Abstract
Purpose – The purpose of this paper is to use the socio-emotional wealth perspective to examine how
the level of family involvement reduces the propensity to use incentives to non-family managers in
small to medium-sized enterprises (SME) family firms.
Design/methodology/approach – Primary data were collected from US firms. To evaluate the
hypotheses, a logit model was employed on a final sample of 2,019 small family firms.
Findings – Results suggest that family influence and control and intra-family transgenerational
succession intentions are negatively related to the propensity to use incentives. Also, the interaction
effects of family management and ownership reduce the propensity to use incentives.
Originality/value – The paper’s empirical findings imply that despite their potential economic
benefits, family involvement reduces the probability that incentives will be offered to non-family
managers because such incentives are perceived to be inconsistent with the preservation of the
family’s socioemotional wealth. Also, choices that reflect a preference for socioemotional wealth may
not only be a function of decision framing and loss aversion but also by the size of the economic payoffs
that might be available. The findings suggest that non-family managers in SME family firms may
be affected by a family’s preoccupation with its socioemotional endowments. Thus, the authors expect
that this paper provides further avenues to explore the decisions about attaining non-economic and
economic goals and other strategic issues in family firms.
Keywords Small to medium-sized enterprises, Family firms, Family business management,
Family involvement, Nonfamily managers, Incentive compensation, United States of America
Paper type Research paper