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Embeddedness and Profitability: The Case of Small Businesses in the US Midwest

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  • Shoopman, Clara

Abstract

Maximizing the profitability of small businesses is key to growing the economy. Small businesses are defined as any independent business with less than 500 employees and make up most businesses in the United States. This study investigates the association between firm profitability and different business goals, aspects of socioemotional wealth (SEW), as well as business/owner characteristics. Socioemotional wealth encompasses nonfinancial values driving businesses. While SEW is frequently associated with family firms it can also be found in nonfamily firms. This study differentiates between SEW aspects like life satisfaction, the renewal of bonds through succession, and identification of the owner with the firm. The data is from the NCR-Stat: Small Business Survey, published by the North Central Regional Center for Rural Development. Using a linear regression for our quantitative analysis no single business goal was found to have a significant association with profitability. However, each aspect of SEW did have a statistically significant correlation with profit. Life satisfaction and the renewal of bonds through succession were positively correlated with profit but identification with the firm had a negative association with profit.

Suggested Citation

  • Shoopman, Clara, 2025. "Embeddedness and Profitability: The Case of Small Businesses in the US Midwest," SS-AAEA Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 2025(1).
    • Handle: RePEc:ags:ssaaea:373436
    DOI: 10.22004/ag.econ.373436
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