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Strategic reference points in family firms

Author

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  • Josip Kotlar
  • Alfredo De Massis
  • Hanqing Fang
  • Federico Frattini

Abstract

Family firms are classically seen as risk averse organizations, and this is evident in their generally lower R&D investments compared to non-family firms. Recent research, however, challenges this predominant view and suggests that family firms can embrace higher strategic risk when faced with threats to their family-centered goals. Still, the internal and external conditions that drive variations in the strategic risk taking behaviors of family firms are little known and understood. This article adds to this literature by developing and testing a conceptual model of strategic risk taking that incorporates behavioral theory, family business literature, and the logic of the strategic reference point theory. With recognition that the interplay between family and economic goals determines heterogeneity in strategic actions of family firms, this model suggests that family managers respond differentially to the feedback information regarding internal and external reference points, and consequently identifies key drivers of variation in the R&D investment behavior of family firms. By examining the pattern in R&D investments of 437 Spanish private manufacturing firms from 2000 to 2006, this study shows how strategic inputs, strategic outputs, and external benchmarks produce variations in strategic decisions about R&D investments in family and non-family firms. The findings offer insights into how internal and external reference points are considered in family firms’ decision making, thereby contributing a deeper understanding into the circumstances under which family goals cope or collide with the economic goals of the firm, and how this influences strategic risk decisions in family firms. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • 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.
  • Handle: RePEc:kap:sbusec:v:43:y:2014:i:3:p:597-619
    DOI: 10.1007/s11187-014-9556-6
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    20. Xin Li & Qiong Xu & Fei Guo & Hecheng Wang, 2023. "State‐owned equity participation and private sector enterprises' strategic risk taking: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 1107-1124, March.
    21. Gamble, Jordan Robert & Clinton, Eric & Díaz-Moriana, Vanessa, 2021. "Broadening the business model construct: Exploring how family-owned SMEs co-create value with external stakeholders," Journal of Business Research, Elsevier, vol. 130(C), pages 646-657.
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    23. Melanie Richards, 2023. "When do Non-financial Goals Benefit Stakeholders? Theorizing on Care and Power in Family Firms," Journal of Business Ethics, Springer, vol. 184(2), pages 333-351, May.
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    More about this item

    Keywords

    Family management; R&D investments; Family goals; Strategic reference points; Heterogeneity of family firms; D81; G32; L21; L26;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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