An Emotions Perspective for Advancing the Fields of Family Business and Entrepreneurship

Introduction

Although there has been some exchange between the literatures of family business and entrepreneurship (as noted by Uhlaner, Kellermanns, Eddleston, & Hoy, 2012), that exchange has been largely limited in scope (e.g., the addition of a variable from one into the other), borrowing in nature (e.g., the transferred variable maintains its complete meaning, form, and measurement), and unidirectional (i.e., a contribution is made in one field or the other but not both). While such studies may make an important contribution, there is the possibility for a different level and form of exchange whose scope is broad and whose nature involves blending (Oswick, Fleming, & Hanlon, 2011) and bricolage (Boxenbaum & Rouleau, 2011), thereby providing the opportunity to contribute simultaneously to our understanding of family business, entrepreneurship, management, and beyond. Specifically, an important yet largely neglected point of intersection between the two fields is the role of emotion (indeed, there are substantial gaps in our understanding of emotions in family businesses [Brundin & Härtel, 2014] and in entrepreneurship [Cardon, Foo, Shepherd, & Wiklund, 2012; Shepherd, 2015]). By emotion, I refer to subjective feeling states that have a clear cause or object, are short in duration, and are focused on a specific target (adapted from Barsade, 2002).

Family business research has long recognized the importance of emotion in understanding decisions and actions (e.g., Harrell, 1997; Kellermanns, Eddleston, & Zellweger, 2012; Zellweger & Dehlen, 2011). Much of this research has focused on the family firm’s socio-emotional wealth. The theory of socio-emotional wealth builds on the notion that family firms have a socio-emotional endowment, which represents “the stock of affect-related value that a family derives from its controlling position in a particular firm” (Berrone, Cruz, & Gomez-Mejia, 2012, p. 271). This socio-emotional endowment is critical in understanding decisions and actions because family firms will make decisions and take actions to preserve this endowment (Cruz, Gomez-Mejia, & Becerra, 2010; Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007). Although its creators and proponents argue that the theory of socio-emotional wealth is in its infancy (Berrone et al., 2012), this work has had a major impact on family business research and provides a foundation for future contributions.

In what follows, I initially anchor my arguments in socio-emotional wealth (as represented in the family business literature) but think more broadly in terms of the roles emotion more generally plays at the intersection of family business and entrepreneurship. By exploring these different roles, I believe future research can make a substantial contribution to the fields of family business and entrepreneurship (and beyond). In this essay, I highlight (and very briefly introduce) six conjectures for potential contributions related to (1) the building of a firm’s stock of emotion resources, (2) the micro-foundations of a firm’s stock of emotion resources, (3) the flow of emotion resources, (4) emotional reactions to failure, (5) emotional responses to others’ suffering, and (6) the emotional choice of opportunities to “do good” or cause harm.

The Building of a Firm’s Stock of Emotion Resources

Not surprisingly, given a strategic management tradition in family business research (Sharma, Chrisman, & Chua, 1997), studies of socio-emotional wealth typically begin with an existing firm and an endowment of socio-emotional wealth (Chua, Chrisman, & De Massis, 2015; Gómez-Mejía, et al., 2007; Kellermanns et al., 2012). An important aspect of entrepreneurship is the study of new venture creation and organizational emergence (Delmar & Davidsson, 2000; Katz & Gartner, 1988). By exploring the process of organizational emergence, we can begin to build an understanding of the creation of this endowment and, perhaps, its “imprinting effect.” How is an emotion-related endowment created, why do some emerging organizations have a greater emotion-related endowment than others, and how does this influence the other nascent activities of organizational emergence? Indeed, research that explores the interrelationship between the activities of building emotion stocks and of building an organization is likely to provide critical new insights for expanding our understanding of the entrepreneurial process and the nascent stages of family firms. For example, it is important to gain a deeper understanding of how the current emotion-related endowment of an emerging organization influences the type, timing, and/or sequence of the nascent activities of organizational emergence (for nascent activities, see Lichtenstein, Dooley, & Lumpkin, 2006). Perhaps organizational emergence has a different pattern for those that begin with a high emotion-related endowment than for those with a low emotion-related endowment and/or for those trying to build their emotion endowment (although this is likely highly dependent on the type of emotion endowment being investigated). For example, engaging in the activities associated with organizational emergence likely reveals or builds a socio-emotional endowment through either member selection for the family business or activities that build stronger connections between founding team members. It may be possible to actively manage the construction of an emotional endowment around the family or some other kinship group. Based on the above, I offer the following conjecture for future research:

