Are Family Owners Willing To Risk "Rocking The Boat"? A Blended Socioemotional Wealth-Implicit Theory Framework

Abstract

We leverage research on socioemotional wealth (SEW) and implicit theories to develop a novel blended SEW-implicit theory framework that explains why some family firms are more risk seeking or more risk averse. According to implicit theory, individuals perceive reality through their interpretative cognitive filters. Those with an entity theory orientation see reality as relatively fixed or uncontrollable, while those with an incremental-implicit theory orientation tend to perceive reality as malleable and change as leading to positive outcomes. We theorize that family firms with high SEW intensity tend to adopt an entity orientation, whereas those with low SEW intensity tend to adopt an incremental orientation. Accordingly, we propose that the likelihood that family owners hold either orientation is shaped by organizational features associated with SEW intensity, namely (a) the salience of family versus business identity, (b) family founder imprinting, (c) generational stage, and (d) favorable path dependence. In turn, family owners with an entity orientation are less likely to take risks compared to family owners with an incremental orientation. Furthermore, we theorize that a firm’s performance hazard can shift family owners' implicit orientation from entity-based to incremental and vice versa, thereby impacting their risk-taking behavior.

Full text

FAMILY OWNERS AND RISK 1
ARE FAMILY OWNERS WILLING TO RISK “ROCKING THE BOAT”?
A BLENDED SOCIOEMOTIONAL WEALTH-IMPLICIT THEORY FRAMEWORK
Luis R. Gómez-Mejía
Arizona State University
Francesco Chirico
Macquarie Business School, Macquarie University
Jönköping International Business School, Jönköping University
Michael C. Withers
Texas A&M University
Geoffrey P. Martin
Melbourne Business School
Robert M. Wiseman
Michigan State University
Acknowledgements: We express our sincere gratitude to associate editor Aaron Hill and two
anonymous reviewers for providing us with invaluable guidance and feedback throughout the
review process.
Corresponding author: Luis R. Gómez-Mejía, , Department of Management, W.P. Carey School
of Business, Arizona State University, Box 874006, Tempe, AZ 85287, USA.
Address Email: luis.gomez-mejia@asu.edu
Journal of Management, forthcoming

FAMILY OWNERS AND RISK 2
ABSTRACT
We leverage research on socioemotional wealth (SEW) and implicit theories to develop a novel
blended SEW-implicit theory framework that explains why some family firms are more risk
seeking or more risk averse. According to implicit theory, individuals perceive reality through
their interpretative cognitive filters. Those with an entity theory orientation see reality as
relatively fixed or uncontrollable, while those with an incremental-implicit theory orientation
tend to perceive reality as malleable and change as leading to positive outcomes. We theorize
that family firms with high SEW intensity tend to adopt an entity orientation, whereas those with
low SEW intensity tend to adopt an incremental orientation. Accordingly, we propose that the
likelihood that family owners hold either orientation is shaped by organizational features
associated with SEW intensity, namely (a) the salience of family versus business identity, (b)
family founder imprinting, (c) generational stage, and (d) favorable path dependence. In turn,
family owners with an entity orientation are less likely to take risks compared to family owners
with an incremental orientation. Furthermore, we theorize that a firm’s performance hazard can
shift family owners' implicit orientation from entity-based to incremental and vice versa, thereby
impacting their risk-taking behavior.
Keywords: Decision-Making; Family Firms; Corporate Governance

FAMILY OWNERS AND RISK 3
ARE FAMILY OWNERS WILLING TO RISK “ROCKING THE BOAT”?
A BLENDED SOCIOEMOTIONAL WEALTH-IMPLICIT THEORY FRAMEWORK
Family firm owners obtain both economic and socioemotional wealth (SEW) benefits
from their business, with SEW encompassing those “non-financial aspects of the firm that meet
the family’s affective needs, such as identity, the ability to exercise family influence, and the
perpetuation of the family dynasty” (Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson &
Moyano-Fuentes, 2007: 106). Since the introduction of SEW theory by Gómez-Mejía et al.
(2007), research has argued that preservation of SEW plays a major role in strategic decision-
making in family firms (e.g., Duran, Kammerlander, van Essen & Zellweger, 2015; Feldman,
Amit & Villalonga, 2016; Patel & Cooper, 2014). A particular focus of this research has centered
on family firms’ risk taking (Hiebl, 2012), which is defined as actions designed to improve
profitability that are associated with greater uncertainty about future income streams (Anderson,
Kreiser, Kuratko, Hornsby & Eshima, 2015; Hoskisson, Chirico, Zyung & Gambeta, 2017).
Traditionally, family firms have been portrayed as risk-averse, with the concentration of
family wealth in a single firm inducing them to protect their patrimony (Anderson & Reeb, 2003;
La Porta, Lopez-de-Silanes & Shleifer, 1999; Morck & Yeung, 2004). However, other research
has challenged this simplistic view, suggesting that family firms may become more risk-seeking
when their SEW is under threat. In particular, Gómez-Mejía and colleagues (2007) extend the
behavioral agency model, or BAM (Wiseman & Gómez-Mejía, 1998) by incorporating the
notion of SEW into the risk calculus of family owners. Building upon this model, Gómez-Mejía
et al. (2007) propose that in response to potential losses to SEW, risk preferences shift and
family firms become more willing to take business risks.
However, the family business literature continues to present a fragmented understanding
of how family firms uniquely approach risk-taking (Chirico, Hoskisson, Pathak & Bau, in press;

