Risk abatement as a strategy for R&D investments in family firms |
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| Authors: | Pankaj C. Patel James J. Chrisman |
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| Affiliation: | 1. Department of Marketing and Management, Miller College of Business, Ball State University, , Muncie, Indiana, U.S.A.;2. Department of Management & Information Systems, Mississippi State University, , Mississippi State, Mississippi, U.S.A.;3. Centre for Entrepreneurship and Family Enterprise, University of Alberta, , Edmonton, Alberta, Canada. |
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| Abstract: | The behavioral agency model suggests family firms invest less in R&D than nonfamily firms to protect their socioemotional wealth. Studies support this contention but do not explain how family firms make R&D investments. We hypothesize that when performance exceeds aspirations, family firms manage socioemotional and economic objectives by making exploitative R&D investments that lead to more reliable and less risky sales levels. However, performance below aspirations leads to exploratory R&D investments that result in potentially higher but less reliable sales levels. Using a risk abatement model, our analyses of 847 firms over 10 years supports our hypotheses. Copyright © 2013 John Wiley & Sons, Ltd. |
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| Keywords: | Risk abatement family firms R&D investment behavioral agency theory |
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