Exploring the effects of socio-emotional wealth and family social capital on family firm growth and innovation – a comparative study.

Abstract

The concepts of socio-emotional wealth (SEW) and family social capital (FSC) have been extensively used by previous researchers to understand how family firms operate and how this affects their business or innovation performance. However, the overall findings of previous research on the influence of SEW and FSC on family firms are mixed, and little research has been done that examines this influence in the context of different cultures and business environments. It was evident from the study of literature that the existing research, although very promising, is still in its infancy. Existing theory was deemed to be inadequate to answer the questions we have because it holds diverging views on many of the subjects of this study. It was thus decided that this exploratory study would further research existing theories, in order to produce new ideas and hypotheses. It is imperative to fill this gap since family firms of all sizes play a crucial role in the economies of most countries, providing many jobs and contributing to their GDP. Research into the role of SEW and FSC in contributing to or hindering family firm performance is important in providing an enhanced understanding of how to improve business growth in individual firms and in the family firms sector, taken as a whole. This qualitative study investigates the influence of socio-emotional wealth and family social capital on business growth and innovation, based on interviews with samples of Pakistani-owned family firms in Pakistan and in the United Kingdom. The purpose is twofold: first to provide an enhanced qualitative understanding of how national culture and business setting may influence the ways in which socio-emotional wealth and family social capital contribute to or hinder business growth and innovation in family firms, and second to investigate how these overlapping concepts might be used in a complementary way in future research. The interviews of respondents, both in Pakistan and the United Kingdom, gave insights not only into how these family businesses operated and performed, but also about the participants’ understanding of FSC and SEW. The findings demonstrate a number of routes socio-emotional wealth and family social capital have taken to influence business growth and innovation activity in these family firms, and confirm the importance of acknowledging national culture, as well as the business environment in which family firms operate, when investigating their behaviour and performance. They also reveal many overlaps between the concepts of socio-emotional wealth and family social capital when investigating this sample of Pakistani-owned family firms. It is concluded that these concepts can be refined and modified for use as complementary research tools in future studies of family firms, emerging from different national cultures. By building on the theoretical and practical findings of the current study, such future studies might help generate an expanded body of evidence about family firms that will help overcome some of the historically mixed research findings and provide clearer guidance to help family firms improve their business and innovation performance.