Diversified acquisitions in family firms: Restricted vs. extended family priorities

Bennet Schierstedt, Marisa Henn and Eva Lutz

Journal of Family Business Strategy, 2020, vol. 11, issue 2

Abstract: Through diversified acquisitions, family firms are able to grow their business in previously untapped markets. In the long term, diversification can enhance extended socioemotional wealth (SEW) priorities, as it reduces business risk and supports the goal of passing businesses on to future generations. However, diversified acquisitions may threaten restricted SEW priorities due to short-term financial and social constraints. Prior studies, therefore, show conflicting results regarding the likelihood of diversified acquisitions in family firms. With the aim of reconciling contradictory findings in the literature, we analyse how distinct configurations of family firms based on family ownership, family management, and family firm life cycle stage affect the likelihood of diversified acquisitions. Using on a hand-collected dataset including 404 strategic acquisitions made by 211 German family firms between 2010 and 2016, our study reveals that high family ownership is linked to a long-term perspective on and respectively extended SEW preferences in acquisition decisions, leading to a higher probability of a diversified acquisition. This effect is weakened in cases of high family management and particularly strong in cases of first-generation family firms. In later generations, family-dominated top management teams decrease the probability of diversified acquisitions, indicating that in these family configurations, a preference for pursuing short-term respectively restricted SEW goals is dominant.

Keywords: Mergers & acquisitions; Family firms; Heterogeneity; Governance; Family life cycle stage (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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DOI: 10.1016/j.jfbs.2020.100357

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