IDEAS home Printed from https://ideas.repec.org/a/bla/jomstd/v58y2021i1p201-235.html
   My bibliography  Save this article

Narrow‐Framing and Risk Preferences in Family and Non‐Family Firms

Author

Listed:
  • Hanqing “Chevy” Fang
  • Esra Memili
  • James J. Chrisman
  • Linjia Tang

Abstract

Building upon prospect theory’s concept of narrow‐framing, we explore family firms’ risk preferences across multiple decisions in corporate entrepreneurship. We argue that family firms’ decisions are less likely to be narrowly framed (more likely to be made as a group rather than in isolation) compared to non‐family firms. Examining the interaction between two risky decisions (internationalization and R&D investment) in two samples of publicly traded firms in the USA and China confirms our hypotheses. Family firms appear more likely than non‐family firms to diversify risk when making multiple decisions concerning corporate entrepreneurship. However, given inferior performance, risk taking across multiple decisions in family firms is positively related.

Suggested Citation

  • Hanqing “Chevy” Fang & Esra Memili & James J. Chrisman & Linjia Tang, 2021. "Narrow‐Framing and Risk Preferences in Family and Non‐Family Firms," Journal of Management Studies, Wiley Blackwell, vol. 58(1), pages 201-235, January.
    • Handle: RePEc:bla:jomstd:v:58:y:2021:i:1:p:201-235
    DOI: 10.1111/joms.12671
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/joms.12671
    Download Restriction: no
    File URL: https://libkey.io/10.1111/joms.12671?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Timothy B. Palmer & Robert M. Wiseman, 1999. "Decoupling risk taking from income stream uncertainty: a holistic model of risk," Strategic Management Journal, Wiley Blackwell, vol. 20(11), pages 1037-1062, November.
    2. Nicholas Barberis & Ming Huang, 2001. "Mental Accounting, Loss Aversion, and Individual Stock Returns," Journal of Finance, American Finance Association, vol. 56(4), pages 1247-1292, August.
    3. Howard Davies & Peter Walters, 2004. "Emergent patterns of strategy, environment and performance in a transition economy," Strategic Management Journal, Wiley Blackwell, vol. 25(4), pages 347-364, April.
    4. Christina Matz Carnes & R. Duane Ireland, 2013. "Familiness and Innovation: Resource Bundling as the Missing Link," Entrepreneurship Theory and Practice, , vol. 37(6), pages 1399-1419, November.
    5. Daniel Kahneman, 2003. "Maps of Bounded Rationality: Psychology for Behavioral Economics," American Economic Review, American Economic Association, vol. 93(5), pages 1449-1475, December.
    6. Charles W. L. Hill & Michael A. Hitt & Robert E. Hoskisson, 1992. "Cooperative Versus Competitive Structures in Related and Unrelated Diversified Firms," Organization Science, INFORMS, vol. 3(4), pages 501-521, November.
    7. Block, Joern H., 2012. "R&D investments in family and founder firms: An agency perspective," Journal of Business Venturing, Elsevier, vol. 27(2), pages 248-265.
    8. Chandra S. Mishra & Daniel L. Mcconaughy, 1999. "Founding Family Control and Capital Structure: The Risk of Loss of Control and the Aversion to Debt," Entrepreneurship Theory and Practice, , vol. 23(4), pages 53-64, July.
    9. Luis R. Gomez–Mejia & Joanna Tochman Campbell & Geoffrey Martin & Robert E. Hoskisson & Marianna Makri & David G. Sirmon, 2014. "Socioemotional Wealth as a Mixed Gamble: Revisiting Family Firm R&D Investments with the Behavioral Agency Model," Entrepreneurship Theory and Practice, , vol. 38(6), pages 1351-1374, November.
    10. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    11. Philip Bromiley & Devaki Rau & Yu Zhang, 2017. "Is R&D risky?," Strategic Management Journal, Wiley Blackwell, vol. 38(4), pages 876-891, April.
    12. Ronald C. Anderson & David M. Reeb, 2003. "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1327, June.
    13. Alok Kumar & Sonya Seongyeon Lim, 2008. "How Do Decision Frames Influence the Stock Investment Choices of Individual Investors?," Management Science, INFORMS, vol. 54(6), pages 1052-1064, June.