FAMILY OWNERS AND RISK 4
Hoskisson et al., 2017; Mismetti et al., 2024). A critical research question that remains
unanswered in the literature noted above is: What accounts for the discrepancies in risk
preferences among family firms? In other words, why do some family firms adopt a risk-averse
stance while other family firms embrace risk? The answers to these questions are of great interest
to academic research (Daspit, Chrisman, Ashton & Evangelopoulos, 2021; Gómez-Mejía, Cruz,
Berrone & De Castro, 2011; Hoskisson et al., 2017; Zellweger, 2017) but also carry substantial
economic and practical relevance, given the global economic presence and impact of family
firms and their significant contributions to the workforce and GDP through their strategic actions
(Jaskiewicz, Combs & Ketchen, 2019; Jaskiewicz, Combs & Rau, 2015; Kempers, Leitterstorf &
Kammerlander, 2019; Mismetti, Sangermano, Del Bosco & Bergamaschi, 2024; Pinelli, Chirico,
De Massis & Zattoni, 2024). Importantly, firm risk-taking is a central focus not only in family
business studies (e.g., Gómez-Mejía et al., 2014; Gómez-Mejía, Patel & Zellweger, 2018; Strike,
Berrone, Sapp & Congiu, 2015) but also in strategic management research (e.g., Becerra &
Markarian, 2021; Zhang & Gu, 2024) as well as in related disciplines such as finance (e.g.,
Barberis, Greenwood, Jin & Shleifer, 2015; Fama & French, 2016) and economics (Andersen,
Denrell & Bettis, 2007; Martínez-Marquina & Shi, 2024). In the business environment, decision-
makers must navigate the uncertainties that organizations face; indeed, business strategies would
hold little value if they did not account for the risks associated with such uncertainties. Virtually
all strategic initiatives involve uncertainty, making it crucial to understand what explains
decision-maker risk preferences (Shapira, 1995; Sitkin & Pablo, 1992).
In this paper, we create a novel theoretical framework that explains family firm risk
taking by taking into account family owners’ cognitive orientation—a factor that has been
missing in prior research. To this end, we blend SEW theory (Gómez-Mejía et al., 2007) with

FAMILY OWNERS AND RISK 5
research on implicit theories (Dweck, Chiu & Hong, 1995a). According to research on implicit
theories, people, groups, and organizations hold fundamental beliefs about the nature of personal
attributes, characteristics of other individuals and entities, and the world around them, which,
although often unarticulated, provide a framework for interpreting reality and guiding behavior
(Dweck, 1999, 2006). Dweck et al. (1995a) conceptualized implicit theories as falling into two
main categories: entity theories and incremental theories. Those holding an entity-based implicit
theory orientation tend to perceive personal attributes and the world as relatively fixed or
uncontrollable. This perspective is often associated with a more deterministic view of outcomes,
potentially leading to lower initiation of change efforts, greater resistance to change, and more
rigid thinking patterns (Dweck & Leggett, 1988). Conversely, individuals holding an
incremental-based implicit theory orientation are more likely to view personal attributes and the
world as malleable. This perspective is characterized by a belief in the potential for growth and
change, often resulting in greater openness to new experiences and a more flexible approach to
challenges (Dweck & Leggett, 1988). Hence, an incremental orientation is associated with a
heightened sense of personal agency and a stronger belief in the efficacy of effort. This
perspective tends to increase the perceived likelihood that initiating change or persisting in the
face of challenges will lead to positive outcomes (Dweck, 1996; Dweck et al., 1995a). We argue
that implicit theories serve as interpretive cognitive filters that owners use to assess the riskiness
of decision choices, ultimately determining their firms’ risk-taking behavior. While other
perspectives may provide an explanation for heterogeneity in risk-taking behavior (e.g.,
Chatterjee & Hambrick, 2011; Sitkin & Pablo, 1992; Tversky & Kahneman, 1992; Wiseman &
Gómez-Mejía, 1998), implicit theory provides a cognitive link among SEW, family firm
characteristics, and risk-taking behavior, which are our focus of interest.

FAMILY OWNERS AND RISK 6
Because certain organizational features of family firms—family versus business identity
salience, family founder imprinting, generational stage, and favorable path dependence (Gómez-
Mejía et al., 2011)—are associated with the importance attached to SEW by family owners, we
theorize that family owners’ implicit theories about their firms’ malleability vary with these
features, and implicit theories, in turn, affect risk-taking behaviors. These four family firm
features are grounded in literature that supports their shared foundation in SEW intensity
(Gómez-Mejía et al., 2011; Hoskisson et al., 2017; Zellweger, 2017). More specifically, we
propose that the stronger the SEW intensity associated with family firm features, the more likely
that the family owners involved will adopt an entity lens. Family owners with an entity-based
implicit theory orientation view their firm as relatively fixed. These owners tend to believe in
circumstantial immutability and lack confidence that the potential benefits of taking risks
outweigh potential losses, which may constrain their willingness to take risks. Conversely, when
organizational features are associated with lower SEW intensity, family owners see their firm as
more adaptable and thus more prone to adopt an incremental-based implicit theory orientation
toward risk-taking. These owners are more likely to tolerate uncertainty when positive risk-
return opportunities arise, viewing them as opportunities for growth. We further theorize that a
performance hazard confronting the firm, a key contingency factor in SEW theory (Gómez-
Mejía et al., 2011; Hoskisson et al., 2017), moderates the relationship between owners’ implicit
theories and risk-taking behaviors. That is, firm performance hazards can shift family owners’
implicit orientation from entity-based to incremental and vice versa, thereby impacting their risk-
taking behavior. Our blended framework allows us to explain variations in risk taking among
family firms by considering both specific family firms’ features and the cognitive orientations of
their owners.

