Socioemotional Wealth in Family Business

This assignment requires students to analyze the concept of socioemotional wealth in family business, exploring its impact on earnings management, CEO succession mechanisms, and entrepreneurial orientation. Students are expected to draw from a range of academic sources to develop a comprehensive understanding of socioemotional wealth and its significance in family business.

Running head: SOCIO-ECONOMIC WEALTH
Socio-economic Wealth
Name of the Student:
Name of the University:
Author note:

1SOCIO-ECONOMIC WEALTH
Abstract
This paper makes a thorough analysis of the relation or the establishment of socio economic
wealth on the family business scenario. Socio-economic wealth is a unique identity in the family
business organization, which differentiates from other profit making organization. A family
CEO, jointly with the board including different associations, organizational impacts
implementation in the main hereditary stage, yet the outcome is pivoted in the former hereditary
stages. The disclosures propose is to investigate the association between implementation and the
energetic associations between relatives having a place with a main family or to the branches of
the family. Examination recommends, exclusive organizations must have the ability to modify
organization and the structure of the board structure, these conditions have coordinating effects
on SEW and implementation. The paper will focus on the different scenario based on the Socio-
economic wealth of the firm with relevance to family business, the links between the two and
other approaches made theoretically. The ways to measure the conduct and there alternatives to
operate the SEW in business. The paper also specifies certain studies that can be done on the
Socio-economic wealth in future.

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Table of Contents
Chapter 1: Introduction....................................................................................................................4
1.1 Background of the Study.......................................................................................................5
1.2 Research Aims and Objectives..............................................................................................6
1.3 Research Questions................................................................................................................7
Chapter 2: Literature Review...........................................................................................................8
2.1 Diversification and SEW:....................................................................................................10
2.2 Technology and SEW:.........................................................................................................10
2.3 Environmental performance and SEW:...............................................................................11
2.4 Hypothesis Development.....................................................................................................14
2.5 Summary..............................................................................................................................16
Chapter 3: Research Methodology................................................................................................17
3.1 Introduction..........................................................................................................................17
3.2 Choice of methodology........................................................................................................17
3.3 Research Philosophy............................................................................................................18
3.4 Research Approach..............................................................................................................18
3.5 Research Design..................................................................................................................19
3.6 Data Collection Process.......................................................................................................19
3.7 Process of data analysis.......................................................................................................20
3.8 Ethical Consideration...........................................................................................................20

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Chapter 4: Data Analysis and Discussion......................................................................................22
4.1 Introduction..........................................................................................................................22
4.2 Thematic Analysis...............................................................................................................22
4.2.1 Influencing factors........................................................................................................22
Chapter 5: Conclusion, Recommendation and Future Work.........................................................28
5.1 Conclusion...........................................................................................................................28
5.2 Recommendation.................................................................................................................28
5.3 Future Research...................................................................................................................29
References list:...............................................................................................................................30

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Chapter 1: Introduction
In early times family business suffered a lot due to the use of wrong methodologies and
they were at large very descriptive and mainly theoretical in nature. However, with the advent of
time there was a development in this field with the participation of the rigor theoretical aspect
that responded collectively to calls which is continuous in nature. The scholars recommended a
sequence that consisted of paradigms that was meant for examining the problems that were
eccentric to the companies that are controlled by families. The above stated paradigms were
inherited from different domains, namely the economic, strategic, financial management
theories, and these focuses mainly on the large corporations that are publicly owned and more
specifically it can be stated to be the highly dispersed ownership1. The aspects that they include
are mainly stewardships theory, agency theory and are also inclusive of views based on the
resources. Even though significant insights is derived from extending and adaptation within the
situation of the above explained theory in order to provide details about the activities of the
organizations that are controlled and owned by family, a huge amount of additional assessments
are to be done, with relevance to the unique characteristics to the family businesses who can be
tangible in nature. For the purpose of studying the family business, this methodology has often
led to contradictory empirical results, excessive reductionism, overlapping terminology,
fragmented theoretical interpretations, and a forced application of borrowed logic to explain
descriptive findings.
1 Jaskiewicz, Peter, et al. "Founder versus family owners’ impact on pay dispersion among non-
CEO top managers: Implications for firm performance." Journal of Management43.5 (2017):
1524-1552.