    14. Vanessa Diaz-Moriana & Eric Clinton & Nadine Kammerlander & G. T. Lumpkin & Justin B. Craig, 2020. "Innovation Motives in Family Firms: A Transgenerational View," Entrepreneurship Theory and Practice, , vol. 44(2), pages 256-287, March.
    15. Zahra, Shaker A. & Covin, Jeffrey G., 1995. "Contextual influences on the corporate entrepreneurship-performance relationship: A longitudinal analysis," Journal of Business Venturing, Elsevier, vol. 10(1), pages 43-58, January.
    16. Daniel Kahneman & Dan Lovallo, 1993. "Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking," Management Science, INFORMS, vol. 39(1), pages 17-31, January.
    17. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, vol. 36(6), pages 643-660, June.
    18. Amit, Raphael & Ding, Yuan & Villalonga, Belén & Zhang, Hua, 2015. "The role of institutional development in the prevalence and performance of entrepreneur and family-controlled firms," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 284-305.
    19. Randall Morck & Lloyd Steier, 2005. "The Global History of Corporate Governance: An Introduction," NBER Chapters, in: A History of Corporate Governance around the World: Family Business Groups to Professional Managers, pages 1-64, National Bureau of Economic Research, Inc.
    20. Zahra, Shaker A., 1991. "Predictors and financial outcomes of corporate entrepreneurship: An exploratory study," Journal of Business Venturing, Elsevier, vol. 6(4), pages 259-285, July.
    21. Richard Gentry & Clay Dibrell & Jaemin Kim, 2016. "Long–Term Orientation in Publicly Traded Family Businesses: Evidence of a Dominant Logic," Entrepreneurship Theory and Practice, , vol. 40(4), pages 733-757, July.
    22. Michael Carney, 2005. "Corporate Governance and Competitive Advantage in Family–Controlled Firms," Entrepreneurship Theory and Practice, , vol. 29(3), pages 249-265, May.
    23. Timothy W. Ruefli & James M. Collins & Joseph R. Lacugna, 1999. "Risk measures in strategic management research: auld lang syne?," Strategic Management Journal, Wiley Blackwell, vol. 20(2), pages 167-194, February.
    24. Lin, Wen-Ting, 2012. "Family ownership and internationalization processes: Internationalization pace, internationalization scope, and internationalization rhythm," European Management Journal, Elsevier, vol. 30(1), pages 47-56.
    25. Nicholas Barberis & Ming Huang, 2001. "Mental Accounting, Loss Aversion, and Individual Stock Returns," NBER Working Papers 8190, National Bureau of Economic Research, Inc.
    26. Shlomo Benartzi & Richard H. Thaler, 1995. "Myopic Loss Aversion and the Equity Premium Puzzle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 73-92.
    27. Guoquan Chen & Chunhong Liu & Dean Tjosvold, 2005. "Conflict Management for Effective Top Management Teams and Innovation in China," Journal of Management Studies, Wiley Blackwell, vol. 42(2), pages 277-300, March.
    28. Cristina Cruz & Mattias Nordqvist, 2012. "Entrepreneurial orientation in family firms: a generational perspective," Small Business Economics, Springer, vol. 38(1), pages 33-49, January.
    29. Patricio Duran & Nadine Kammerlander & Marc van Essen & Thomas Zellweger, 2016. "Doing More with Less : Innovation Input and Output in Family Firms," Post-Print hal-02312103, HAL.
    30. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    31. Choi, Young Rok & Zahra, Shaker A. & Yoshikawa, Toru & Han, Bong H., 2015. "Family ownership and R&D investment: The role of growth opportunities and business group membership," Journal of Business Research, Elsevier, vol. 68(5), pages 1053-1061.
    32. Pankaj C. Patel & James O. Fiet, 2011. "Knowledge Combination and the Potential Advantages of Family Firms in Searching for Opportunities," Entrepreneurship Theory and Practice, , vol. 35(6), pages 1179-1197, November.
