We leverage research on socioemotional wealth (SEW) and implicit theories to develop a novel blended SEW-implicit theory framework that explains why some family firms are more risk seeking or more risk averse. According to implicit theory, individuals perceive reality through their interpretative cognitive filters. Those with an entity theory orientation see reality as relatively fixed or uncontrollable, while those with an incremental-implicit theory orientation tend to perceive reality as malleable and change as leading to positive outcomes. We theorize that family firms with high SEW intensity tend to adopt an entity orientation, whereas those with low SEW intensity tend to adopt an incremental orientation. Accordingly, we propose that the likelihood that family owners hold either orientation is shaped by organizational features associated with SEW intensity, namely (a) the salience of family versus business identity, (b) family founder imprinting, (c) generational stage, and (d) favorable path dependence. In turn, family owners with an entity orientation are less likely to take risks compared to family owners with an incremental orientation. Furthermore, we theorize that a firm’s performance hazard can shift family owners' implicit orientation from entity-based to incremental and vice versa, thereby impacting their risk-taking behavior.

Research Summary: Entrepreneurs make critical decisions in uncertain environments where information is limited, outcomes are difficult to predict, and multiple goals often compete. Yet, existing research offers scattered insights into how entrepreneurs dynamically adapt to such contexts and how their decisions are shaped by behavioral and cognitive foundations such as judgment, intuition, and experience. We shed light on these phenomena by exploring how decision-making is influenced by factors at multiple levels, from individual traits and family dynamics to team interactions and organizational structures. A key aspect of our inquiry focuses on how entrepreneurs manage uncertainty by balancing economic goals, such as growth and profitability, with non-economic objectives like social impact, sustainability, or knowledge advancement. By integrating these perspectives, this work offers a conceptual framework that connects antecedents, processes, and outcomes of entrepreneurial decision-making under uncertainty and competing goals, providing a promising roadmap for future research.

Managerial Summary: Entrepreneurs often make decisions in uncertain environments, where they must contend with limited information and competing goals. This work explores how entrepreneurs balance economic objectives, such as profit, with non-economic ones, like satisfying various stakeholders, achieving social impact, and sustainability. It highlights the role of individual, family, team, and organizational factors in shaping these decisions, offering novel insights into how entrepreneurs can manage trade-offs, adapt feedback-based strategies, and recalibrate priorities over time. For owners, managers, and business leaders, understanding these dynamics can lead to better decision-making, improved risk management, enhanced strategic alignment, increased innovation, and a more balanced approach to growth.

We explore business exits in four family business portfolio firms located in Pakistan. Our research objective is to understand why when facing an unexpected situation that violates their expectations (a decline in firm performance), the owners of family business portfolio firms are more likely to retain some businesses in the firm’s portfolio while choosing to exit from one or more other businesses. Results from our qualitative analyses reveal that family business portfolio firm owners prioritize protecting the firm’s legacy business, even if it is underperforming, over pursuing potential future opportunities in satellite businesses, including successful ones. This paradoxical approach can ultimately place the overall business at risk. Our results provide insights regarding the roles of sensemaking and emotions when family business portfolio firm owners identify, evaluate, and then select a course of action to pursue to deal with an unexpected event. We observe that the owners of the family business portfolio firms in our sample engage in a sensemaking process that shapes their understanding of how their emotions of guilt, sadness, and fear—and their related emotional attachment to the firm’s legacy business—affect their business exit decisions. 

We offer novel insights into the utilization of heterogeneous types of financial slack (unabsorbed, absorbed, and potential) by family versus non-family small- and medium-sized enterprises (SMEs). We hypothesize that agency problems in family SMEs imply idiosyncratic effects on the ability to leverage the different types of financial slack, with implications for financial performance. Moreover, among family SMEs, having a family CEO can engender additional agency problems, reinforcing the heterogeneous effects of slack resources on performance. A longitudinal analysis of a panel dataset of Italian SMEs generally supports our expectations while revealing some counterintuitive findings regarding the effect of unabsorbed financial slack on performance.

Building on social identity theory, we theorize and find that in a merger, paired family firms are better able to retain employees and improve postmerger performance compared to other merger pairs. We contribute to social identity theory by theorizing better postmerger performance as mediated by job security for family firm combinations. We also contribute to the job security and M&A literature by examining how job security and postmerger performance vary based on the paired social identity of owners. In addition to identity similarity, the type of identity also matters in mergers. We argue that family owner social identity similarity fosters greater integration between merging parties while allowing family owner pairs to retain some autonomy through their employees, thereby maximizing postmerger performance. Our data on private Swedish firms, complemented by eleven qualitative interviews across five countries and three continents, confirm that family mergers outperform other merger combinations via job security. In a supplementary critical experiment examining industry dissimilarity, we compare the socioemotional wealth perspective–which emphasizes loss aversion and predicts family firms’ unrelated diversification avoidance–to the social identity theory. Consistent with social identity theory, our results show that both job security and postmerger performance improve with unrelated family firm mergers.

