How family influence, socioemotional wealth, and competitive conditions shape new technology adoption
| Published date | 01 September 2017 |
| Author | Akbar Zaheer,David Souder,Rebecca Ranucci,Harry Sapienza |
| DOI | http://doi.org/10.1002/smj.2614 |
| Date | 01 September 2017 |
Strategic Management Journal
Strat. Mgmt. J.,38: 1774–1790 (2017)
Published online EarlyView 14 December 2016 in WileyOnline Library (wileyonlinelibrary.com) DOI: 10.1002/smj.2614
Received 21 December 2014;Final revision received12 October 2016
HOW FAMILY INFLUENCE, SOCIOEMOTIONAL
WEALTH, AND COMPETITIVE CONDITIONS SHAPE
NEW TECHNOLOGY ADOPTION
DAVID SOUDER,1*AKBAR ZAHEER,2HARRY SAPIENZA,3and
REBECCA RANUCCI4
1Department of Management, University of Connecticut School of Business, Storrs,
Connecticut, U.S.A.
2Strategic Management and Entrepreneurship Department, Carlson School of
Management 3-365, University of Minnesota, Minneapolis, Minnesota, U.S.A.
3Strategic Management and Entrepreneurship Department, Carlson School of
Management 3-390, University of Minnesota, Minneapolis, Minnesota, U.S.A.
4Department of Management, Marketing, and Entrepreneurship, Barney School of
Business, University of Hartford, West Hartford, Connecticut, U.S.A.
Research summary:In family businesses, investment decisions often involveboth socioemotional
wealth and economic considerations. Focusingon new technology adoption, we argue that multiple
dimensions of socioemotional wealth contribute to complex effects within differenttypes of family
rms— depending on the level of family control—as well as in contrast to non-family rms.
Results based on cable TV operators from 1983 to 1987 conrm that family ownership correlates
negatively with technology adoption, especially when family owners hold a minority rather
than majority position. We also show contingencies based on performance improvements and
competitive threats. Our arguments contribute newinsights about the tensions between economic
and socioemotional factors within minority family ownership that areabsent from non-family rms
and more pronounced than in majority family rms.
Managerial summary:We nd evidence of greater reluctance toward new technology adoption
among rms with minority family inuence than majority family inuence. This suggests that goals
related to socioemotional wealth only partly explain the cautious decision-making observed in
family rms, with further caution arising from conictingpriorities between family and non-family
owners. Recent performance improvements help offset the reluctance to adopt new technology,
albeit to a lesser degree among rms with minority family ownership. High levels of competitive
threats also offset the reduction in new technology adoption, and contrary to expectations, to a
greater extent among minority family rms. Copyright © 2016 John Wiley & Sons, Ltd.
INTRODUCTION
Most strategy research expects economic potential
to represent the primary motivation for business
decisions. In family rms, however, a growing
Keywords: family rms; socioemotional wealth; technol-
ogy adoption; threat of competition; investment policy
*Correspondence to: David Souder, Department of Manage-
ment, University of Connecticut School of Business, 2100 Hill-
side Road Unit 1041, Storrs, CT 06269-1041, U.S.A. E-mail:
dsouder@business.uconn.edu
Copyright © 2016 John Wiley & Sons, Ltd.
literature describes a behavioral decision-making
process through which socioemotional wealth
considerations— aimed at perpetuating the family
dynasty by retaining family control of and identity
with the rm— takes precedence over a more
traditional assessment of economic costs and ben-
ets (Gomez-Mejia et al., 2007)1. Among several
1We designate “family rms” as businesses in which a single
family has an ownership stake of at least vepercent.
Family Inuence and New Technology Adoption 1775
implications of this research stream, scholars have
concluded that socioemotional wealth implies
a preference among family rms for tradition
and stability, noting that these preferences may
dissuade certain investments perceived as risky,
such as R&D (Chrisman and Patel, 2012) or new
technology adoption (König, Kammerlander, and
Enders, 2013). In addition to the inherent risk
of potential economic loss, the fresh capital and
expertise often needed to pursue such investments
also increases the risk that family inuence in
the rm might decline because of changes in
decision-making processes and management style,
resulting in diminished power to pursue the family
agenda (Leitterstorf and Rau, 2014).
Extending the logic of socioemotional wealth,
we further distinguish between rms with minority
family ownership and those with majority family
ownership. Departing from the existing presump-
tion that socioemotional wealth increases along
with family inuence, we argue that conicts
between economic and socioemotional consid-
erations are greatest when ownership is shared
between minority family and non-family interests,
because it is difcult to build consensus about how
to incorporate the family’s socioemotional goals
with the pursuit of economic returns that benet all
owners. In these settings, the inability of minority
family owners to prioritize socioemotional wealth
can increase the reluctance of such owners to pursue
new risky investments that might further threaten
their inuence in the rm. By contrast, families
with a majority ownership position can unilaterally
resolve tradeoffs between socioemotional wealth
and economic returns based on family priorities.
Thus, rms with minority family ownership feature
tensions between economic and socioemotional
factors that are less severe in rms with a majority
family interest and absent in non-family rms.
Our study proposes and demonstrates that rms
with minority family interest adopt technology
differently than both non-family rms and rms
with majority family interest. We explore the
nuances of socioemotional wealth by identifying
conditions under which majority family rms
behave more similarly to non-family rms than to
minority family rms. The empirical context, cable
TV operators in the mid-1980s, offers two essential
features: (1) variation in family control, and (2)
rm-level data on investment in new technology.
Specically, during this period cable operators
could invest in new infrastructure to provide an
expanded line-up of cable channels, which offered
the potential for future growth but involved signif-
icant capital outlays and operating changes. The
interplay of economic and socioemotional wealth
considerations suggests important differences
between minority and majority family interest in
addition to the longstanding distinction between
family and non-family businesses.
Applying our theoretical arguments to cable
TV operators, we expect that family inuence
correlates negatively with the capital-intensive
initiative to adopt new technology, and to a greater
degree when the family holds a minority rather
than majority position. By analyzing the decision
to adopt new technology across different ownership
structures, we contribute to a deeper understanding
of socioemotional wealth in several ways. First,
we argue that new technology adoption poses a
threat to the socioemotional component of utility,
making the cost of new technology adoption
higher for family owners relative to non-family
owners. Second, building on research into the
dimensionality of socioemotional wealth (Berrone,
Cruz, and Gomez-Mejia, 2012; Chua, Chrisman,
and De Massis, 2015; Gomez-Mejia et al., 2011;
Miller and Le Breton-Miller, 2014) we argue that
afnity factors of socioemotional wealth— such as
family identity, emotional attachment, and social
connectedness through the rm— represent the dis-
tinguishing socioemotional factors between family
and non-family rms, whereas factors related to
control (Berrone et al., 2012) or command (Miller
and Le Breton-Miller, 2005) change the ability
of majority family owners to preserve and pursue
these afnity factors through investment decisions
relative to minority family owners. Consequently,
minority family rms have their socioemotional
utility at greater risk, as their level of control can
be further reduced if adopting new technology
requires the rm to raise new external capital.
Finally, we model internal and external contin-
gencies that change the perception of socioemo-
tional losses help to further dene the boundary
conditions of socioemotional wealth.
Municent internal conditions resulting from
performance improvements provide a gain context
for family rms through the application of those
additional resources, while competitive external
threats make cumulative economic and socioemo-
tional losses more salient to family owners. These
contingencies impose different risks on family
preferences, with the resultant decision framing
Copyright © 2016 John Wiley & Sons, Ltd. Strat. Mgmt. J.,38: 1774–1790 (2017)
DOI: 10.1002/smj
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