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1.1 Background of the Study
In Asian countries, the level of family organizations is quite prominent. Various
researches have been developed which has proved family profit making organization to be a
prominent portion of SEW Guide lines. The available data on the Asian Family and firms that
are non-family firms are collected from reliable sources in order to attain the result that is
desired. The current research paper focuses on medium-large listed organizations taking by
assessing and making a comparison of the family based businesses and the non-family profit
making organizations. The properties of medium as well broad organizations allow a connection
with delayed consequences of exploratory examinations on recorded associations. The test
carried out on family companies execution give mixed results in luminosity of the different
family organization, in light of unmistakable ownership edges, on an organization, or on blends
of proprietorship and association2. Family organizations address a conscious happening universe
along with particular models of organization and organization, which impact execution in a
surprising way. It is considered, from the perspective of SWE that the influence on the
implementation of family improvement in the profit making organization, dismembering the
characteristics of board and ownership that shape the SEW. Possibility of socio emotional
wealth, or loaded with feeling endowments, insinuates the effective family organizations get
from the non-budget parts of the profit of organization, for illustration, identity, the aptitude to
rehearse family effect, and the reassurance of the family organization and characteristics. The
power of the Socio economic wealth is mentioned by Barron: that the family and organization
2 Strike, Vanessa M., et al. "A socioemotional wealth approach to CEO career horizons in family
firms." Journal of Management Studies 52.4 (2015): 555-583.

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ownership, proprietorship disseminating, family CEO, and the proximity of different relatives on
the board and weight of the non-official people on the board3. The paper considers the possible
coordinating factors of SEW highlighted by composing, that is family generational stage,
organization size, the qualified closeness of non-family financial specialists and organization
risk.
This analytical study would look to understand the socioeconomic wealth on the financial
performance of the family firms and the understanding would be attained with the help of
various past researches and thereafter create a methodology in accordance to which analysis of
the data can be constructed in order to bring about the actual result.
1.2 Research Aims and Objectives
The research aims and objectives look to address the factors and the features that would be
taken into consideration and undertake results that would be helpful in taking the research
forward in an effective manner. The aims and objectives of the research are as follows:
 Ascertain the impact of socio-economic wealth on the financial performance of the
family firms
 Assess the diversification of the socio-economic wealth and accordingly understand the
potential risks associated with it
3 Chrisman, James J., et al. "The ability and willingness paradox in family firm
innovation." Journal of Product Innovation Management 32.3 (2015): 310-318.

7SOCIO-ECONOMIC WEALTH
1.3 Research Questions
The research question addresses the issues that would be answered in this paper and
thereby the paper would be completed effectively. The research question for this paper is as
follows:
Q1. What is the impact of socio-economic wealth on the risk taking and financial performance of
family businesses in Asia?

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Chapter 2: Literature Review
The separation of control and ownership causes asymmetric information and conflict of
interest between managers and owners. In family-controlled firms, for minimizing, the agency
costs the interest of managers and owners are aligned with the personal ownership. Agency costs
in family firms are generally lower compared to non-family firms. Analysis of family firm’s
performance and behavior are analyzed by referring to agency theory. However, this theoretical
framework does not fully explain the variety of behaviors and complexities among the family
firms4. A genera socio economic wealth model is developed by building on behavioral agency
theory for explaining the particularities of family firms5. As per the behavioral agency theory,
emotional commitment or effectiveness of family members influences the family member’s
behavior and the loss is avoided by decision maker act.
The family based companies gain their utility and effectiveness from the authoritative
personnel, who act selflessly with regards to the family members and maintaining the social
capital of the family companies. The SEW comprises of several aspects and they include the
control of the family and their influence, recognition of the members of the family who are
related to the company, social ties of the family, emotional attachment among the company,
4 Schulze, William S., and Franz W. Kellermanns. "Reifying socioemotional wealth." (2015):
447-459.
5 Arrondo-García, Rubén, Carlos Fernández-Méndez, and Susana Menéndez-Requejo. "The
growth and performance of family businesses during the global financial crisis: The role of the
generation in control." Journal of Family Business Strategy7.4 (2016): 227-237.