Micro-Foundations of a Firm’s Stock of Emotion Resources

Given interest in family firm performance, it is not surprising that family business scholars of socio-emotional wealth have focused on the firm level of analysis (Cruz et al., 2010; Gómez-Mejía et al., 2007), but there are research opportunities to explore the micro-foundations of a firm’s stock of emotions by changing the level of analysis to individuals, dyads, and subgroups within the firm (including within the family; see Miller & Le Breton-Miller, 2014; Schulze & Kellermanns, 2015). Specifically, by disaggregating firm-level socio-emotional wealth, we can gain a deeper understanding of how and why the stocks and flows of emotions (particularly those related to kinship ties) affect entrepreneurial activities and ultimately help explain the extent and nature of the firm’s entrepreneurial actions and the consequences of those actions for members (of the family and/or business) and/or firm performance. ¹ Perhaps an interesting and important first step is to explore the emotion stocks (type and level) of subgroups within the firm and within the family. Subgroups within the family (e.g., husband and wife, siblings, in-laws, grandchildren) likely form and differ in their perceptions of, for example, the value of current family control of the business; therefore, each has the potential for a different level of socio-emotional wealth. Future research can make an important contribution by exploring subgroups’ emotion stocks in general—and emotion-related values more specifically (and emotions flows)—to explain how and why families with different subgroups make different decisions and/or have different performance outcomes. ²

Of course, the importance of such research is enhanced to the extent that these differences in emotion stocks across subgroups affect entrepreneurial activities and, thus, entrepreneurial action. Perhaps differences in subgroup emotion-related values can be a source of conflict over which opportunities the firm should pursue. If this is the case, then how are these conflicts resolved? Perhaps differences in subgroup emotion-related values is functional to the extent that the subgroups engage in entrepreneurial activities that are well suited to what is valued and/or emotionally rewarding, or maybe the conflict across subgroups is functional (i.e., task conflict) because the different subgroups act as a “check” for the others’ opportunity proposals to keep the firm in some form of “emotional” balance. Perhaps differences in subgroup emotion stocks are helpful in generating a larger set of potential opportunities from which to choose (for advantages of a larger opportunity set, see Gruber, Macmillan, & Thompson, 2008) or from which to create a portfolio of ventures (see Bakker & Shepherd, 2015). I recognize the challenge of such cross-level research but also believe that the contributions from it can be substantial. Based on the above, I propose the following:

Stocks and Flows of Emotion Resources

A theory on the stock of emotion-related values (e.g., socio-emotional wealth) can be enhanced by exploring the flow of that stock (Chua et al., 2015) and differences in flow across family members (Miller & Le Breton-Miller, 2014) to provide the basis for a more dynamic, finer-grained process model (e.g., the stock and flow of knowledge; Dierickx & Cool, 1989) of how collective emotions influence the decision making within family and/or entrepreneurial businesses. It is likely that the stock of socio-emotional wealth and other forms of emotion-related values changes (and perhaps ebbs and flows) as the firm, family, family members, and/or founders progress through the entrepreneurial process. Specifically, the perceived value of family control and influence (Berrone, Cruz, Gomez-Mejia, & Larraza-Kintana, 2010; Gómez-Mejía et al., 2007) may be more desirable for some aspects of the entrepreneurial process (e.g., developing the business) than other aspects (e.g., inventing). Indeed, some family members may identify (Dyer & Whetten, 2006) more with some aspects of the firm and less with other parts (e.g., identify more with the marketing department than with the manufacturing department) and may generate positive emotions by pursuing opportunities with which they identify and generate negative emotions from the pursuit of opportunities with which they do not identify.

Furthermore, kinship ties are likely stronger for some subgroups than others (e.g., Discua Cruz, Howorth, & Hamilton, 2013) and may “switch” for different tasks involved in the entrepreneurial process (e.g., kinship ties with one’s sister may be stronger for creative endeavors, such as inventing, and stronger with one’s brother for the efficient exploitation of an opportunity). Moreover, given emotional attachments to aspects of work (Eddleston & Kellermanns, 2007), the failure of entrepreneurial projects may break some of the emotional attachments (Shepherd, Patzelt, & Wolfe, 2011) between kin while providing the opportunity for new attachments to form (e.g., a new project or an addition to the family). However, kinship ties may not be the exclusive domain of the family firm; it may be possible to explore the development of stocks of emotions around nonfamily kinship groups. It could be that socio-emotional wealth theory ceases to apply when the focal group is not the family, but it seems that socio-emotional wealth scholars are open to the possibility: “non-family principles and managers might experience some of this [socio-emotional wealth]” (Berrone et al., 2012, pp. 259-260).