    33. Carmelo Cennamo & Pascual Berrone & Cristina Cruz & Luis R. Gomez–Mejia, 2012. "Socioemotional Wealth and Proactive Stakeholder Engagement: Why Family–Controlled Firms Care More about their Stakeholders," Entrepreneurship Theory and Practice, , vol. 36(6), pages 1153-1173, November.
    34. Luis R. Gomez‐Mejia & Marianna Makri & Martin Larraza Kintana, 2010. "Diversification Decisions in Family‐Controlled Firms," Journal of Management Studies, Wiley Blackwell, vol. 47(2), pages 223-252, March.
    35. Henri Barki & Alain Pinsonneault, 2005. "A Model of Organizational Integration, Implementation Effort, and Performance," Organization Science, INFORMS, vol. 16(2), pages 165-179, April.
    36. Josip Kotlar & Alfredo De Massis & Hanqing Fang & Federico Frattini, 2014. "Strategic reference points in family firms," Small Business Economics, Springer, vol. 43(3), pages 597-619, October.
    37. G.T. Lumpkin & Keith H. Brigham & Todd W. Moss, 2010. "Long-term orientation: Implications for the entrepreneurial orientation and performance of family businesses," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 22(3-4), pages 241-264, May.
    38. Kimberly A. Eddleston, 2008. "Commentary: The Prequel to Family Firm Culture and Stewardship: The Leadership Perspective of the Founder," Entrepreneurship Theory and Practice, , vol. 32(6), pages 1055-1061, November.
    39. G. T. Lumpkin & Keith H. Brigham, 2011. "Long–Term Orientation and Intertemporal Choice in Family Firms," Entrepreneurship Theory and Practice, , vol. 35(6), pages 1149-1169, November.
    40. Allison W. Pearson & Laura E. Marler, 2010. "A Leadership Perspective of Reciprocal Stewardship in Family Firms," Entrepreneurship Theory and Practice, , vol. 34(6), pages 1117-1124, November.
    41. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    42. Miller, Danny & Le Breton-Miller, Isabelle & Lester, Richard H. & Cannella Jr., Albert A., 2007. "Are family firms really superior performers?," Journal of Corporate Finance, Elsevier, vol. 13(5), pages 829-858, December.
    43. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October.
    44. Jess H. Chua & James J. Chrisman & Alfredo De Massis, 2015. "A Closer Look at Socioemotional Wealth: Its Flows, Stocks, and Prospects for Moving Forward," Entrepreneurship Theory and Practice, , vol. 39(2), pages 173-182, March.
    45. Patricio Duran & Nadine Kammerlander & Marc van Essen & Thomas Zellweger, 2016. "Doing More with Less : Innovation Input and Output in Family Firms," Post-Print hal-02276703, HAL.
    46. Ronald C. Anderson & David M. Reeb, 2003. "Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1328, June.
    47. Choelsoon Park, 2002. "The Effects of Prior Performance on the Choice Between Related and Unrelated Acquisitions: Implications for the Performance Consequences of Diversification Strategy," Journal of Management Studies, Wiley Blackwell, vol. 39(7), pages 1003-1019, November.
    48. Jess H. Chua & James J. Chrisman & Pramodita Sharma, 1999. "Defining the Family Business by Behavior," Entrepreneurship Theory and Practice, , vol. 23(4), pages 19-39, July.
    49. Vanessa M. Strike & Pascual Berrone & Stephen G. Sapp & Lorenzo Congiu, 2015. "A Socioemotional Wealth Approach to CEO Career Horizons in Family Firms," Journal of Management Studies, Wiley Blackwell, vol. 52(4), pages 555-583, June.
    50. Wei Huang & Agyenim Boateng & Alexander Newman, 2016. "Capital structure of Chinese listed SMEs: an agency theory perspective," Small Business Economics, Springer, vol. 47(2), pages 535-550, August.
    51. James J. Chrisman & Jess H. Chua & Alfredo Massis & Tommaso Minola & Silvio Vismara, 2016. "Management processes and strategy execution in family firms: from “what” to “how”," Small Business Economics, Springer, vol. 47(3), pages 719-734, October.
    52. Sarah Kaplan, 2008. "Framing Contests: Strategy Making Under Uncertainty," Organization Science, INFORMS, vol. 19(5), pages 729-752, October.