9SOCIO-ECONOMIC WEALTH
family and among the members of the family who associated with the company6. Thus, the
recognition of the members of the family is closely associated with the company and the
sustenance of the owners of the family, socio-economic becomes essential itself and thereby
guiding the attitude of the company. It is seen that by making use of corporate governance,
strategies, management and the risk mitigating approaches. The maintenance of SEW leads to
the influential objectives which can be overviewed in the following:
 Maintaining influence and control over the business
 Enabling the dynasty of the family with the help of the business
 Maintaining the image and reputation of the family
As per the literature review, the model of socio emotional wealth have depicted various
consequences on different fields such as research and development, diversification efforts,
environmental performance and pricing of IPO7.
6 Schepers, Jelle, et al. "The entrepreneurial orientation–performance relationship in private
family firms: the moderating role of socioemotional wealth." Small Business Economics 43.1
(2014): 39-55.
7 Chang, Sea‐Jin, and Jungwook Shim. "When does transitioning from family to professional
management improve firm performance?." Strategic Management Journal 36.9 (2015): 1297-
1316.

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2.1 Diversification and SEW:
In terms of diversification efforts, family firms behave differently and it is indicated by
findings from literature review that family firms diversify more compared to non-family firms at
both international and domestic level. It is hinted by research that family firms strive to enter into
region that are close to them on cultural basis. The model of SEW helps in explaining the firms
specific behavior. In order to protect the SEW, family firms are expected to have less
diversification. Owner of family firms avoid diversification because they fear the loss of control
over operations, although diversification indicates bearing less risk. View of fewer
diversification efforts are supported by other arguments that influence of family business would
diminish by appointing non-family members to family business8. Furthermore, the shareholding
of family might be diluted if external funding does diversification. Contrary to this, once there is
increase in business risk, family firms as rational investors opt for diversification. This is
indicative if the fact that performance of family firms is worst compared to other firms.
2.2 Technology and SEW:
Considering the technological aspect, there is fewer diversifications by family firms on
this aspect due to fear of risks factor. In order for firms to build competitive advantage, one of
the important strategic choices is making investment in research and development. It is provided
by economic rationality that the main motivation of family firms to make investment in research
and development comes from promoting growth, innovation and survival of company. The
8 Daspit, Joshua J., et al. "A strategic management perspective of the family firm: Past trends,
new insights, and future directions." Journal of Managerial Issues 29.1 (2017): 6.

11SOCIO-ECONOMIC WEALTH
overall risk of firms can be reduced by creation of investment across firms through synergies9.
Nevertheless, the family SEW would be threatened by R & D investment because of several
reasons. Firstly, there would be loss of family influence, as R & D projects would require
assistance from outside parties. Secondly, firms with different product lines would be largely
benefitted from such projects. Thirdly, there is a possibility of potential loss of shareholdings of
family due to external financing of the project. Lastly, when undertaking such projects, it is
required to take clear step away from practices. It has been found from some research that there
exist negative relationship between R & D investment and family ownership. Activities of R & D
of family firms tend to increase if the board comprise of outsiders that are more independent10.
2.3 Environmental performance and SEW:
It is evident from literature review that family firms intend to convey positive image to
society for which they pollute less. However, lower pollution does not have any relation with
9 Dow, Sandra, and Jean McGuire. "Family matters?: A cross‐national analysis of the
performance implications of family ownership." Corporate Governance: An International
Review24.6 (2016): 584-598.
10 Garcés-Galdeano, Lucía, et al. "Entrepreneurial orientation in family firms: the moderating role
of technological intensity and performance." International Entrepreneurship and Management
Journal 12.1 (2016): 27-45.