Are green patents granted to family firms perceived more favorably by the market than those granted to non-family firms? Using a sample of 8918 green patents granted to family and non-family firms between 2014 and 2018, our study shows that it depends on the attributes of the green patent. Integrating the green innovation and family firm literatures with signaling theory, we develop a theoretical framework that highlights the need for family firms to balance their pursuit of green innovation with signals of innovation stability and due diligence so as to gain the greatest market value from their green patents. In contrast, we theorize that green patents offer nonfamily firms the greatest gain in market value when they signal innovation radicalness and newness. While our results show that the stock market reaction does not vary significantly between family and non-family firms, when we consider the attributes of green patents, we find that compared to nonfamily firms, family firms with longer green patent grant lags realize a more positive market reaction whereas those with higher patent radicalness experience a more negative market reaction. As such, our study suggests that the types of green patents that garner the greatest market value differ for family and nonfamily firms. The findings are robust to alternate family firm definitions, and additional robustness checks.

Political embeddedness and family embeddedness are two influential yet distinct areas of entrepreneurship research. In this study, we integrate these two streams of research to focus on family political embeddedness and its implications for new venture creation. Drawing on the social embeddedness perspective and utilizing a longitudinal dataset of 17,084 individuals from the China Family Panel Studies (2014-2022), complemented by 32 qualitative interviews, we examine the relationship between family political embeddedness and entrepreneurial entry, revealing a nuanced interplay. Our theory and related findings reveal a general negative relationship between family political embeddedness and entrepreneurial entry. However, we also unveil an indirect pathway through which family political embeddedness can foster entrepreneurial entry through political news consumption. Finally, we theorize and find that perceived government efficiency strengthens the relationship between political news consumption and entrepreneurial entry. Our work yields important theoretical and practical implications.

In situations of high uncertainty, Chief Executive Officer (CEO) advice seeking is of critical importance to access additional knowledge to inform their strategic decisions, such as in relation to radical innovation. Yet, little research has investigated the underlying mechanisms of CEO advice seeking in radical innovation decisions – especially when CEOs face conflicting advice. Using data from two discrete choice experiments (249 CEOs and 155 CEOs, respectively), complemented by ten qualitative interviews with CEOs, Chief Marketing Officers (CMOs) and Chief Technology Officers (CTOs), we investigate how conflicting advice from CMOs and CTOs affects CEO choices in radical innovation projects, contingent on various degrees of market and technological uncertainty. Subsequently, by using additional survey data (166 CEOs), we assess how external advice seeking affects the relationship between advice seeking from CTOs and CMOs and firms’ radical innovation performance under market and technological uncertainty. Given conflicting CMO vs. CTO advice, our results indicate that when a radical innovation project is characterized by high technological uncertainty, CEOs are more likely to choose radical innovation projects that the CTO supports, even if the CMO does not. Yet, surprisingly, we do not find that CEOs’ radical innovation decisions are affected by CMOs’ supporting advice when an innovation project faces high market uncertainty. Finally, we find that the positive effect of CEO advice seeking from CMOs (CTOs) on firms’ radical innovation performance is strengthened if the CEO also seeks external advice under high market (technological) uncertainty.

Using the literature on epistemic and aleatory uncertainty and the theoretical framework on ‘protecting the core,’ we evaluate the impact of sudden operational closures under implied volatility, a revealed uncertainty, on stock market reaction. We propose three hypotheses about the relationship between implied volatility and firm performance under the positive sentiment and Total Factor Productivity (TFP). We use a comprehensive event study methodology to test the proposed hypotheses. We draw on Capital IQ's Key Development database, which provides operational closure events. Further, we merge the operations closures events with the Compustat data to obtain a sample of 1501 US manufacturing firms with 10,883 events between 2002 and 2019. Though implied volatility is not significantly related to market performance, the relationship of implied volatility with a firm's market performance is strengthened by positive sentiment and TFP. The findings have implications for operations managers aiming to manage revealed uncertainty. This paper is the first attempt at empirically evaluating uncertainty management strategies under uncertainty conditions characterized by an environment of high implied volatility. The suspension of primary corporate operations reflects disruptions that must be carefully managed to improve business performance.

We draw from resource orchestration and socioemotional wealth (SEW) arguments to examine radical innovation in multifamily firms. We theorize that the weak coordination mechanism associated with multifamily ownership has a negative effect on the positive SEW-radical innovation relationship. Additionally, we argue that low generational involvement – the number of family generations involved simultaneously in the family firm's top management team – mitigates the negative moderating effect of multifamily ownership. Low generational involvement is a mobilizing mechanism that ensures that the family firm uses its SEW to produce radical innovation. We use a sample of Spanish firms to test our expectations. Our results show that firms realize the positive effect of SEW on radical innovation in concert with the leadership governance mechanism of multifamily ownership and low generational involvement. These results are important in that evidence suggests that radical innovation plays a strong role in family firms' long-term survival, success, and renewal. We conclude our paper with a discussion of the study's theoretical contributions and opportunities for future research.