Jeremy A. Woods, Doctoral Student

1. Jeremy A. Woods, Doctoral Student Department of Management, College of Business, University of Cincinnati Overview One major factor which differentiates family businesses from non-family businesses is the fact that family business owners often derive a high degree of non-financial, emotional value (both positive and negative) from their businesses (Astrachan & Jaskiewicz, 2008; Gómez-Mejia, Takács Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007). Deriving a positive sense of pride in the products/services the company produces (Abdel-Maksoud, Dugdale, & Luther, 2005), or a negative sense of stifled creative freedom (Ingram, 2011) from one’s work, is common for family business owner-managers. Such emotional value has been suggested to influence family business owner-managers’ valuations of their companies (Astrachan & Jaskiewicz, 2008). Relatively little work (see Gómez-Mejia et al., 2007 for a notable exception) has been done empirically measuring the emotional value which private family business owner-managers derive from their businesses. This paper addresses that gap. Hypothesis 1 Many small business owner-managers take pride in their competence at successfully achieving their goals and priorities (MacKenzie, 2002). Family business owners have been found to be particularly proud of both the products/services they produce (Abdel-Maksoud et al., 2005) and the success of their companies (Denison, Lief, & Ward, 2004). Hypothesis 1: Private family business owner-managers will derive a higher sense of pride from their work than the owner-managers of other private businesses. Hypothesis 2 Paradoxical tensions in family businesses can sometimes stifle creativity and innovation (Ingram, 2011). In particular, inter-generational interaction in family firms is often characterized by a “shadow” (Davis & Harveston, 1999; Eddleston, Otondo, & Kellermanns, 2008) cast upon the younger generation of family firm managers by the older generation. Such influence can fuel family psychodynamics (Kellermanns & Eddleston, 2004) such as children’s desire to differentiate themselves from their parents, heightening the feeling of a lack of creative freedom. Hypothesis 2: Private family business owner-managers will derive a lower sense of creative freedom from their work than the owner-managers of other private businesses. Hypothesis 3 The value which family business owner-managers attach to their businesses is proposed to consist of both financial and non-financial components (Astrachan & Jaskiewicz, 2008). It is proposed that this non-financial value can be either positive or negative depending on whether the owner-manager experiences more emotional returns (i.e., positive emotional benefits such as sense of pride and accomplishment) or more emotional costs (i.e., negative emotional liabilities such as a sense of stifled creative freedom due to relationship conflicts with family members) (Astrachan & Jaskiewicz, 2008; Brundin, 2012). Hypothesis 3: The levels of (A) pride and (B) creative freedom which private family business owner-managers derive from their work will be positively correlated with their valuations of their businesses. Methods This paper is based on a pilot survey of 40 small business owner-managers from a variety of industries across the United States. The survey was designed to capture a broad range of demographic information, perceptions of decision-making issues, sales management practices, and perceptions of emotional value and business valuation. Respondents were 75% male, ranging in age from 35-85, with over half (55%) being 40-49 years old and another third (32.5%) being 50-69 years old. Roughly half the businesses had 5 employees or less (50%) and $500,000 or less in annual revenues (55%), but some of the businesses were significantly larger, with the upper 10% having over 100 employees and over $50 million in annual revenues. Roughly half (47.5%) of the businesses were, broadly stated, family businesses1. This paper performed a multivariate analysis of variance (MANOVA) test on the above-mentioned data utilizing an index variable reflecting the “familiness” of the business (the extent to which multiple family members had ownership stakes in and/or worked in the business) as a fixed factor and two survey questions (7-point Likert scales from strongly disagree to strongly agree) as dependent variables: (1) “I am more proud of what I do in this job than I would be if I were doing something else at another company.”; and (2) “I can be more creative in this job than I could be if I were doing something else at another company.” Additionally, this paper performed a linear regression analysis with the two above-mentioned survey questions as independent variables and an additional survey question, “What do you consider the current financial value of the company to be (i.e., the amount of money you would accept to sell your ownership stake in the company)?” as a dependent variable. Results are summarized in the table below. Discussion & Implications Regardless of the lack of support for hypotheses 1, 3a, and 3b above, the support for hypothesis 2, and the strong significance of familiness as a predictor of both owner-manager sense of pride (albeit in a direction at odds with the predictions of extant theory) and sense of creative freedom, suggests that further empirical investigation of this topic is likely to add to both scholars’ and practitioners’ understanding of a key, unique aspect of family business valuation. I look forward to pursuing this research. Measuring Emotional Value in Family Businesses:Owner-Manager Sense of Pride and Sense of Creative Freedom 1. Family businesses were defined as those businesses having either multiple family members holding ownership positions and/or multiple family members working together in the business and/or the intent to pass on ownership of the business from one generation of the family to the next.