12SOCIO-ECONOMIC WEALTH
economic benefits and they can only protect their socio emotional wealth (SEW)11. In terms of
their perceived SEW; family firms towards environmental pressures make adjustment.
Relationship between IPO pricing and family firms has been investigated in the literature
review. It is argued by some authors that the reason associate with acceptance of higher IPO
under pricings by family firms is to enhance and preserve their SEW. The need of SEW to
preserve the reputation of family firms are related with higher IPO under pricings and this helps
in reducing litigation and reputation risks during the process of IPO12. Different scholars perceive
impact of SEW on pro-active stakeholder engagement of family firms differently13. It is argued
by authors that in order to pursue SEW, family firms are more inclined to pursue pro-active
stakeholder engagement.
11 Revilla, Antonio J., Ana Pérez-Luño, and María Jesús Nieto. "Does family involvement in
management reduce the risk of business failure? The moderating role of entrepreneurial
orientation." Family Business Review 29.4 (2016): 365-379.
12 Chang, Sea‐Jin, and Jungwook Shim. "When does transitioning from family to professional
management improve firm performance?." Strategic Management Journal 36.9 (2015): 1297-
1316.
13 Gomez‐Mejia, Luis R., et al. "Socioemotional wealth as a mixed gamble: Revisiting family
firm R&D investments with the behavioral agency model." Entrepreneurship Theory and
Practice 38.6 (2014): 1351-1374.

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All the five components of SEW that is family influence and control, family members
identification within the firms, binding social ties, family members emotional attachment and
family members bond renewal positively impacts the engagement with external and internal
stakeholders. However, it is argued by some about the existence of negative relationship
between stakeholder engagement and SEW14.
The influence of family firms by SEW on the acquisition behavior has also been
investigated. It has been ascertained that the influence of SEW on acquisition behavior of firms
varies with different performance levels by firms. This depicts that acquisition behavior of
family firm’s changes when they do not reach their aspiration levels. The acquisition target of
family firms facing economic loss is unrelated and they are more likely to acquire15. Contrary to
this, family firms under slack for bolstering their SEW endowments are associated with buying
related targets16.
14 Peng, Mike W., et al. "An institution-based view of large family firms: A recap and
overview." Entrepreneurship Theory and Practice (2017): 1042258717749234.
15 Poletti-Hughes, Jannine, and Jonathan Williams. "The effect of family control on value and
risk-taking in Mexico: A socioemotional wealth approach." International Review of Financial
Analysis (2017).
16 Kraiczy, Nils D., Andreas Hack, and Franz W. Kellermanns. "What makes a family firm
innovative? CEO risk‐taking propensity and the organizational context of family firms." Journal
of Product Innovation Management 32.3 (2015): 334-348.

14SOCIO-ECONOMIC WEALTH
It has been ascertained from empirical findings that there is less engagement in
acquisition by family owned firms. The findings are deemed to be logically correct as when it
comes to acquisition behavior, family firms are expected to be less active because such
acquisition has the likelihood of threatening their SEW endowment and dilution of control17.
Summarizing the above findings, it can be said that the behavior of family firms is
influenced by SEW with regard to diversification, R & D, IPO pricing, environmental behavior
and engagement of stakeholders. Although, SEW is related to family firms until they do not have
any financial trouble. As soon as the business risks is faced by firms, the goal settings of such
firms shift to more rational financial goals as against pure SEW goals. The consequence of
financial performance and SEW goals of such firms does not have clear answers, while the
research is on progress.
2.4 Hypothesis Development
The most significant objective of the families is the sustenance of the sentimental gift
within the company and therefore the performance is a fundamental aim to the development of
SEW. The control and the influence of the family within the companies is an essential dimension
of SEW and the empirical researches have explained that the families look to avoid brining out
the capital in front of the investors. Additionally, while being reluctant towards taking risk, they
look to undertake debt financing in order to safeguard their control18. The positive performance is
17 Hoskisson, Robert E., et al. "Managerial risk taking: A multitheoretical review and future
research agenda." Journal of management 43.1 (2017): 137-169.
18 Chua, Jess H., James J. Chrisman, and Alfredo De Massis. "A closer look at socioemotional
wealth: Its flows, stocks, and prospects for moving forward." Entrepreneurship Theory and