FAMILY OWNERS AND RISK 7
Our blended theoretical formulation contributes to the management literature in important
ways. First, we provide a theoretical framework that suggests family firms differ in terms of their
cognitive orientation, namely implicit theories related to the malleability of their businesses, and
that this in turn depends on SEW intensity. Importantly, we leverage the implicit theories
perspective that combines cognitive and social psychology to explain how the family group
interacts as a collective to make decisions regarding firm risk. In doing so, we complement
existing research on SEW by proposing that SEW’s influence on firm strategy may depend on
family owners’ implicit beliefs about their firms’ malleability and their willingness to
successfully execute risky strategies. Specifically, our paper is a pioneer in bridging the literature
on SEW and implicit theories to predict family firm risk taking. We believe that the propositions
offered here should help in spawning future empirical studies on the antecedents of risky
strategic choices in family-owned firms and more broadly on how cognitive framing is
intertwined with owners’ dominant interests in influencing risk taking.
Second, we deepen our understanding of why some family firms take greater risk or are
more willing “to rock the boat” than others. We propose that some family firm features foster
SEW intensity, ultimately molding how family owners visualize the nature of risk and their
collective willingness to successfully execute it (implicit orientations). These implicit
orientations, together with the firm's performance hazard, in turn, determine how much risk-
taking family owners are willing to assume. In so doing, our theorizing moves beyond the typical
comparison of family versus non-family firms in terms of the role of SEW in supporting or
hindering venturing risk (Jaskiewicz & Dyer, 2017; Kempers et al., 2019; Neubaum,
Kammerlander & Brigham, 2019). In particular, we extend the findings from family firm
literature that has used BAM and its mixed gamble logic to examine the role of SEW intensity in

FAMILY OWNERS AND RISK 8
shaping family firm risk taking. We do so by detailing the conditions under which the firm’s
performance hazards may also induce family owners to become less, rather than more, risk
taking. The mixed gamble logic argues that decision makers weigh the downside and the upside
risk of a choice (Gómez-Mejía, Chirico, Martin & Baù, 2023; Gómez-Mejía et al., 2011;
Hoskisson et al., 2017). As the firm faces performance hazards, family owners are likely to
switch from an entity to an incremental orientation, thus taking more risk—accepting the
possibility of larger potential losses or higher probability of failure. Both the family’s economic
well-being and SEW would be lost if the firm fails to survive; the potential losses in the family
owners’ mixed gamble calculus would be catastrophic. Given this level of risk, maintaining the
status quo (entity orientation) becomes an unattractive option. However, and interestingly, on the
other hand, if family owners hold an incremental orientation as performance hazards increase,
they are more likely to shift towards an entity orientation, thus taking on less risk. In a
disappointing performance context, the incremental orientation may be seen as unsuccessful and
blamed by the family for poor performance outcomes—putting financial welfare, as well as
SEW, in danger. In this situation, we predict that a more prudent approach to deal with the
threats may be seen as superior, and thus, the entity orientation becomes relatively more
attractive.
Finally, our paper contributes to emerging research on implicit theories at collective
levels in the form of organizational mindsets, suggesting that ownership groups can possess
implicit theories that influence and shape how they approach strategic decision-making in their
organizations. By applying this concept to family firms, we extend the understanding of how
collective implicit theories operate in unique organizational contexts. Furthermore, our research
addresses the call by Murphy and Reeves (2019) to explore how organizational features may

FAMILY OWNERS AND RISK 9
influence mindset expression. In the context of family firms, we propose that the unique features
of these organizations can shape the development and expression of collective implicit theories.
This approach not only advances our understanding of family firms but also contributes to the
broader literature on how organizational characteristics can foster certain types of mindsets.
SOCIOEMOTIONAL WEALTH, IMPLICIT THEORIES AND RISK TAKING
Goals associated with affect-related utility—or socioemotional endowment—are argued
to dominate financial objectives in decision-making processes within family firms (Davila,
Duran, Gómez-Mejía & Sanchez-Bueno, 2023; Gómez-Mejía et al., 2007). That is, while family
owners purportedly have target levels of socioemotional endowments as well as financial targets
(Gómez-Mejía et al., 2011; Hoskisson et al., 2017), socioemotional goals are argued to dominate
(Martin & Gómez-Mejía, 2016). In accordance with prospect theory and the concept of loss
aversion, family owners are expected to be loss averse with regards to their endowed wealth.
Loss aversion suggests that individuals weigh losses more heavily than gains of the same value,
meaning they tend to preserve their existing endowments (given that current wealth is taken as a
proxy for the target; Kahneman & Tversky, 1979) rather than make choices that place their
accumulated wealth at risk of loss in pursuit of further gains (Bromiley, 2009). In the context of
family control, this implies that family owners aim to preserve both financial and non-financial
forms of wealth (as SEW cannot exist independently of financial viability) rather than place that
wealth at risk (Gómez-Mejía et al., 2011).
Yet, family owners must continuously navigate uncertainties that stem from market
volatility, technological advancements, competitive pressures, and regulatory changes
(Jaskiewicz et al., 2019). Strategic decisions, such as entering new markets, launching innovative
products, or undertaking mergers and acquisitions, inherently involve varying degrees of risk that

