IDEAS home Printed from https://ideas.repec.org/a/eee/fambus/v3y2012i2p118-126.html
   My bibliography  Save this article

The role of regret in the owner-manager decision-making in the family business: A conceptual approach

Author

Listed:
  • Hirigoyen, Gérard
  • Labaki, Rania

Abstract

This article responds to recent calls of scholars for more research on emotions in the family business by providing an initial analytical study of the owner-manager regret in decision-making. First, we suggest an enlarged theoretical framework for analyzing decision-making in the family business by building on the behavioural model of emotions in decision-making of Loewenstein and Lerner (2003) and Regret Theory. Second, we offer a first characterization of the emotion of regret in the family business. Given the overlap between the family and the business systems, we introduce a dual dimension of regret that is family-based and business-based. We also extend the analysis towards a dynamic view of regret by accounting for the owner-manager's experienced regret at the time of decision in addition to the traditionally analyzed expected regret. Departing from the common assumption that the owner-manager is altruistic towards the family and acts as a steward for the business, we consider that the owner-manager's expected outcomes refer to emotional and financial value maximization. Based on these characterizations, we develop a conceptual model with a series of propositions on the role of the owner-manager regret in decision-making. Finally, we present the theoretical, conceptual and practical contributions of the study as well as its limitations from which stem research avenues on regret and decision-making in the family business.

