This paper challenges the prevalent notion that family- owned firms are more risk averse than publicly owned firms. Using behavioral theory, we argue that for family firms, the primary reference point is the loss of their socioemotional wealth, and to avoid those losses, family firms are willing to accept a significant risk to their per- formance; yet at the same time, they avoid risky business decisions that might aggravate that risk. Thus, we pro- pose that the predictions of behavioral theory differ depending on family ownership. We confirm our hypotheses using a population of 1,237 family-owned olive oil mills in Southern Spain who faced the choice during a 54-year period of becoming a member of a cooperative, a decision associated with loss of family control but lower business risk, or remaining indepen- dent, which preserves the family’s socioemotional wealth but greatly increases its performance hazard. As shown in this study, family firms may be risk willing and risk averse at the same time.
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