FAMILY OWNERS AND RISK 10
family firms must take at different levels. If business strategies did not account for these risks,
they would lack robustness and foresight, limiting a family firm’s ability to adapt and thrive in
an unpredictable landscape (Mismetti et al., 2024). Therefore, risk-taking is essential to both the
survival and growth of family firms (Hoskisson et al., 2017; Zellweger, 2017).
Our paper combines the insights from SEW and implicit theories in social psychology
(Dweck, 1999, 2006), offering a conceptual framework that proposes explanations for different
risk preferences among family firms. Because the literature on SEW has been reviewed
elsewhere (e.g., Hernández-Perlines, Araya-Castillo, Millán-Toledo & Cisneros, 2023; Jiang,
Kellermanns, Munyon & Morris, 2017; Swab, Sherlock, Markin & Dibrell, 2020) and it is well
known among family business scholars, we devote most of our attention below to the implicit
theories perspective, which, to our knowledge, has never been applied in the family business
field.
The Foundations of Implicit Theories
The literature on implicit theories mainly derives from the work of Dweck and colleagues
in the context of whether intelligence is fixed or malleable over time (e.g., Dweck et al., 1995a;
Dweck, Chiu & Hong, 1995b; Dweck & Leggett, 1988). However, the idea of implicit theories
has been applied to a variety of other perspectives as well (for an extensive review, see Dweck,
1999). In particular, implicit theories have been examined in the context of organizational power
(Coleman, 2004), employee voice (Detert & Edmondson, 2011), network dynamics (Kuwabara,
Hildebrand & Zou, 2016), creativity (Loewenstein & Mueller, 2016), brand extension decisions
(Yorkston, Nunes & Matta, 2010), crisis response (Jeong, Gong, & Zhong, 2023), and the roles
of corporate directors (Boivie, Withers, Graffin & Corley, 2021). To our knowledge, the implicit
theories perspective has yet to be used for the analysis of organizational risk taking, our main

FAMILY OWNERS AND RISK 11
concern in a family firm context. The critical insight is that individuals and collective entities
generally hold implicit theories (Murphy & Reeves, 2019), which are their “basic assumptions
about themselves and their world” (Dweck, 1996: 96). Implicit theories are similar to deductive
(or explicit) academic theories, which provide some underlying assumptions about cause-and-
effect relationships (Detert & Edmondson, 2011). However, in comparison to deductive theories
that tend to follow the calculus of particular disciplines (e.g., price theory in economics), implicit
theories are often unarticulated schema-like perspectives and assumptions.
Within the implicit theories literature, as noted earlier, two particular optics likely to
influence risk preferences have been identified and garnered significant attention: entity and
incremental. As Mathur, Jain, Hsieh, Lindsey and Maheswaran (2013: 143) explain:
Individuals with an entity theory orientation tend to view people, events, and objects in
relatively fixed, unchanging terms… and are more sensitive and receptive to fixed or
static states... In contrast, incremental theorists tend to possess a more dynamic and
flexible view of people, events, and objects, and have been shown to be more sensitive
and receptive to changing or dynamic [growth] states.
These implicit theories help individuals interpret reality and filter external cues. These in turn
shape how decision makers adopt different cognitive, affective, and behavioral responses
(Dweck, 2006; Dweck et al., 1995b; Kuwabara et al., 2016).
While the literature on implicit theories, grounded in psychology, has not expressly dealt
with strategic risk taking, it ontologically provides general cognitive styles that endorse either a
conservative posture to maintain the status quo (entity theory) or a dynamic posture to improve
current conditions (incremental theory). Hence, those with an entity orientation are wary of
changes in social reality, strive for structure in the relevant domain, feel vulnerable, tend to make
helpless attributions reflective of an external locus of control, and prefer stable and predictable
processes and actions (Dweck & Leggett, 1988), all of which are inimical to risk taking. In this

FAMILY OWNERS AND RISK 12
regard, Dweck et al. (1995a) note that believing something cannot be changed is the logical
opposite of believing it can be changed. Accordingly, they raise the question: if someone
believes a situation is innate and unalterable (those holding an entity theory view), then what
would be the purpose of taking risks trying to change it? In contrast, those who hold incremental
optics tend to see change as an opportunity to move forward, believe in mastery over one’s
future, exhibit an internal locus of control, and keep an open mind to modify processes and
actions as necessary (Dweck, 2006; Kuwabara et al., 2016). All of these incremental theory
features, which Dweck (2006) summarizes as “a mindset of success,” would seem to go hand in
hand with a decision maker’s willingness to take risks.
Recent research has advanced a more nuanced understanding of implicit theories and
mindsets. Rather than being mutually exclusive or globally applied, implicit theories are now
recognized as domain-specific and existing on a continuum. Individuals can hold different
implicit theory orientations for different attributes or domains of life and can shift between entity
and incremental perspectives depending on the context (Murphy & Reeves, 2019). Moreover,
these orientations are not fixed traits but can be influenced by experiences, feedback, and
intentional interventions (Leith et al., 2014). Interestingly, research on implicit theories differs
from other theories of psychological attributes (e.g., prospect theory, regulatory focus theory,
five-factor personality) in that the mechanisms of implicit theories adapt seamlessly to group
decision-making contexts. In fact, while research on implicit theories has examined individual-
level beliefs, the theory naturally extends to examining decision making at collective levels,
including groups and organizations (Canning et al., 2019; Murphy & Dweck, 2009; Rattan &
Ozgumus, 2019).