Recognizing that experiencing entrepreneurial activities can influence the level of a stock of emotions provides a basis for exploring the reciprocal relationship between a stock of emotions and entrepreneurial action. That is, if a stock of emotions (e.g., collective emotion-related values) affects the decision for entrepreneurial action (including which opportunities to pursue) and the entrepreneurial process affects the level of that stock of emotions, then there is the possibility of an “emotion stock–entrepreneurial action” spiral. The spiral could be positive such that the stock of emotions encourages entrepreneurial action, and entrepreneurial action builds the emotion stock, which in turn encourages further entrepreneurial action, and so forth. The spiral could be negative such that a drop in the emotion stock (or a threat of a loss to the stock) leads to less entrepreneurial action, less entrepreneurial action leads to a further drop in the emotion stock, and so on. Based on the above, I offer the following conjecture:

Emotional Reactions to Failure

While family business research has investigated the consequences of the loss (or threatened loss) of socio-emotional wealth for decision making (Cruz et al., 2010; Gómez-Mejía et al., 2007) and entrepreneurship research has investigated the consequences of the loss of an entrepreneurial endeavor (i.e., a project [Shepherd et al., 2011] or a business [Shepherd, 2003]) for decision making, it is surprising that there has been little overlap between the two. Cross-fertilization will likely be beneficial to both fields. Specifically, perhaps higher emotion stocks lead to greater persistence despite poor performance, but such persistence can make failure more costly when it eventually occurs, having a more negative impact on the family’s well-being (and that of its members). Furthermore, the greater the emotion stock invested in the business, the more important the business is to the family (and to family members) and the greater the grief generated from its failure. This would indicate that these family members and families would suffer longer, learn less, and be less motivated to try again. However, perhaps some of the emotion stocks that encouraged persistence could also be used as a resource for coping with grief—that is, while experiencing more grief over the failure of an entrepreneurial endeavor, those with high collective emotion stocks may be able to more quickly reduce grief, learn more quickly from the failure, and be more motivated to try again. Alternatively, the failure of the firm may destroy or radically change the family’s (and family members’) emotion-related set of values. As indicated by the many speculations mentioned above, we do not yet have a good understanding of the relationship between, on the one hand, the emotion stocks of a family (and/or the individuals and groups within the family) and, on the other hand, the failing and/or failure of entrepreneurial endeavors (i.e., projects or firms).

Emotional Responses to Others’ Suffering

There is evidence that family influence in the management of a business can lead to business decisions and actions that are more socially responsible and represent stronger notions of community citizenship (Berrone et al., 2010; Dyer & Whetten, 2006). This prosocial motivation could be stimulated, in part, by high sensitivity to the firm’s external image (Micelotta & Raynard, 2011; Sharma & Manikutty, 2005). Prosocial motivation refers to the desire to expend effort to help (i.e., protect or promote the welfare of) other people (Batson, 1998; Grant, 2007), and prosocial behavior is acting on that motivation. Prosocial behavior can be enacted in a firm through compassion organizing. Compassion organizing refers to “a collective response to a particular incident of human suffering that entails the coordination of individual compassion” and is based on routines used for a firm’s normal work that can be redirected to rapidly respond to an employee in need, which helps alleviate suffering (Dutton, Worline, Frost, & Lilius, 2006, p. 62).

However, when the cause of the member’s suffering is not well suited to what the firm’s existing routines can deliver, perhaps the family within (and perhaps reaching beyond) the boundaries of the firm can provide routines and processes well suited to the organizational member’s suffering. That is, the family can represent a basis for organizing the identification and exploitation of an opportunity to alleviate a member’s suffering, and some families are likely better at compassion organizing than others. Perhaps families that have faced suffering in the past are more capable of compassion organizing in the family business context.

As opposed to the “normal” routines of an established firm, in a study of the Black Saturday bushfires, my colleague and I (Shepherd & Williams, 2014) found that new ventures were spontaneously created (within hours and days) in the aftermath of a natural disaster that caused widespread suffering. Considering that organizational emergence typically takes months and even years, it is remarkable how quickly these ventures were formed and took action to alleviate suffering (days and weeks). Many of these ventures involved family. It could be that family provided a set of routines and processes for rapidly accelerating the venture-creation process to deliver customized solutions to alleviate suffering. Yes, the Black Saturday bushfire is an extreme example, and perhaps I am biased (two of my aunties survived the fire), but it is through these extreme cases that we can extend and build theory. It suggests that there is more to learn about the role of family in venture creation (Aldrich & Cliff, 2003) over and above the “family” from “fools, family, and friends” as sources of capital, especially when it comes to the creation of ventures as a means for alleviating suffering. Perhaps offering a compassionate response reinforces or strengthens prosocial motivation, develops new routines (within the family and/or firm) to alleviate subsequent suffering (by family and/or organizational members), and builds capabilities for rapidly creating new ventures. This leads to my next conjecture:

