Peter Jaskiewicz

Emotional Returns and Emotional Costs in Privately Held Family Businesses: Advancing Traditional Business Valuation

This article introduces a formula to assess the total value of privately held family businesses from the owners perspective. It is argued that the total value of a business is not only composed of its financial worth and private benefits, as is usually assumed by traditional financial theory, but that emotional components also have an impact on valuation. In particular, it is assumed that emotional returns (ER) positively affect total value, whereas emotional costs (EC) negatively affect total value. Even though every stakeholder faces emotional costs and returns, it is solely the family business owner who ultimately decides on the worth of a business and consequently factors ER-EC into his or her valuation. The presented formula provides a better understanding of investment decisions in family businesses and a more accurate valuation of these businesses.

Economic and Technological Importance of Innovations in Large Family and Founder Firms

Prior research has analyzed R&D spending in family and founder firms. Yet little is known about the economic and technological importance of innovations in these types of firms. Using patent citation data, we show that founder-managed firms, which we argue favor an entrepreneurial orientation, receive more patent citations when compared with other firms, even controlling for R&D spending. By contrast, family-managed firms, many of which, we argue, pursue socioemotional wealth for the family, receive fewer patent citations compared with other firms, again, controlling for R&D spending. Patent citations have been shown in the literature to reflect the economic and technological importance of innovations.

How Family, Business, and Community Logics Shape Family Firm Behavior and “Rules of the Game” in an Organizational Field

The relationships between family firms and their institutional contexts are critical to family firm legitimacy and sustainability. However, we still know little about how these relationships influence firm behavior. We draw on the institutional literature—institutional logics in particular—to investigate the behavior of different types of wineries within the Okanagan region in Western Canada. We analyze how family, business, and community logics guide firm behavior, and how different combinations of logics lead firms to take action that modifies the field to support their own legitimacy and sustainability.

Addressing the Elephant in the Room: Disentangling Family Heterogeneity to Advance Family Business Research

Over the years, thoughtful scholars have left us compelling reminders that differences among families shape family business goals, behaviors, and outcomes (Aldrich & Cliff, 2003; Dyer, 2006; Olson et al., 2003; Rogoff & Heck, 2003). Yet the integration of prevalent family differences in theory building and empirical testing in the context of family business is still in its infancy (Combs et al., in press; Danes, 2014; James, Jennings, & Breitkreuz, 2012; Martinez & Aldrich, 2003; Powell et al., in press). One reason for the status quo is that many scholars commonly apply management theories that include neither the family nor its heterogeneity as an element. With the growing heterogeneity of family patterns within and across societies around the world, in this essay we highlight different dimensions and approaches to capture family heterogeneity and discuss how researchers might begin to build and test richer theory to extend and refine our knowledge of family firms. The discipline of “family science,” which draws from anthropology, sociology, psychology, and education, among others, provides us with abundant theories that include and illuminate families (Jaskiewicz, Combs, Shanine, & Kacmar, 2016). Pioneering studies have already highlighted the relevance of family structures (Aldrich & Cliff, 2003) and the family system (Olson et al., 2003) for family business behavior and outcomes, and one recent study discussed the implications of family science theories for family business research (Jennings, Breitkreuz, & James, 2013). However, we still lack a comprehensive overview that ties together dimensions of family heterogeneity that are relevant for family business research and the prominent family science theories (Jaskiewicz et al., 2016) that might help us theorize how these family dimensions affect family business behaviors and outcomes. With this essay, we aim to fill this gap. Ignoring differences among families in family business research is problematic because the results of our work may be misleading. Therefore, while reading this essay, we encourage researchers to reflect on the sources of family heterogeneity, the ways to account for them in future research, and their potential impact on family business outcomes.

To Be or Not to Be: How Family Firms Manage Family and Commercial Logics in Succession

We draw on the institutional logics perspective to understand different approaches that family firms can use to manage the process of succession. Based on the analysis of 21 case studies of family firms in Germany, we identify four different ways of managing potentially conflicting family and commercial logics that are associated with four different succession processes. Our findings contribute to the family firm literature by improving our knowledge of the heterogeneity of family firms and by explaining different ways that the family logic can influence firm behavior. Moreover, we contribute to institutional theory by showing the importance of filtering mechanisms for organizations that must respond to coexisting logics.

