|fulltext etc.||no fulltext attached|
A recent stream of research has started investigating the impact of
socioemotional aspects of organizational ownership on the monetary
value attached to a firm by its owners. In these attempts, several
researchers have chosen the setting of family firms, since these
firms have long be said to strive for non-financial next to
financial goals (e.g., Chrisman, Chua & Litz 2004; Astrachan
& Jaskiewicz 2008, Gomez-Mejia, Haynes, Nunez-Nickel, Jacobson
& Moyano-Fuentes 2007). Based on the contentions of prospect
theory, Zellweger, Kellermanns, Chrisman & Chua (2009) provide
direct evidence that socioemotional aspects related to
organizational ownership can have a monetary value in themselves by
showing how transgenerational sustainability intentions increase
acceptable sales prices indicated by family firm owners.
However, whereas above studies discuss aspects of socioemotional wealth with positive valence, family firm owners also experience negative aspects related to organizational ownership, such as relationship conflicts. Relationship conflicts exist when there are interpersonal incompatibilities among group members which typically include annoyance and tension among group members (Jehn 1995), reducing productivity and satisfaction (Gladstein 1984; Wall & Nolan 1986), a particularly relevant socioemotional cost in the context of family firm ownership (Zellweger & Astrachan, 2008). While early organizational conflict theorists suggested that such conflict is detrimental to organizational functioning (Pondy 1967; Brown 1983; Sorenson 1999; Eddleston & Kellermanns 2007) and focused much of their attention on the causes and resolution of conflict (Schmidt & Kochan 1972; Brett 1984; Danes, Zuiker, Kean & Arbuthnot 1999), we lack an understanding about how relationship conflicts enter socioemotional wealth considerations, and through compensation inclination and mental accounting possibly impact the minimum acceptable sales price at which an owner is willing to sell out. Indeed, it has been suggested that relationship conflict in family firms may rip controlling families apart and threaten the survival of their organizations (Davis & Harveston 2001) by creating incentives to sell out ownership stakes (Levinson 1971; Beckhard & Dyer 1983).
By investigating how relationship conflicts in family firms color acceptable sales prices of organizational ownership we make several important contributions. First, we speak to the recent literature exploring socioemotional aspect of corporate ownership (Gomez-Mejia et al. 2007; Astrachan & Jaskiewicz 2008; Shepherd, Wiklund & Haynie 2009) by exploring an untapped dimension of socioemotional wealth considerations, namely relationship conflicts. Thereby, we reach beyond studies who have investigated positively valenced aspects of socioemotional wealth (Zellweger, Kellermanns, Chrisman & Chua, 2009) and explore a potential downside related to family firm ownership. Second, we challenge Zellweger and Astrachan's (2008) recent assertion that socioemotional costs related to corporate ownership should feed into minimum acceptable sales prices in an inverted U-shaped manner. We argue that severe relationship conflicts do not lead to withdrawal behavior but, instead, foster escalating assessment of conflict related sunk costs. Third, we add to the ongoing discussion in economic psychology literature about how negative emotions may impact the monetary valuation of possessions (e.g., Lerner & Keltner 2000; Loewenstein & Lerner 2003). In this context, mood congruency theory contends that valuation of events and possessions is negatively influenced by bad emotions and positively influenced by positive emotions (Bower 1981; Lazarus 1991; Rusting 1998; Rusting 1999; Innes-Ker & Niedenthal 2002; Lin, Chuang, Kao & Kung 2006). In contrast to these predictions, prospect theory suggests that owners will price unpleasant outcomes through sunk cost considerations, negative experiences leading to higher valuations (Tversky & Kahneman 1991; Brockner 1992; Garland & Conlon 1998; Arkes & Ayton 1999). The present paper reconciles these conflicting views by showing that as a response to negative emotional affect (in our case induced by relationship conflicts) family firm owners will first lower their valuation of organizational ownership, as predicted by mood congruency theory, and above a certain conflict escalation level, start pricing sunk costs as assumed by prospect theory. As such, we propose a U-related relationship between relationship conflicts and minimum acceptable sales prices indicated by family firm owners. In sum, as a first study, we examine the carryover effect of negative emotional affect on the subjective valuation of organizational ownership (e.g., DeSteno, Petty, Wegener & Rucker 2000; Lerner & Keltner 2000).
We obtained 349 questionnaires from privately-held family firm owners in Germany, representing 326 distinct firms. Using hierarchical multiple regression and following recent methodological guidance (Zellweger & Astrachan, 2008) we show that relationship conflict biases acceptable sales prices, after controlling for financial and non-financial influences on firm value (e.g., risk, cash flow, growth, size, private financial benefits of control, long-term investments).
Our preliminary results support our theoretical considerations. Through the theoretical lenses of mood congruency and prospect theory we indeed show that minimum acceptable sales prices are falling at lower severity of relationship conflict, as a result of mood congruent behavior induced by disappointment, sadness and consecutive disattachment related to the conflict. In such situations, willingness to accept prices are falling, creating incentives to sell out at lower prices, to get rid of the asset, even if this means accepting lower minimum acceptable sales prices. In contrast to the predictions of mood congruency theory, we find that as relationship conflicts gain in severity and escalate, nurturing anger, rage and mutual blaming, sinister attributions and actions, family firm owners get primed by the conflict and tend to hold their efforts with regards to the conflict on their mental accounts. In consequence, they require compensation when indicating minimum acceptable sales prices.
|type||conference paper (English)|
Socioemotional wealth, family firms, emotional value
|name of conference||30th Annual Babson College Entrepreneurship Research Conference (Lausanne)|
|date of conference||9-6-2010|
|title of proceedings||BCERC Proceedings 2010|
|volume / edition||Vol. 30; Iss. 13|
|publisher||Frontiers of Entrepreneurship Research (Wellesley)|
|citation||Zellweger, T., Kellermanns, F. W., & Dehlen, T. (2010). The Impact of Relationship Conflict on Socioemotional Wealth Considerations of Family Firm Owners. In BCERC Proceedings 2010, Vol. 30; Iss. 13. Wellesley: Frontiers of Entrepreneurship Research.|