second dimension of (SEW) influences organizational outcomes. Stevens, Kidwell and Sprague (2015) draw on the basic idea that family owners' identity is strictly connected with the firm. In consequence, the boundaries between the reputation of family and firm fade (Leitterstorf & Rau, 2014). Shepherd and Haynie (2009) uncovered that an appropriate level of family business identity fit strengthens the tendency to entrepreneurial activities. Therefore, family...