Explaining Performance Differences between Family Firms with Family and Nonfamily CEOs: It's the Nature of the Tie to the Family that Counts!

Drawing on regulatory focus theory, we advance a microtheory for Naldi, Cennamo, Corbetta, and Gómez–Mejías findings suggesting that family ties as well as the career aspirations that derive from them trigger relatively higher prevention and relatively lower promotion goal orientations of family when compared with nonfamily chief executive officers (CEOs). Our conceptualization offers an alternative theory for why family firms with family CEOs outperform those with nonfamily CEOs in contexts such as industrial districts where conservation strategies are more valuable, but underperform in contexts such as publicly listed firms where market–driven strategies are more valuable. Our commentary highlights the need for future research to examine variance in the self–regulatory mindsets of family and nonfamily CEOs, and to link these differences to firm strategies and performance.

Founder Versus Family Owners’ Impact on Pay Dispersion Among Non-CEO Top Managers Implications for Firm Performance

Emerging evidence suggests that pay dispersion among non-CEO top management team (TMT) members harms firm performance, which raises questions about why firms’ owners tolerate or even support it. Prior research shows that the key distinction between founder and family owners is that in addition to firm performance and growth goals, family owners pursue socioemotional goals. On the basis of this distinction, we develop and test theory linking founders’ and families’ ownership to TMT pay dispersion. Consistent with our theory, a Bayesian panel analysis of Standard & Poor’s 500 firms shows that founder owners use less TMT pay dispersion and that family owners, relative to founder owners, use more, although that declines across generations. We also provide evidence that TMT pay dispersion harms firm performance. Our theory and results are significant because they help to explain why some owners favor compensation practices that cause TMT pay dispersion, despite evidence that this harms firm performance.

The Effects of Founder and Family Ownership on Hired CEOs’ Incentives and Firm Performance

Although large owners monitor managers effectively, they differ in important ways. Whereas founder owners focus on firm performance, family owners also pursue socioemotional goals. We leverage this distinction to theorize that family owners offer hired CEOs more incentive pay—to attract nonfamily CEOs, signal good governance, and achieve better firm performance. Without socioemotional wealth distractions, founder owners do not need high incentives and overusing them is counterproductive. Bayesian regressions using a panel of 335 S&P 500 firms support our theory. A key implication is that founder and family owners approach governance differently and these differences affect firm performance.

Paid Employee or Entrepreneur? How Approach and Avoidance Career Goal Orientations Motivate Individual Career Choice Decisions

The focus of much career choice research is framed around a unidimensional conceptualization of motivation in which the tendency to approach a career assumes a proportionately equal and opposite willingness to avoid it. Drawing upon regulatory focus theory, we advance a dual-channel model of career choice, which allows us to capture the competing goal orientations leading individuals to approach and avoid any given career choice decision. Our results support our main hypothesis that both promotion and prevention career goal orientations mediate the relationship between individual differences, situational characteristics, and career choices in either paid employment or entrepreneurship.

Frugal Principals, Lavish Agents: CEO Compensation in Family-, Founder- and Other Firms

Using agency theory we formulate hypotheses about the executive compensation practices among lone founder firms and family firms. We argue that compensation schemes reflect attempts to reduce the agency costs inherent in the different ownership structures. Hence, lone founder-owned firms where owner-manager incentive alignment and monitoring advantages are great will exhibit the lowest levels of total and incentive CEO compensation. By contrast, family-owned firms, while enjoying owner-manager agency advantages over other companies, face unique owner-owner agency conflicts as family owners may pressure their CEOs to serve the family instead of the firm. Higher levels of total and incentive CEO compensation thus were expected to be paid to reduce the impact on the CEO of such pressure. These expectations were borne out in our study of S&P 500 companies. However, we also found contrary to the above rationales that despite their higher compensation packages diffusely held firms did not benefit more from higher CEO compensation than founder- or family-owned firms, nor did they outperform. Moreover, CEO compensation was negatively related to performance in the former. It appears therefore that founder- and family-owned firms employ more efficient compensation packages than more diffusely held public firms.