Suggested Citation

  • Hirigoyen, Gérard & Labaki, Rania, 2012. "The role of regret in the owner-manager decision-making in the family business: A conceptual approach," Journal of Family Business Strategy, Elsevier, vol. 3(2), pages 118-126.
    • Handle: RePEc:eee:fambus:v:3:y:2012:i:2:p:118-126
    DOI: 10.1016/j.jfbs.2012.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1877858512000241
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jfbs.2012.03.004?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Smith, Adam, 1759. "The Theory of Moral Sentiments," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1759.
    2. Loewenstein, George, 1996. "Out of Control: Visceral Influences on Behavior," Organizational Behavior and Human Decision Processes, Elsevier, vol. 65(3), pages 272-292, March.
    3. Gérard Hirigoyen, 2009. "Concilier finance et management dans les entreprises familiales," Revue française de gestion, Lavoisier, vol. 0(8), pages 393-411.
    4. David E. Bell, 1983. "Risk Premiums for Decision Regret," Management Science, INFORMS, vol. 29(10), pages 1156-1166, October.
    5. Simon, Herbert A, 1978. "Rationality as Process and as Product of Thought," American Economic Review, American Economic Association, vol. 68(2), pages 1-16, May.
    6. Danny Miller & Isabelle Le Breton‐Miller & Barry Scholnick, 2008. "Stewardship vs. Stagnation: An Empirical Comparison of Small Family and Non‐Family Businesses," Journal of Management Studies, Wiley Blackwell, vol. 45(1), pages 51-78, January.
    7. Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-824, December.
    8. Ethel Brundin & Mattias Nordqvist, 2008. "Beyond Facts and Figures: The Role of Emotions in Boardroom Dynamics," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(4), pages 326-341, July.
    9. Eddleston, Kimberly A. & Kellermanns, Franz W., 2007. "Destructive and productive family relationships: A stewardship theory perspective," Journal of Business Venturing, Elsevier, vol. 22(4), pages 545-565, July.
    10. Michael C. Jensen & William H. Meckling, 1994. "The Nature Of Man," Journal of Applied Corporate Finance, Morgan Stanley, vol. 7(2), pages 4-19, June.
    11. Loomes, Graham & Sugden, Robert, 1987. "Some implications of a more general form of regret theory," Journal of Economic Theory, Elsevier, vol. 41(2), pages 270-287, April.
    12. Paroush, Jacob & Venezia, Itzhak, 1979. "On the theory of the competitive firm with a utility function defined on profits and regret," European Economic Review, Elsevier, vol. 12(3), pages 193-202, July.
    13. Pollak, Robert A, 1985. "A Transaction Cost Approach to Families and Households," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 581-608, June.
    14. Herbert A. Simon, 1955. "A Behavioral Model of Rational Choice," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 69(1), pages 99-118.
    15. David E. Bell, 1982. "Regret in Decision Making under Uncertainty," Operations Research, INFORMS, vol. 30(5), pages 961-981, October.
    16. Michael Lubatkin & William S. Schulze & N Dino Richard, 2003. "Toward a theory of agency and altruism in family firms," Post-Print hal-02311679, HAL.
    17. Pieper, Torsten M., 2010. "Non solus: Toward a psychology of family business," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 26-39, March.
    18. Sugden Robert, 1993. "An Axiomatic Foundation for Regret Theory," Journal of Economic Theory, Elsevier, vol. 60(1), pages 159-180, June.
    19. Chrisman, James J. & Chua, Jess H. & Litz, Reginald, 2003. "A unified systems perspective of family firm performance: an extension and integration," Journal of Business Venturing, Elsevier, vol. 18(4), pages 467-472, July.
    20. Schulze, William S. & Lubatkin, Michael H. & Dino, Richard N., 2003. "Toward a theory of agency and altruism in family firms," Journal of Business Venturing, Elsevier, vol. 18(4), pages 473-490, July.
    21. Carlos Laciana & Elke Weber, 2008. "Correcting expected utility for comparisons between alternative outcomes: A unified parameterization of regret and disappointment," Journal of Risk and Uncertainty, Springer, vol. 36(1), pages 1-17, February.
    22. Nygren, Thomas E. & Isen, Alice M. & Taylor, Pamela J. & Dulin, Jessica, 1996. "The Influence of Positive Affect on the Decision Rule in Risk Situations: Focus on Outcome (and Especially Avoidance of Loss) Rather Than Probability," Organizational Behavior and Human Decision Processes, Elsevier, vol. 66(1), pages 59-72, April.
    23. Michenaud, Sébastien & Solnik, Bruno, 2008. "Applying regret theory to investment choices: Currency hedging decisions," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 677-694, September.
    24. Basco, Rodrigo & Pérez Rodríguez, María José, 2011. "Ideal types of family business management: Horizontal fit between family and business decisions and the relationship with family business performance," Journal of Family Business Strategy, Elsevier, vol. 2(3), pages 151-165.
    25. van Dijk, Eric & Zeelenberg, Marcel, 2005. "On the psychology of `if only': Regret and the comparison between factual and counterfactual outcomes," Organizational Behavior and Human Decision Processes, Elsevier, vol. 97(2), pages 152-160, July.
    26. Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
    27. Shefrin, Hersh & Statman, Meir, 1985. "The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence," Journal of Finance, American Finance Association, vol. 40(3), pages 777-790, July.
    28. Loomes, Graham & Starmer, Chris & Sugden, Robert, 1992. "Are Preferences Monotonic? Testing Some Predictions of Regret Theory," Economica, London School of Economics and Political Science, vol. 59(233), pages 17-33, February.
    29. Olson, Patricia D. & Zuiker, Virginia S. & Danes, Sharon M. & Stafford, Kathryn & Heck, Ramona K. Z. & Duncan, Karen A., 2003. "The impact of the family and the business on family business sustainability," Journal of Business Venturing, Elsevier, vol. 18(5), pages 639-666, September.
    30. Zeelenberg, M., 1999. "The use of crying over spilled milk : A note on the rationality and functionality of regret," Other publications TiSEM 66ac04be-d1ee-4a0e-9e97-7, Tilburg University, School of Economics and Management.
    31. Lin, Chien-Huang & Huang, Wen-Hsien & Zeelenberg, Marcel, 2006. "Multiple reference points in investor regret," Journal of Economic Psychology, Elsevier, vol. 27(6), pages 781-792, December.
    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. Goel, Sanjay & Mazzola, Pietro & Phan, Phillip H. & Pieper, Torsten M. & Zachary, Ramona K., 2012. "Strategy, ownership, governance, and socio-psychological perspectives on family businesses from around the world," Journal of Family Business Strategy, Elsevier, vol. 3(2), pages 54-65.
    2. D’Allura, Giorgia Maria & Woolum, Andrew H. & Foulk, Trevor A. & Erez, Amir & Pittino, Daniel, 2023. "Event-sampling method with experimental design: A promising method for investigating microfoundational phenomena within family businesses," Journal of Family Business Strategy, Elsevier, vol. 14(2).
    3. Labaki Rania, 2013. "Beyond the Awaking of a “Sleeping Beauty”: Toward Business Models Inclusive of the Emotional Dimension in Entrepreneurship," Entrepreneurship Research Journal, De Gruyter, vol. 3(3), pages 265-276, July.
    4. Hauck, Jana & Prügl, Reinhard, 2015. "Innovation activities during intra-family leadership succession in family firms: An empirical study from a socioemotional wealth perspective," Journal of Family Business Strategy, Elsevier, vol. 6(2), pages 104-118.
    5. Arno Nuijten & Nick Benschop & Antoinette Rijsenbilt & Kristinka Wilmink, 2020. "Cognitive Biases in Critical Decisions Facing SME Entrepreneurs: An External Accountants’ Perspective," Administrative Sciences, MDPI, vol. 10(4), pages 1-23, November.