FAMILY OWNERS AND RISK 13
Implicit theory research suggests groups and dominant coalitions in organizations may
also embrace a particular mindset when considering changes and responding to external
challenges (Murphy & Reeves, 2019; Rattan & Ozgumus, 2019). For example, Canning et al.
(2019) proffer that firms can possess shared beliefs or assumptions about the malleability of
employee talent and ability, and these implicit theories in turn influence organizational choices.
These collective implicit theories, often referred to as organizational mindsets, represent shared
beliefs or assumptions that can influence decision-making processes. Hence, organizational
strategies are likely to be reflective of collective decision-making processes that are influenced
by shared beliefs among those who hold significant power and exert a considerable influence on
the firm’s strategic choices (as would be the case with family owners). This research suggests
that implicit theories can exist at the group level and not just as individual predispositions
(Canning et al., 2019; Forsyth, 2014; Murphy & Dweck, 2009).
In line with much of the family business literature, we recognize that family firm choices
are determined by group decision making among family owners, and therefore, we treat family
owners as a collective entity (Christensen-Salem, Mesquita, Hashimoto, Hom & Gómez-Mejía,
2021; Gómez-Mejía et al., 2023). Thus, while there may be differences among individual family
members within a given firm on their outlook, and some family members may have a
disproportionate influence relative to others, one would still expect to find a collective mindset
for those at the helm (Ben-Shahar, Carmeli, Sulganik & Weiss, 2022). With that said, we
acknowledge that the influence of implicit orientations is more likely to impact organizational
behavior when the firm remains under the control of the founding family. This impact is less
likely in multi-divisional firms with multiple layers of management. Implicit theory has
advantages over other theories in that it combines elements of social and cognitive psychology,

FAMILY OWNERS AND RISK 14
enabling theoretical examination of the link between SEW and implicit theory and their joint
influence on decision making within the family owner group. Table 1 provides a comparison of
entity- and incremental-based implicit theories and their potential application to the family firm
context, to which we now turn our attention.
--Insert Table 1 about here--
SEW and Implicit Theories
Integrating insights from the SEW literature with implicit theories, we develop a blended
theory of risk taking among family firms. We argue that the more important SEW is to family
owners (or SEW intensity), the more likely they are to hold an entity orientation and the less
likely they are to make risky choices. In developing our model, we explore how the level of
SEW intensity associated with key family firm characteristics influences implicit theories among
firm owners about their firms’ malleability. We propose that the intensity of SEW embedded in
these family firm features shapes implicit orientations, which in turn determine risk-taking
behaviors. Implicit theories, which integrate both social and cognitive psychology, combined
with SEW theory, allow for a more comprehensive theoretical examination of decision-making
within the family owner group.
To capture the core variations in SEW intensity, our model specifically focuses on four
primary family firm features: the salience of family versus business identities, family founder
imprinting, generational stage, and favorable path dependence. Extensive evidence in the
literature demonstrates that these features are characterized by high SEW intensity (Gómez-
Mejía et al., 2024b; Zellweger, 2017). They uniquely encapsulate critical dimensions of SEW
that form a cohesive framework for understanding the emergence of implicit theory orientations
in family firms. That is, the bind that ties these four features together is that they collectively

FAMILY OWNERS AND RISK 15
signal SEW presence (see Gómez-Mejía et al., 2011), marking them as central factors that
encompass SEW’s multifaceted nature. This targeted approach allows us to dissect the nuanced
ways SEW manifests, setting these four features apart as the most critical for our theory.
Additionally, we examine how firm performance hazard—a central factor in SEW theory
(Gómez-Mejía et al., 2011; Gómez-Mejía et al., 2007; Hoskisson et al., 2017)—moderates the
relationship between family owners’ implicit theory orientations and their risk-taking
preferences. Figure 1 presents our comprehensive theoretical framework from a blended SEW-
implicit theory approach.
--Insert Figure 1 about here--
As Gómez-Mejía et al. (2011: 666) explain, “Because socioemotional wealth is a
fundamental endowment of family principals potential losses to that endowment increase
subjective risk bearing.” Our theoretical model leverages this insight to suggest that how SEW
preservation manifests within family firms may depend on their owners’ implicit theory
orientations, given the research on the influence of implicit theories on motivations, goals,
actions, and behaviors (Dweck, 1996; Dweck, 2006). In doing so, our model integrates SEW
theory with research on implicit theories, offering a new theoretical perspective to explain the
heterogeneity of risk taking in family firms.
ANTECEDENTS TO IMPLICIT THEORY ORIENTATIONS IN FAMILY FIRMS
Research exploring firm or executive tolerance for risk (such as accepting higher risk of
bankruptcy) has operationalized strategic risk taking as investments that increase firm fixed
costs, thereby creating uncertainty that future payoffs may not cover those higher fixed costs;
these include R&D investments, capital expenditures, and acquisitions (Devers, McNamara,
Wiseman & Arrfelt, 2008; Gómez-Mejía, Neacsu & Martin, 2019). These decisions are

