In the horns of the dilemma: socioemotional wealth, financial wealth and acquisitions in family firms

We posit that family firms often face a dilemma in their strategic decision making: whether to maintain current socioemotional wealth (SEW) or pursue prospective financial wealth. Applying such a mixed gamble perspective to acquisitions, family owners assess potential acquisitions with regard to their impact on both wealth dimensions. In line with this reasoning, we find that family control implies a general reluctance to acquire, and, when an acquisition happens, a preference for related targets. Because financial and socioemotional viewpoints lead to largely incompatible predictions about the occurrence and relatedness of acquisitions, family firm owners use their firm's vulnerability as a signal. Increased vulnerability leads to a heightened propensity to prioritize financial over SEW problem framing, which is reflected in the acquisition of unrelated targets. Empirical results are supportive of these predictions.