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the resource of the cash flow for the organizations and permits it towards the financial operations
without any alternative to the sources that are external in nature. Furthermore, the profitability
makes sure the continuation for the future members of the family and the regeneration of the
bonds of the family to the company with the help of dynastic progression19. Therefore, there is
estimation that family companies follow profitability in order to maintain SEW and thereby
outperforming the non-family based businesses20.
H1: the degree to which the family companies surpass the non-family companies is reliant on the
intensity of SEW.
There have been numerous studies that reveal that the involvement of the families within
the management generates a stronger bonding among the business and the family. This leads in
an extensive effort in order to maintain SEW. The literature even recommends that the presence
of the family within the company results to prominent impacts on their reputation and this in a
Practice 39.2 (2015): 173-182.
19 De Massis, Alfredo, et al. "Ability and willingness as sufficiency conditions for family‐
oriented particularistic behavior: implications for theory and empirical studies." Journal of Small
Business Management 52.2 (2014): 344-364.
20 Minichilli, Alessandro, Marina Brogi, and Andrea Calabrò. "Weathering the storm: Family
ownership, governance, and performance through the financial and economic crisis." Corporate
Governance: An International Review 24.6 (2016): 552-568.

16SOCIO-ECONOMIC WEALTH
manner remunerates the managers of the family in order to enhance their performance21.
Furthermore, the empirical evidences on the listed company reveals that the CEO’s of the
families have a positive effect on their performance.
H2: Involvement of the family in the private companies and their active management has a
positive impact on the performance of the company
2.5 Summary
The literature review looks to address the various aspects of SEW and the divergence of
SEW in accordance to which, the several elements of SEW has been determined. In this manner
an understanding of the impact of SEW on the financial performance and the risk taking ability
of the family companies can be understood22. The development of the hypothesis has indicated
that the intensity of SEW has been essential in surpassing the performance of family business
over the non-family business. The other hypothesis has indicated that active management of the
family members in their business have a positive impact on the performance of the company.
21 Revilla, Antonio J., Ana Pérez-Luño, and María Jesús Nieto. "Does family involvement in
management reduce the risk of business failure? The moderating role of entrepreneurial
orientation." Family Business Review 29.4 (2016): 365-379.
22 Jaskiewicz, Peter, et al. "The effects of founder and family ownership on hired CEOs’
incentives and firm performance." Entrepreneurship Theory and Practice 41.1 (2017): 73-103.

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Chapter 3: Research Methodology
3.1 Introduction
This segment of the research has the intention of addressing the kind of data that would
be collected in order to take this research paper forward and thereby attaining results that would
be helpful in gaining fruitful outcomes23. There are numerous kinds of data that can be exploited
by the researcher, but the selection of the data is dependent on the topic on which the research
has commenced. The methodology section would even highlight the research approach, design,
data collection process, data analysis technique and the research philosophy so that an idea about
the data collection process and the type of data that is to be used can be identified.
3.2 Choice of methodology
The selection of the methodology is an essential element for the researcher as the
authentic selection of the methodology would determine the effectiveness of the collected data.
The researcher has the idea that in this paper secondary data would be used in order to have an
understanding of the outcome of the research in accordance to this topic and therefore qualitative
methodology has been chosen and accordingly qualitative data analysis would be undertaken
23 Newbert, Scott, and Justin B. Craig. "Moving Beyond Socioemotional Wealth: Toward a
Normative Theory of Decision Making in Family Business." Family Business Review 30.4
(2017): 339-346.

18SOCIO-ECONOMIC WEALTH
with the help of which effective results can be attained24. The researcher would undertake
thematic qualitative data analysis and accordingly precise results can be attained.
3.3 Research Philosophy
The philosophy is communicated in order to gain a specific knowledge and understanding
of the tools and the equipment and the process that would be used by taking help of which the
current topic associated data can be attained. There are several philosophies that are available to
the researcher, but according to this paper, positivism philosophy has been selected because of
the fact that this paper would positively identify the impact of SEW on the financial performance
along with the risk taking capability of the family firms25.
3.4 Research Approach
The approach of the research addresses the frameworks and the models that would be
used by the researcher in order to complete the paper in an effective manner. The researcher in
this paper would use secondary data and the secondary data would go through qualitative data
analysis and therefore deductive approach would be undertaken. Deductive approach makes use
24 Poletti-Hughes, Jannine, and Jonathan Williams. "The effect of family control on value and
risk-taking in Mexico: A socioemotional wealth approach." International Review of Financial
Analysis (2017).
25 Berrone, Pascual, Cristina Cruz, and Luis R. Gomez-Mejia. "Family-controlled firms and
stakeholder management: A socioemotional wealth preservation perspective." The Sage
handbook of family business (2014): 179-195.