FAMILY OWNERS AND RISK 16
perceived ex ante by executives to increase firm risk (Larraza-Kintana, Wiseman, Gómez-Mejía
& Welbourne, 2007). Each of those decisions often requires recruitment (dependence on outside
talent), additional external finance (equity or debt), and/or further delegation of control due to the
expanded size of the firm (Martin, Gómez–Mejía, Berrone & Makri, 2017). In these situations,
family owners are likely to lose some degree of control over their firm. As noted above, many
family firm scholars have found empirical support for family firms’ reluctance to take such
actions, which may lead to a loss of family control and hence SEW (e.g., Chrisman & Patel,
2012; Daily & Dollinger, 1991; Gómez-Mejía, Makri & Larraza Kintana, 2010; Miller, Le
Breton-Miller & Lester, 2010). Agency scholars also argue that undiversified financial wealth
dampens family owners’ predisposition to pursue promising business endeavors that might pose
a hazard to that undiversified wealth (for a review, see Hoskisson et al., 2017).
As noted above, much of the conversation in recent years with regard to risk taking
among family firms has been around the preservation of SEW (Gómez-Mejía et al., 2023;
Hoskisson et al., 2017). For instance, driven by SEW concerns, family firms have been argued to
be more attached to the status quo than bringing about change (Mullins & Schoar, 2016).
However, family owners may differ in their implicit theory orientations about whether the
organization is malleable or relatively fixed. In other words, in the pursuit of SEW, should the
organization remain relatively fixed (e.g., “This is how the family has always done it”) or should
it be changed and adapted (e.g., “The family that adapts together stays together”)? Once again,
the entity orientation is closely related to the “status quo mindset” (Quintanilla, 2011: 623).
Because the entity and incremental implicit theories influence how goals (such as preservation of
SEW) are pursued (Dweck, 1996), examining the antecedents and outcomes of these implicit

FAMILY OWNERS AND RISK 17
theories can potentially offer new insights into why some family firms take more risk than
others.
Given that social and cultural contexts critically shape individuals’ implicit theories
(Loewenstein & Mueller, 2016), we leverage existing research on family firm differences
(Gómez-Mejía et al., 2011) to analyze the role of SEW in explaining when family firm owners
exhibit behaviors reflecting an entity or an incremental implicit theory orientation within their
firms. Our overarching logic is that the stronger the SEW intensity (i.e., its level), the more likely
the family firm will adopt an entity orientation, and conversely, the weaker the SEW intensity,
the more open the family firm will be to adopting an incremental orientation. Drawing from the
family business literature, we focus on idiosyncratic firm features associated with SEW intensity,
which, in turn, help us understand whether family owners collectively adopt an entity or an
incremental theory orientation. As discussed earlier, these antecedents include the family versus
business identities, family founder imprinting, family generational stage, and favorable path
dependence (Gómez-Mejía et al., 2011; Hoskisson et al., 2017; Zellweger, 2017). We propose
that these antecedents shape the implicit theory orientations of the family ownership group. In
particular, the associated SEW intensity likely molds the family’s collective implicit theories
about the malleability of their firm. This blended SEW-cognitive implicit perspective offers
novel insight into how implicit theories develop at the group level in family firms, extending our
understanding beyond individual-level processes to collective, intergenerational phenomena.
Family versus Business Identity Salience
Organization identity reflects those aspects that are central, enduring, and distinctive
about the organization (Albert & Whetten, 1985). This identity reflects the degree to which the
organization is differentiated from other organizations and provides a unique sense of belonging

FAMILY OWNERS AND RISK 18
for its members (Ashforth & Mael, 1989). From this perspective, the greater the distinctiveness
of the organization’s identity, the more likely it is that an observer will see the organization as a
distinct social category. One aspect that makes family firms unique is that they have a dual
business and family identity (Shepherd & Haynie, 2009). Family business scholars have long
argued that some family firms tend to emphasize the family more than the business identity and
vice versa (Kets de Vries, 1993; Zellweger, Kellermanns, Chrisman & Chua, 2012). In other
words, we do not contend that the two identities cannot coexist; rather, we assert that family
owners vary regarding which identity may prevail when making decisions on behalf of the firm.
In particular, we propose that the relative strength of family versus business identity is an
important manifestation of SEW intensity and that this in turn shapes the implicit theories that
family owners hold about their firm's malleability. This process parallels how early experiences
shape individuals’ implicit theories (Dweck, 1999).
Family firms with a more salient and stronger family identity are expected to prioritize
meeting the family’s socioemotional needs over other utilities, such as satisfying shareholders’
desires for profit maximization (Gómez-Mejía et al., 2010). This emphasis on family identity is
likely to be focused on preserving family control while also protecting the traditions embedded
in the family image of the firm. Changes that threaten either family control or the family image
will be eschewed. Thus, those holding a family identity enjoy a stronger SEW intensity, and this
likely fosters an entity-based implicit theory orientation about the organization (Berrone, Cruz &
Gómez-Mejía, 2012). Family owners may perceive the organization as relatively fixed, viewing
substantial changes as potential threats to the core definition of what the firm represents and
hence its SEW. This entity orientation aligns with maintaining the current status quo and reflects
how family-centric values, rather than pure business calculus, guide decision-making in these