    53. C. K. Prahalad & Richard A. Bettis, 1986. "The dominant logic: A new linkage between diversity and performance," Strategic Management Journal, Wiley Blackwell, vol. 7(6), pages 485-501, November.
    54. Randall K. Morck, 2005. "A History of Corporate Governance around the World: Family Business Groups to Professional Managers," NBER Books, National Bureau of Economic Research, Inc, number morc05-1, March.
    55. David G. Sirmon & Michael A. Hitt, 2003. "Managing Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms," Entrepreneurship Theory and Practice, , vol. 27(4), pages 339-358, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andrea Calabrò & James J. Chrisman & Liena Kano, 2022. "Family-owned multinational enterprises in the post-pandemic global economy," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(5), pages 920-935, July.
    2. Yannick Bammens & Paul Hünermund & Petra Andries, 2022. "Pursuing Gains or Avoiding Losses: The Contingent Effect of Transgenerational Intentions on Innovation Investments," Journal of Management Studies, Wiley Blackwell, vol. 59(6), pages 1493-1530, September.
    3. Aldrich, Howard E. & Alvarez, Sharon A. & Brumana, Mara & Campopiano, Giovanna & Minola, Tommaso, 2023. "Entrepreneurship in family firms: What’s next? Multilevel embeddedness and individuals’ cognition," Journal of Family Business Strategy, Elsevier, vol. 14(3).
    4. Dong, Guowei & Kokko, Ari & Zhou, Haoyong, 2022. "Innovation and export performance of emerging market enterprises: The roles of state and foreign ownership in China," International Business Review, Elsevier, vol. 31(6).
    5. Espeche, José Francisco Tragant & Sacristán-Navarro, María & Zúñiga-Vicente, José Ángel & Crespo, Nuno Fernandes, 2023. "Innovation and internationalisation during times of economic growth, crisis, and recovery prior to Covid-19: A configurational approach comparing Spanish manufacturing family and non-family firms," Journal of Family Business Strategy, Elsevier, vol. 14(1).
    6. Riccardo Camilli & Alessandro Mechelli & Alessandra Stefanoni & Fabrizio Rossi, 2023. "Addressing Managerial Loss Aversion for the Corporate Value Creation Process: A Critical Analysis of the Literature and Preliminary Approaches," Administrative Sciences, MDPI, vol. 14(1), pages 1-16, December.
    7. Francesco Debellis & Michele Pinelli & Marcel Hülsbeck & Anne Heider, 2023. "Ownership, governance, and internationalization in family firms: a replication and extension," Small Business Economics, Springer, vol. 61(4), pages 1437-1459, December.
    8. Chen, Junlin & Feng, Xiaojing & Kou, Gang & Mu, Mengting, 2023. "Multiproduct newsvendor with cross-selling and narrow-bracketing behavior using data mining methods," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 169(C).
    9. Helen X. H. Bao & Rohan Cardoza, 2023. "Political institutions and corporate risk‐taking: International evidence," International Review of Finance, International Review of Finance Ltd., vol. 23(4), pages 777-793, December.
    10. Tommaso Minola & Nadine Kammerlander & Franz W. Kellermanns & Frank Hoy, 2021. "Corporate Entrepreneurship and Family Business: Learning Across Domains," Journal of Management Studies, Wiley Blackwell, vol. 58(1), pages 1-26, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vanessa Diaz-Moriana & Eric Clinton & Nadine Kammerlander & G. T. Lumpkin & Justin B. Craig, 2020. "Innovation Motives in Family Firms: A Transgenerational View," Entrepreneurship Theory and Practice, , vol. 44(2), pages 256-287, March.
    2. Hanqing “Chevy†Fang & James J. Chrisman & Daniel T. Holt, 2021. "Strategic Persistence in Family Business," Entrepreneurship Theory and Practice, , vol. 45(4), pages 931-950, July.
    3. Ivan Miroshnychenko & Alfredo De Massis & Danny Miller & Roberto Barontini, 2021. "Family Business Growth Around the World," Entrepreneurship Theory and Practice, , vol. 45(4), pages 682-708, July.