Emotional Choices on Opportunities to “Do Good” and/or “Cause Harm”

Rather than global predictions about the entrepreneurial actions of family firms or even a specific family firm, it is the contingencies that are likely important in understanding behavior. One such contingency is the nature of the opportunity because the noneconomic value of that opportunity can vary across family businesses for a host of family and nonfamily reasons. For example, because the notion of family values reinforces the notion of community (Arregle, Hitt, Sirmon, & Very, 2007; Miller & Breton-Miller, 2006), perhaps businesses more dominated by family are more prosocial toward the communities in which they are embedded (e.g., local neighborhood and/or family-oriented groups), which may or may not mean that they are less prosocial toward distant groups. This is important in an entrepreneurial context because prosocial motivation may explain why some family firms identify and exploit specific opportunities to “do good” for some but not others. That is, by understanding the role of family in focusing firm attention, we can gain a deeper understanding of core elements of the social and sustainable entrepreneurship research streams. Indeed, exploring differences in families and their influence on firm decision making is likely to enhance our understanding of firm actions that facilitate (or obstruct) social and/or environmental outcomes.

While the managers of the family firm may take actions to promote (or protect) the welfare of other family members (Kellermanns & Eddleston, 2004; Schulze, Lubatkin, Dino, & Buchholtz, 2001), are they motivated to help promote (or protect) the natural environment? For example, in one study, Shepherd, Patzelt, and Baron (2013) found that entrepreneurs disengaged their pro-environmental values to exploit opportunities that harm the natural environment when they had high entrepreneurial self-efficacy and faced an environment of low munificence. Therefore, people who we may expect to be good stewards of the natural environment (i.e., strong pro-environmental values) sometimes face conditions under which they disengage their values to act as poor stewards of the natural environment. Although the notion of stewardship is central to many studies of family businesses, it is unclear what stewardship theory of family businesses would predict in this situation. On the one hand, being a good steward of the family firm would encourage ethical decision making (e.g., not exploiting opportunities that harm the environment) to maintain a positive external image of the family. On the other hand, if stewardship of the firm and of the natural environment came into conflict, then the entrepreneur may disengage his or her pro-environmental values to exploit an opportunity that harms nature to protect the family’s interest in the firm. Future research can make important contributions by exploring the role of family in the disengagement of values and morals to exploit what others perceive as “anti-social” opportunities. Perhaps it could be the other way around—when stewardship of the family firm and of the natural environment are in conflict, the key decision maker(s) may disengage their family values to avoid exploiting opportunities that harm the natural environment. Again, future research can explore the conditions under which family values are disengaged to exploit certain opportunities. This leads to my final conjecture:

Conclusion

Although there are many research opportunities at the intersection of the fields of entrepreneurship and family business (see Goel & Jones, 2016; Kellermanns and Eddleston, 2006; Zellweger, Kellermanns, Chrisman, & Chua, 2012), I think that those emanating from the topic of emotion offer considerable potential for important contributions to knowledge. Both fields recognize the importance of emotion and have explored it in different ways. This diversity of knowledge on the topic, when blended together, provides the basis for new insights. In particular, the conjectures for future contributions arising from research on emotional responding and on the choice of opportunity to “do good” and/or “cause harm” rest on the “shakiest” foundations, but in many ways, this is the reason why these topics are so exciting—we have the chance to journey into unknown territory and help build the foundation of knowledge for a topic that has positive implications for individuals, families, organizations, and societies.

This journey into the unknown may require the use of new vehicles in the form of unfamiliar research methods. For example, my colleagues and I used pictures to stimulate certain emotions in respondents engaged in an experiment (Klaukien, Shepherd, & Patzelt, 2013), Regan Stevenson (in his doctoral dissertation; 2016) is using state-of-the-art technologies to capture the physiological manifestations of emotions, and there are undoubtedly other methods and technologies that are available (or will soon become available) to capture the different types and intensities of emotions. These new methods can help us pursue some of the questions implied by the conjectures above, but they also—and perhaps more importantly—generate new questions, questions that were not even conceivable beforehand.

I am excited about the possibilities presented by emotion-based research in the fields of family business, entrepreneurship, and the intersection of the two. I hope that this essay stimulates thought, interaction, and action.