Socioemotional Wealth as a Mixed Gamble: Revisiting Family Firm R&D Investments With the Behavioral Agency Model

Abstract

Theoretical explanations for family firm underinvestment in R&D relative to nonfamily firms remain nascent. We revisit this question using a refinement to the behavioral agency model (BAM)-the mixed gamble-that allows us to examine the socioemotional trade-offs that R&D represents for the family firm and how this differentiates their R&D investment decision from nonfamily firms. We do so in an empirical context where R&D investment is of greatest importance-high-technology industries. Moreover, we examine three contingencies that allow us to explore heterogeneity across family firms in their R&D decisions due to their effect upon the family's socioemotional wealth mixed gamble: institutional investor ownership, related diversification, and performance hazard.