FAMILY OWNERS AND RISK 19
firms (Morgan & Gómez-Mejía, 2014). In other words, in firms with a strong family identity, a
concomitant high SEW intensity may further reinforce the tendency towards an entity-based
view. The desire to protect and maintain the family's central role in the firm becomes paramount,
potentially limiting openness to change.
Conversely, in firms where the business identity is stronger and thus SEW intensity is
weaker, family owners may be more likely to approach major decisions with an incremental
theory orientation. Those holding a business identity would seem to favor growth over
preservation of tradition by seeking new opportunities requiring adaptation and flexibility. As
Sundaramurthy and Kreiner (2008: 418) explain, when the business identity is strong within the
family firm, it creates “a state that resembles a nonfamily business.” In this case, an orientation
toward organizational change may be emphasized as ownership is focused more on building out
the firm as a professional business through strategic initiatives toward growth and innovativeness
(Zellweger, 2017). Following these arguments, we propose:
Proposition 1: Family owners with a greater family versus business identity are more
likely to possess an entity rather than an incremental-based implicit theory orientation
toward the malleability of their firms.
Family Founder Imprinting
Most family firms originate as founder-led firms (Davis & Harveston, 1999; Levinson,
1971), and the founder’s lasting imprint on the firm can greatly affect those aspects that are
central, enduring, and distinctive about the organization (Fauchart & Gruber, 2011; Marquis &
Tilcsik, 2013; Whetten, 2006). Founder imprinting strongly reinforces the view of the
organization as a family firm (Eddleston, 2008) and hence it imparts the firm with high SEW
intensity (Gómez-Mejía et al., 2011). In this regard, organizational members and outside
constituents may depict a firm as a family business because of the lasting founder imprinting and

FAMILY OWNERS AND RISK 20
the family’s ties to that founder (Jaskiewicz et al., 2015). Well-known examples of firms with
strong founder imprinting and high family influence include the Tata Group from India (founded
by Jamselji Nusserwangi Tata), Ikea from Sweden (founded by Ingvar Kamprad), Grupo Caso
SAB from Mexico (founded by Carlos Slim), Motorola (founded by Paul Galvin), and Hilton
(founded by Conrad H Hilton). A large body of literature suggests that a founder’s influence can
endure long after the founder is gone (Stinchcombe, 1965), influencing strategic direction
(Boeker, 1989), organizational innovation (Hsu & Lim, 2013), governance (Cannella, Jones &
Withers, 2015; Lynall, Golden & Hillman, 2003) and managerial succession (Burton &
Beckman, 2007; Krause, Acharya & Covin, 2014). We propose that the strength of SEW
associated with founder imprinting directly shapes the implicit theories that family owners hold
about their firm's malleability.
This process parallels how role models shape individuals’ implicit theories (Dweck,
1999). Although some studies acknowledge that imprinting can also promote learning and
change (e.g., Simsek, Fox & Heavey, 2014), most scholars agree that strong founder imprinting
with its concomitant SEW intensity in family firms tends to produce inertial pressures and
strategic persistence, thus reducing the overall strategic options available to the management
team (Beckman & Burton, 2008; Johnson, 2007). As Boeker (1989: 490) explains, founder
imprinting helps to establish managerial values and philosophies, “limiting the range of future
strategic choices that are considered.” In this regard, “the imprinting hypothesis assumes a
reduction of managerial discretion” for those subsequent decision makers succeeding the founder
(Schreyögg & Sydow, 2011: 326). Thus, a strong SEW intensity associated with family
imprinting is likely to foster an entity orientation and discourage an incremental orientation.

FAMILY OWNERS AND RISK 21
In terms of familial implicit theories, a family founder’s strategic decisions and actions
thus serve as a guide for those current decision makers, but also limit the range of strategic
changes that are potentially entertained (Pieper, Smith, Kudlats & Astrachan, 2015). The
acceptable repertoire of strategic options may be considered in terms of what the family founder
would have done and how the options would align with the organizational strategic direction
established by the founder (Johnson, 2007; Marquis & Tilcsik, 2013). Continuing the founder’s
legacy, an important element of SEW intensity (Berrone et al., 2012), leads to a belief that
maintaining the status quo is the foundation of future success, while novel strategies are likely to
increase firm vulnerability. From this perspective, the reduced managerial discretion derived
from imprinting may also reflect how the entity-theory orientation exemplifies resistance to
change that is seen as not aligned with the founders’ original intent and strategic approach.
Similarly, founder imprinting produces relatively oversimplified thinking in which the
owners ask, “What would the founder do?” when faced with critical decisions. In short, when
founder imprinting is strong, the corresponding high SEW intensity may enhance the reverence
for the founder's vision and methods. This is likely to strengthen the belief that the firm’s core
attributes should remain fixed, aligning with an entity-based implicit theory. Conversely, at
lower levels of founder imprinting, and hence weaker SEW intensity, family owners are less
beholden to how the organization operated under the original founders. These owners are likely
to be more open-minded and willing to entertain novel strategic alternatives. Thus, these owners
are more inclined to approach their organizations with an incremental-based implicit theory
orientation, viewing the firm as more malleable and open to change (Hoskisson et al., 2017).
Following these arguments, founder imprinting should lead family owners to engage in decisions
with an entity theory orientation. Thus, we propose:

