Nonfamily Managers, Family Firms, and the Winner's Curse: The Influence of Noneconomic Goals and Bounded Rationality

25 Pages Posted: 8 Oct 2014

See all articles by James J. Chrisman

James J. Chrisman

Mississippi State University - College of Business

Esra Memili

University of North Carolina - Department of Marketing, Entrepreneurship, Hospitality and Tourism, Bryan School of Business and Economics

Kaustav Misra

Saginaw Valley State University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2014

Abstract

We explain why family‐centered noneconomic goals and bounded rationality decrease the willingness and ability of small‐ and medium‐sized family firms to hire and provide competitive compensation to nonfamily managers even in a labor market composed of stewards rather than agents. Family‐centered noneconomic goals attenuate the ability to attract high‐quality, nonfamily managers by promoting inferior total compensation packages, fewer opportunities for advancement, idiosyncratic strategies, and higher performance expectations. Furthermore, bounded rationality limits nonfamily managers' ability to meet performance expectations when hired. The result is the “winner's curse,” where neither the economic nor noneconomic goals of family owners are fully achieved.

Suggested Citation

Chrisman, James J. and Memili, Esra and Misra, Kaustav, Nonfamily Managers, Family Firms, and the Winner's Curse: The Influence of Noneconomic Goals and Bounded Rationality (September 2014). Entrepreneurship Theory and Practice, Vol. 38, Issue 5, pp. 1103-1127, 2014. Available at SSRN: https://ssrn.com/abstract=2506960 or http://dx.doi.org/10.1111/etap.12014

James J. Chrisman (Contact Author)

Mississippi State University - College of Business ( email )

Mississippi State, MS 39762-0964
United States

Esra Memili

University of North Carolina - Department of Marketing, Entrepreneurship, Hospitality and Tourism, Bryan School of Business and Economics ( email )

P.O.Box 26170
Greensboro, NC 27412
United States

Kaustav Misra

Saginaw Valley State University - Department of Economics ( email )

7400 Bay Road
University Center, MI 48710-0001
United States

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