Entrepreneurship Cross-Enterprise Leadership Centre

Abstract: This paper challenges the predominant view that as CEOs near retirement, they forgo risky long-term strategic choices and instead focus on decisions that enhance their own short-term self-interests. Drawing on the socioemotional wealth (SEW) literature, we argue that unlike near-retirement CEOs in widely held firms, near-retirement CEOs in family firms are more concerned about transgenerational control and the legacy that they pass on to future generations. We further contend that the priority of SEW dimensions can change within family firms depending on the CEO's time to retirement. Consequently, near-retirement CEOs in family firms differ from their counterparts in nonfamily firms in that they are willing to continue to engage in international acquisitions as they approach retirement, despite the potential short-term risks. We further hypothesize that this effect depends on whether the CEO is a family member, whether the CEO is succeeded by another family member, and whether the CEO is the founder. In analyzing 3,432 family and nonfamily firm-year observations from the S&P 500 for the period between 1997 and 2009, we find support for our hypotheses. Subsequent analyses indicate that near retirement, family CEOs acquire larger and culturally closer targets than their nonfamily counterparts. Our paper confirms the need to more fully consider the characteristics of owners and managers in analyses of the CEO career horizon problem.

Link(s) to publication:

http://dx.doi.org/10.1111/joms.12123

Abstract: Research Question/Issue: Our study seeks to explain the relationship between publicly listed family-controlled firms (FCFs) and investor and employee outcomes before and during the global financial crisis. Theoretically, we develop hypotheses suggesting that FCF resilience is beneficial to both investor and employees. Employing a large firm-level data set of 2,949 firms across 27 European countries, we test the hypotheses that FCFs' long-term orientation makes them resilient to the effects of economic shocks. In addition, using hierarchical linear modeling we evaluate family firm investor and employee outcomes, and the moderating impact of legal institutions protecting minority investors and employees. Research Findings/Insights: We find that FCFs financially outperform non-FCFs during the financial crisis, beginning in 2007 and reaching its lowest point in 2009, but show no significant differences during the stable-growth period between 2004 and 2006. We evaluate two employee outcomes: downsizing and wage decreases. We find that FCFs are less likely to downsize their workforce or cut wages in both pre-crisis and crisis conditions. Based upon hypotheses founded in the comparative capitalisms logic, we find significant institutional effects that are contrary to our predictions. Our findings suggest that investors and employees of FCFs achieve more favorable outcomes for their interests when the rules pertaining to investor protection and their enforcement are poorly developed. Theoretical/Academic Implications: We contribute to the emerging literature on the institution-based view of comparative corporate governance by demonstrating that family-controlled firms' stakeholder outcomes are contingent upon legal protection for employees and investors under contrasting economic circumstances. Practitioner/Policy Implications: Family owners, employees and minority investors should consider both firm-level and country-level governance institutions when investing in different countries, especially in times of economic crisis as jurisdiction-level institutions and firm ownership choices produce variable outcomes for different stakeholders in both crisis and non-crisis conditions.

Link(s) to publication:

http://dx.doi.org/10.1111/corg.12087

Abstract: This article analyzes an important aspect of the social behavior of the self-employed in America. We ask whether the self-employed express their social responsibility to society by giving more to charity than the general population, and if so which charitable causes they give to. We use social identity theory to generate hypotheses about the determinants and objectives of charitable giving among members of this socially and economically important group. Testing these hypotheses with nationally representative, longitudinal US data, we find that the American self-employed are indeed more likely to exhibit social responsibility toward their community by giving to charities than the general population. While the self-employed support broadly similar charities to the general population, they give substantially more to organizations which: address issues in the local community; provide health care; and serve the needy. We trace out implications of our findings for scholars, practitioners, and policy-makers.

Link(s) to publication:

http://dx.doi.org/10.1007/s11187-014-9580-6