Socioemotional Wealth, Generations and Venture Capital Involvement in Family-Controlled Businesses

47 Pages Posted: 1 May 2012

See all articles by Annalisa Croce

Annalisa Croce

Polytechnic University of Milan - Dipartimento di Economia e Produzione

José Martí

Universidad Complutense de Madrid - Department of Accounting and Finance

Olaf Matthaeus Rottke

Complutense University of Madrid - Departamento de Economia Financiera; Zeppelin University - Chair for Strategic Organization and Financing

Date Written: January 15, 2012

Abstract

In this paper we analyze how the will to protect socioemotional wealth affects venture capital (VC) involvement in family-controlled businesses (FCBs). We find that first generation FCBs receiving VC show significantly lower productivity growth than other investees prior to the initial VC investment. We argue that the higher reluctance to lose control in first generation FCBs explains why only those that are not performing well are willing to accept an external investor as new shareholder. We also find, however, that the impact of VC financing on productivity growth is higher in first generation FCBs than in other investees. Since managers’ entrepreneurial orientation decreases over time, the effect of VC involvement is more limited in second or following generation FCBs.

Suggested Citation

Croce, Annalisa and Martí Pellón, José and Rottke, Olaf Matthaeus, Socioemotional Wealth, Generations and Venture Capital Involvement in Family-Controlled Businesses (January 15, 2012). Available at SSRN: https://ssrn.com/abstract=2049303 or http://dx.doi.org/10.2139/ssrn.2049303

Annalisa Croce

Polytechnic University of Milan - Dipartimento di Economia e Produzione ( email )

Piazza Leonardo da Vinci, 32
Milan, 20133
Italy

José Martí Pellón (Contact Author)

Universidad Complutense de Madrid - Department of Accounting and Finance ( email )

Carretera de Humera s/n
Madrid 28223, Madrid 28223
Spain
+ 3491 3942310 (Phone)
+ 34 91 3942534 (Fax)

Olaf Matthaeus Rottke

Complutense University of Madrid - Departamento de Economia Financiera ( email )

Carretera de Humera s/n
Madrid, Madrid 28223
Spain

Zeppelin University - Chair for Strategic Organization and Financing ( email )

Am Seemooser Horn 20
Friedrichshafen, Lake Constance 88045
Germany

HOME PAGE: http://www.zeppelin-university.de

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