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

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  • 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.

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  • 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
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    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).

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