    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. Basco, Rodrigo, 2013. "The family's effect on family firm performance: A model testing the demographic and essence approaches," Journal of Family Business Strategy, Elsevier, vol. 4(1), pages 42-66.
    2. Han Bleichrodt & Peter P. Wakker, 2015. "Regret Theory: A Bold Alternative to the Alternatives," Economic Journal, Royal Economic Society, vol. 0(583), pages 493-532, March.
    3. Martín Egozcue & Xu Guo & Wing-Keung Wong, 2015. "Optimal output for the regret-averse competitive firm under price uncertainty," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 279-295, December.
    4. Udo Broll & Peter Welzel & Kit Pong Wong, 2016. "Regret theory and the competitive firm revisited," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 481-487, December.
    5. Korn, Olaf & Rieger, Marc Oliver, 2019. "Hedging with regret," Journal of Behavioral and Experimental Finance, Elsevier, vol. 22(C), pages 192-205.
    6. Wong, Kit Pong, 2014. "Regret theory and the competitive firm," Economic Modelling, Elsevier, vol. 36(C), pages 172-175.
    7. Wong, Kit Pong, 2014. "Fixed versus variable rate loans under regret aversion," Economic Modelling, Elsevier, vol. 42(C), pages 140-145.
    8. Wong, Kit Pong, 2015. "A regret theory of capital structure," Finance Research Letters, Elsevier, vol. 12(C), pages 48-57.
    9. Udo Broll & Peter Welzel & Kit Pong Wong, 2016. "The Impact of Regret on Exports," German Economic Review, Verein für Socialpolitik, vol. 17(2), pages 192-205, May.
    10. Udo Broll & Peter Welzel & Kit Wong, 2015. "Exchange Rate Risk and the Impact of Regret on Trade," Open Economies Review, Springer, vol. 26(1), pages 109-119, February.
    11. Jiakun Zheng, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Post-Print hal-04227414, HAL.
    12. Broll, Udo & Welzel, Peter & Wong, Kit Pong, 2020. "Regret aversion and asymmetric price distribution," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).
    13. Broll, Udo & Welzel, Peter & Wong, Kit Pong, 2017. "The firm under regret aversion," CEPIE Working Papers 03/17, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    14. Broll, Udo & Welzel, Peter & Wong, Kit Pong, 2019. "Hedging and the regret theory of the competitive firm," CEPIE Working Papers 05/19, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    15. Diecidue, Enrico & Somasundaram, Jeeva, 2017. "Regret theory: A new foundation," Journal of Economic Theory, Elsevier, vol. 172(C), pages 88-119.
    16. Broll, Udo & Welzel, Peter & Wong, Kit Pong, 2014. "Multinational firm, exchange rate risk and the impact of regret on trade," Dresden Discussion Paper Series in Economics 04/14, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    17. Servaas van Bilsen & Roger J. A. Laeven & Theo E. Nijman, 2020. "Consumption and Portfolio Choice Under Loss Aversion and Endogenous Updating of the Reference Level," Management Science, INFORMS, vol. 66(9), pages 3927-3955, September.
    18. Zheng, Jiakun, 2021. "Willingness to pay for reductions in health risks under anticipated regret," Journal of Health Economics, Elsevier, vol. 78(C).
    19. Ben Irons & Cameron Hepburn, 2007. "Regret Theory and the Tyranny of Choice," The Economic Record, The Economic Society of Australia, vol. 83(261), pages 191-203, June.
    20. Mazzi, Chiara, 2011. "Family business and financial performance: Current state of knowledge and future research challenges," Journal of Family Business Strategy, Elsevier, vol. 2(3), pages 166-181.

    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:eee:fambus:v:3:y:2012:i:2:p:118-126. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/719791/description#description .

    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.