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of the models and the frameworks that are already existent and this approach is ideal for this
research as the researcher in this case would be using secondary data26.
3.5 Research Design
The design is related to having an understanding of the design and the outline that would
be used in order to frame the collected data in such a manner that the data can be used in an
effective manner27. The design that would be used by the researcher in this paper is exploratory
research design because of the fact that the researcher would be exploring the data in accordance
to the family firms and these data are secondary in nature and hence exploration of the data is
helpful in determining the outcome that is desired by the researcher.
3.6 Data Collection Process
Secondary data has been used in this research paper and with the help of the secondary
data, information in accordance to the SEW and it impact of the financial performance and the
risk taking ability of the family organizations can be understood. The secondary data has been
collected for five family companies, which are operational in Singapore and their data with
regards to sentiments towards SEW would be helpful in understanding how it impacts the
financial performance along with the risk taking capability of the family organization. The data
26 Simsek, Zeki, et al. "Strategic leadership and leaders in entrepreneurial contexts: A nexus for
innovation and impact missed?." Journal of Management Studies 52.4 (2015): 463-478.
27 Kraiczy, Nils D., Andreas Hack, and Franz W. Kellermanns. "What makes a family firm
innovative? CEO risk‐taking propensity and the organizational context of family firms." Journal
of Product Innovation Management 32.3 (2015): 334-348.

20SOCIO-ECONOMIC WEALTH
has been attained by taking assistance of the website of the companies, data that is available from
the internet sources and the financial performance of the family firms28. The data that would be
collected will be useful in discovering the solutions to the issues with respect to which the
research has been undertaken.
3.7 Process of data analysis
The data analysis process that is selected by the researcher will be useful in answering
and addressing the issues with respect to which this paper has been initiated29. The researcher has
selected thematic analysis with the help of which all the elements would be addressed and
thereafter an idea can be attained in accordance to which outcome of the paper can be discovered
by the researcher.
3.8 Ethical Consideration
The researcher has abided to the ethics that have been constructed by national and the
international bodies and accordingly results can be attained that would be true and authentic and
would bring out results that can be used by the readers30. The researcher has abided by the ethical
28 Firfiray, Shainaz, et al. "Is nepotism so bad for family firms? A socioemotional wealth
approach." Human Resource Management Review 28.1 (2018): 83-97.
29 Kraus, Sascha, et al. "Entrepreneurial paths to family firm performance." Journal of Business
Research (2017).
30 Minichilli, Alessandro, et al. "CEO succession mechanisms, organizational context, and
performance: A socio‐emotional wealth perspective on family‐controlled firms." Journal of
Management Studies 51.7 (2014): 1153-1179.

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codes and therefore all the data which is used are collected from precise sources and therefore
fair and valid data can be used for the completion of the research paper.

22SOCIO-ECONOMIC WEALTH
Chapter 4: Data Analysis and Discussion
4.1 Introduction
This section of the paper would assess the gathered data with the assistance of the
expertise of researcher and the thematic tool that would be efficient in attaining the results that is
desirable for the researcher. The analysis would determine the key factors with the help of which
an understanding of the extent of impact of SEW on the risk taking capability and the financial
performance of the family firms can be understood.
4.2 Thematic Analysis
4.2.1 Influencing factors
The companies that have been selected were assessed and it was discovered that there are
distinct factors that have an effect on the financial performance and the risk taking capability of
the family companies in accordance to socio-economic wealth31. The assessment of the factors
would be helpful in determining the performance activities of the family firms in Singapore.
4.2.1.1 Harmony
The family companies have been looked upon the key area of conflict with a business and
therefore the essentiality to sustain harmony within the family is still one of the essential factors
that would be lead to the attainment of the long term objectives of the company32. The harmony
of the family that is totally reliant on the interpersonal trust, can lead to orderly, stable and
31 Madison, Kristen, et al. "Viewing family firm behavior and governance through the lens of
agency and stewardship theories." Family Business Review 29.1 (2016): 65-93.
32 Gottardo, Pietro, and Anna Maria Moisello. "The impact of socioemotional wealth on family
firms’ financial performance." Problems and Perspectives in Management 13.1 (2015): 67-77.