    4. Fernando Muñoz-Bullón & Maria J. Sanchez-Bueno & Alfredo De Massis, 2020. "Combining Internal and External R&D: The Effects on Innovation Performance in Family and Nonfamily Firms," Entrepreneurship Theory and Practice, , vol. 44(5), pages 996-1031, September.
    5. Mike W. Peng & Wei Sun & Cristina Vlas & Alessandro Minichilli & Guido Corbetta, 2018. "An Institution-Based View of Large Family Firms: A Recap and Overview," Entrepreneurship Theory and Practice, , vol. 42(2), pages 187-205, March.
    6. Markin, Erik T. & Skorodziyevskiy, Vitaliy & Zhu, Lina & Chrisman, James J. & Fang, Hanqing “Chevy”, 2022. "Lone-founder firms in China: Replicating Miller et al. (2007) in a different context," Journal of Family Business Strategy, Elsevier, vol. 13(4).
    7. Moreno-Menéndez, Ana M. & Casillas, José C., 2021. "How do family businesses grow? Differences in growth patterns between family and non-family firms," Journal of Family Business Strategy, Elsevier, vol. 12(3).
    8. 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).
    9. Pascual Berrone & Patricio Duran & Luis Gómez-Mejía & Pursey P M A R Heugens & Tatiana Kostova & Marc Essen, 2022. "Impact of informal institutions on the prevalence, strategy, and performance of family firms: A meta-analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 1153-1177, August.
    10. Jiang, Fuxiu & Shi, Wei & Zheng, Xiaojia, 2020. "Board chairs and R&D investment: Evidence from Chinese family-controlled firms," Journal of Business Research, Elsevier, vol. 112(C), pages 109-118.
    11. Miroshnychenko, Ivan & De Massis, Alfredo, 2022. "Sustainability practices of family and nonfamily firms: A worldwide study," Technological Forecasting and Social Change, Elsevier, vol. 174(C).
    12. 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).
    13. Ginesti, Gianluca & Ossorio, Mario & Dawson, Alexandra, 2023. "Family businesses and debt maturity structure: Focusing on family involvement in governance to explain heterogeneity," Journal of Family Business Strategy, Elsevier, vol. 14(2).
    14. Kosmidou, Vasiliki & Holt, Daniel T., 2022. "The relationship between family management and performance: A configurational approach in exploring the role of socioemotional wealth and generational stage," Journal of Family Business Strategy, Elsevier, vol. 13(4).
    15. Richard Gentry & Clay Dibrell & Jaemin Kim, 2016. "Long–Term Orientation in Publicly Traded Family Businesses: Evidence of a Dominant Logic," Entrepreneurship Theory and Practice, , vol. 40(4), pages 733-757, July.
    16. César Camisón-Zornoza & Beatriz Forés-Julián & Alba Puig-Denia & Sergio Camisón-Haba, 0. "Effects of ownership structure and corporate and family governance on dynamic capabilities in family firms," International Entrepreneurship and Management Journal, Springer, vol. 0, pages 1-34.
    17. Min, Byung-seong, 2021. "Heterogeneity of R&D in family firms," Journal of Business Research, Elsevier, vol. 129(C), pages 88-95.
    18. César Camisón-Zornoza & Beatriz Forés-Julián & Alba Puig-Denia & Sergio Camisón-Haba, 2020. "Effects of ownership structure and corporate and family governance on dynamic capabilities in family firms," International Entrepreneurship and Management Journal, Springer, vol. 16(4), pages 1393-1426, December.
    19. Tommaso Minola & Nadine Kammerlander & Franz W. Kellermanns & Frank Hoy, 2021. "Corporate Entrepreneurship and Family Business: Learning Across Domains," Journal of Management Studies, Wiley Blackwell, vol. 58(1), pages 1-26, January.
    20. Alessandri, Todd M. & Mammen, Jan & Eddleston, Kimberly, 2018. "Managerial incentives, myopic loss aversion, and firm risk: A comparison of family and non-family firms," Journal of Business Research, Elsevier, vol. 91(C), pages 19-27.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jomstd:v:58:y:2021:i:1:p:201-235. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-2380 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.