Risk behavior of family firms: A literature review, framework, and research agenda

Abstract

This chapter reviews prior, so far inconclusive, research on the risk behavior of family firms. On the one hand, scholars assume risk-averse behavior of family firms based on agency theory and wealth concentration arguments. On the other hand, scholars predict that family firms are willing to take substantial financial risks to preserve their SEW. By integrating finance, management, and entrepreneurship literature, we show that different underlying definitions of “risk” are key for a better understanding of family firms’ risk behavior and subsequent strategic decisions. We provide a conceptual model, highlight gaps in the existing literature, and propose fruitful areas for further research.