23SOCIO-ECONOMIC WEALTH
socially integrating frameworks which keeps the family together. It has been suggested that
harmony within the family can lead to improvement in the financial performance and even
enhance the risk taking capability of the family firms33.
The companies that have been selected for this research have stated that each one of them
have been keeping familial harmony and this has performed as a guiding factor that has even led
to strategic decisions in regards to risk taking ability and financial performance of the
companies34. For example, two of the chosen organizations have been seen to be trying to expand
their business and take their operations out of their neighboring market but few of them have
committed strongly to remain with their domestic activities and therefore they are not risk takers.
The sustenance of harmony has been an essential factor and this is related directly to SEW and
therefore explaining that risk taking capability along with the financial performance can improve
with the maintenance of family bonding and harmony in the family firms.
4.2.1.2 Trust towards external relationships
From the point of view of a relation, trust and the capability to establish long term
relationships creates a key aspect of the cultures of the family firms. There have been numerous
33 Martin, Geoffrey, Joanna Tochman Campbell, and Luis Gomez-Mejia. "Family control,
socioemotional wealth and earnings management in publicly traded firms." Journal of Business
Ethics 133.3 (2016): 453-469.
34 Zachary, Miles A., et al. "Time to recalibrate? Exploring entrepreneurial orientation of family
businesses before, during, and after an environmental jolt." International Journal of
Management and Enterprise Development 16.1-2 (2017): 57-79.

24SOCIO-ECONOMIC WEALTH
researches that have explained that trust underlies with the structure of governance and the
activities of the family firms. The small feature and the extensive bonds among the members of
the family can generally improve the extent of trust within the family companies35. The
researches recommends that the enhanced values and an increased long term commitment has
been discovered in several family companies and this influences the relationships that are based
on the trust, which should make the financial performance and the risk taking ability much
better. While the member of the family in certain cases have indicated the significance of trust in
their financial performance and risk taking ability, the companies have even indicated the
significance of trust among the members of the family along with the distrust of the outside
relationship in accordance to their financial and risk taking abilities36.
The companies that have been selected in this paper have indicated that trust and honesty
are the central principles with the help of which the companies exist and with the help of which
the companies are able to undertake their commercial transactions37. There are certain companies
35 Lee, Tingko, and Wenyi Chu. "The relationship between entrepreneurial orientation and firm
performance: Influence of family governance." Journal of Family Business Strategy 8.4 (2017):
213-223.
36 Vandekerkhof, Pieter, et al. "Socio‐Emotional Wealth Separation and Decision‐Making
Quality in Family Firm TMTs: The Moderating Role of Psychological Safety." Journal of
Management Studies (2017).
37 Binacci, Martina, et al. "Are All Non‐Family Managers (NFMs) Equal? The Impact of NFM
Characteristics and Diversity on Family Firm Performance." Corporate Governance: An
International Review 24.6 (2016): 569-583.

25SOCIO-ECONOMIC WEALTH
that have showed trust only to their family members and their relatives and do not show trust to
the outsiders but there are few companies who have shown the courage to show trust to the
outsiders and the comparison of the two kinds of family companies indicate that the ones that are
showing trust to the outsiders are having better business performance in accordance to the ones
who are not. The financial performance and the risk taking capability have been higher for these
companies and thereby indicating that the companies have been operating effectively.
4.2.1.3 Environmental Performance
The development and the creation of the environmental management practices have been
one of the key factors that improve the financial performance of a business. The family firms
have given significant amount of stress on reducing the extent of pollution from their activities.
The companies that have been chosen for the analysis have indicated that they have been making
use of various environment friendly tools and processes with the help of which they are able to
reduce their extent of pollution and create a safer and eco-friendly product38. This increases the
reputation and the image of the companies in front the consumers and thereby is able to enhance
their financial performance. Once the companies gain the confidence of the consumers they are
able to increase their risk taking capability because of the fact that they now have the confidence
of the consumers and thereby encourages them to undertake risks with the help of which they
would be able to provide better and improved products and services.
38 Kotlar, Josip, and James J. Chrisman. "Point: How family involvement influences
organizational change." Journal of Change Management (2018): 1-11.

