How values and socioemotional wealth influence behavior and performance in family firms

Abstract

Socio-psychological research agrees that values are one of the most influential factors shaping our behavior and decision-making. Thus, values have been used in multiple different disciplines to explain the behavior of individual humans, communities, and societies. Furthermore, they have been used to determine the character of organizations, their culture, and outcomes. Values have also found their way into the family business research stream. Due to the unique, and well-known connection between family and business, especially values of the founder, and consecutively the owner-managers of family firms are deemed to be of severe importance. They were named to influence resources, choices, goals, build the foundation, and in general shape the behavior of the firm. Specifically, research has deemed them for the corporate culture, longevity, social responsibility, and socioemotional wealth behavior. However, even though the importance of values has been named and assumed to be of relevance, a sound empirical underpinning about how they manifest themselves, how and to what extent they shape behavior and if they influence firm-level outcomes is severely lacking. This is especially surprising as values help to overcome crises and are crucial to the longevity of businesses, which is especially relevant in family firms. Thus, goal of this research is to highlight the importance of individual values of the owner-manager, their impact on family firm behavior and outcomes. As owner-managers normally lead a business over very long time periods exert they exert an enormous amount of influence on the firm imprinting their values on the firm itself. Based upon value theory and in accordance with the upper echelon theory, where it is argued that characteristics of the human being ultimately influence the performance of a firm through strategic decisions, we argue, that the basic human values of owner-managers, consciously and unconsciously influence the behavior of the firm, impacting the performance and motivation of non-family employees. Therefore, four consecutive studies have been planned and executed. The first study qualitatively investigates the assumed connection between individual values and III socioemotional wealth behavior of owner-managers. Results show that the assumed connection between values and socioemotional wealth exists, that values and socioemotional wealth can change over time, and that social-oriented and personoriented values influence different areas of socioemotional wealth behavior. The second study quantitatively tests this identified connection. Measuring values with the portrait-value questionnaire of Schwartz and connecting them to socioemotional wealth, measured by the FIBER scale. The results of the structural equation model show, that openness to change and self-enhancement values influence the F and I dimension of the FIBER scale while self-transcendence and conservation values mostly influence dimensions B, E, and R. Thus, our initial assumption that different values influence different areas of socioemotional wealth behavior was supported. Our third study investigates the connection of individual values, socioemotional wealth as an aggregated construct, and firm performance. Based on upper echelon theory, we suggested, that SEW mediates the effect between values and firm-level performance. Results of our sample support this notion, showing that performance is indeed influenced by individual values. While person-focused values have a positive direct impact on performance, social-focused values influence performance not directly, but mediated by socioemotional wealth in a positive way. The last study investigates how the family and their values, influence their non-family employees. While research has shown that the workforce of family firms tends to be more motivated when it comes to innovative ideas than their non-family firm counterparts, why this is the fact has not been investigated. Thus, we qualitatively investigated why non-family employees tend to be intrapreneurially active in family firms, and which role the family plays within this context. Results show that the influence of the family, their values, and care strengthens identification with the workforce, leading to a sense of belonging, intrinsically motivating them to contribute to innovative activities. First and foremost, this research highlights the importance of individual actors, their values, and their influence on the behavior, decisions, and performance of a firm. It adds to the research stream, investigating the heterogeneity and ambivalent behavior of family firms, by adding a value perspective. It generates new insights about socioemotional wealth, its origin, and its influence on firm-level variables. IV Values are internalized at an early age, however, influence our behavior consciously and unconsciously for the rest of our lives. Being aware of this fact, knowing which value hierarchy is inherent in oneself and how they impact behavior can thus help to understand and change decision-making, goal setting, and in general the direction of a firm. This work sheds light on details of the underlying mechanisms, identifying values of owner-managers and investigating their influence on behavior and performance as well as non-family employees while revealing the necessity to further deepen our knowledge about values, not only within the family business research domain, but business research in general.