26SOCIO-ECONOMIC WEALTH
4.2.1.4 Technology
The degree of technology is another factor that can influence SEW and thereafter an idea
can be obtained with respect to the impact on the financial performance along with the risk
taking capability of the organization39. The family firms do not have extensive degree of tools
and technologies that they can use in comparison to the non-family businesses, but they have
adequate tools with the help of which they can compete with their rivals. There are two
companies that have indicated that they have using extensive level of technological skills and
this has been influential for them in order to improve their business and accordingly their
financial performance as well40. The risk taking capability gets increased once the family firms
are able to grow their business with the assistance of these tools and technologies. The use of the
technologies reduces the concerns of the members of the family on the socio-economic wealth
and thereby is helpful in enhancing the risk taking capacity and the financial performance of the
businesses.
39 Boling, J. Ruben, Torsten M. Pieper, and Jeffrey G. Covin. "CEO tenure and entrepreneurial
orientation within family and nonfamily firms." Entrepreneurship Theory and Practice 40.4
(2016): 891-913.
40 Martin, Geoffrey P., Robert M. Wiseman, and Luis R. Gomez-Mejia. "Bridging finance and
behavioral scholarship on agent risk sharing and risk taking." The Academy of Management
Perspectives 30.4 (2016): 349-368.

27SOCIO-ECONOMIC WEALTH
Chapter 5: Conclusion, Recommendation and Future Work
5.1 Conclusion
The results that have been gathered in accordance to this topic by the researcher is
helpful in determining the impact of SEW on the risk taking capability and the financial
performance of family firms. The background of the research explains what SEW is and how it

28SOCIO-ECONOMIC WEALTH
has been incorporated and understood by the family firms. The research aims and objectives
along with the research questions have been able to create an understanding about the aspects in
accordance to which the paper would move forward. The results that have been obtained
indicates that SEW has significant amount of impact on the financial performance of the family
firms. The results have indicated that the factors that have been discussed leads to family firms
concentrate more on their businesses and therefore, changing their focus from the SEW is helpful
in improving the financial performance of the family firms. In the similar manner the risk taking
ability of the family firms would improve as well if the companies are able to take these factors
as essentially important rather than the socio-economic wealth. The socio-economic wealth
would rise with enhanced business performance and therefore the paper has been able to address
both the objectives. The secondary data that has been collected has been of significant help for
the researcher in order to reach this conclusion. The differentiation in the performance of the
companies that are making use of the factors and those who have not used extensively is an
essential factor in determining the impact of SEW.
5.2 Recommendation
The recommendation refers to the advices and suggestions that have been discovered
from this paper that can be used by the researcher at any future course of time with the help of
which the performance of the family firms can better in accordance to the current scenario. It is
advisable that the family firms assesses their operational activities from time to time and
accordingly make changes in the areas that deemed necessary. The evaluation of the business
performance of the rival family firms should even be undertaken with the help of which one
would be able to have an understanding of the aspects on which special attention needs to be
given by the family firms. It is even recommended that trust should be generated towards the

29SOCIO-ECONOMIC WEALTH
outsiders so that better business performance can be developed and the rate of commercial
transactions would increase as well.
5.3 Future Research
This current topic has the potential of future research because of the fact that with the
advent of time, there would be several changes in the internal and the external factors that are
related to the businesses of the family firms and therefore future researches would be helpful in
determining what has been the impact of SEW on the risk taking capability and the financial
performance of the family firms. If the researchers are able to discover changes in the future
researches, then accordingly a comparison can be made with the help of which mindset of the
members of the family firms can be understood. The SEW factors may even change in the future
course of time and thereby the impact of these changes whether positive or negative is influential
creating an understanding whether the family firms would be able to benefit from the changes
that have taken place.
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