FAMILY OWNERS AND RISK 22
Proposition 2: Family owners with a stronger family founder imprinting are more likely
to possess an entity rather than an incremental-based implicit theory orientation toward
the malleability of their firms.
Generational Stage
High SEW intensity tends to be present in early generational stages (Gómez-Mejía et al.,
2011), and this may amplify the commitment to the family's vision and values. This could
reinforce an entity-based view, as changing the firm may be seen as a threat to the family's
legacy. Because SEW intensity tends to decline in successive generations (Gómez-Mejía et al.,
2011), we propose that, as family firms progress from the founding (i.e., first) stage to
subsequent stages and SEW intensity weakens accordingly, the family owners’ orientation
toward an entity view will generally diminish. As family firms transition to later generational
stages, several key changes occur that may influence implicit theories. At later stages, ownership
becomes increasingly diffused among a greater number of family members (Schulze, Lubatkin,
Dino & Buchholtz, 2001). This dispersion may lead to more diverse perspectives and
expectations about the firm's future (Chirico, Ireland, Pittino & Sanchez-Famoso, 2022; 2025).
Concurrently, family members may develop varying levels of interest in maintaining their
holdings or commitment to the original family goals, and thus, SEW concerns become less
relevant to decision making. This diversity of viewpoints may foster a more flexible, incremental
view of the firm's potential.
The increasing diversity within the ownership group in later generational stages can lead
to the emergence of factions, necessitating the formation of coalitions for family owners to
exercise their influence (Miller & Le Breton-Miller, 2006). This dynamic may encourage a more
adaptable view of the organization. Furthermore, expectations among family owners may shift
over generations. While some may maintain strong commitments to dynasty (a key element of

FAMILY OWNERS AND RISK 23
SEW; Berrone et al., 2012), others may approach their ownership as simply another investment
or income source. This shift in expectations may promote a more malleable view of the firm’s
future.
These changes in later generations may create an environment more conducive to an
incremental theory orientation (Strike et al., 2015). Family owners in later generations, less
constrained by SEW concerns, may be more open to initiating change, viewing the organization
as more adaptable to new circumstances and opportunities. They may be more likely to perceive
malleability as leading to positive outcomes, particularly those that foster the financial wealth of
family owners who are no longer as focused on maintaining the status quo. Conversely, in earlier
generational stages, family owners may be more closely tied to the founder's vision and original
organizational structure (Zellweger, 2017). This closer connection to the firm’s origins, and thus
higher SEW intensity, may foster an entity theory orientation, where the organization is viewed
as less malleable and more fixed in its characteristics and capabilities. Formally, we propose:
Proposition 3: Family owners in an earlier generation stage are more likely to possess
an entity rather than an incremental-based implicit theory orientation toward the
malleability of their firms.
Favorable Path Dependence
One of the fundamental insights from organizational research is that a firm's strategic
direction cannot be explained without referring to its past (Sydow, Schreyögg & Koch, 2009;
Vergne & Durand, 2010). This is because a firm’s idiosyncratic past—reflecting prior decisions
and the performance implications of those decisions—has a direct influence on its subsequent
strategic choices and its capabilities to successfully execute those choices. As Barney (1991:
108) suggests, “If a firm obtains valuable and rare resources because of its unique path through
history, it will be able to exploit those resources in ways that cannot be duplicated in other

FAMILY OWNERS AND RISK 24
firms.” Many influential studies in strategic management have focused on the role of path
dependence as a precursor of organizational actions (e.g., Boeker, 1989; Thietart, 2016; Vaara &
Lamberg, 2015). Path dependence is defined as the phenomenon for which the range of decisions
available in a given situation is constrained by choices made in the past, even if the conditions
that influenced those earlier decisions are no longer relevant (Sydow et al., 2009).
This organizational phenomenon parallels findings in the SEW literature showing that as
long as the firm is doing relatively well, owners are less likely to undertake venturing risks that
may jeopardize SEW (Gómez-Mejía et al., 2007). In the context of family firms, we distinguish
between favorable and unfavorable path dependence. Favorable path dependence refers to a
historical trajectory of successful decisions and outcomes that have positively influenced the
firm's capabilities, resources, and market position. This success can reinforce specific strategies
and decision-making patterns. Correspondingly, prior success is also likely to be associated with
increased asset specificity in support of past strategic choices, thus limiting the firm’s future
malleability. Conversely, unfavorable path dependence refers to a history of less successful or
even detrimental decisions that may constrain the firm’s future options or perpetuate suboptimal
practices (de Groote & Kammerlander, 2022). In other words, a path strewn with poor decisions
may encourage a “go-for-broke” mentality that replaces a concern for protecting SEW with a
motivation for exploring innovative solutions to ensure firm survival.
A favorable path dependence is likely to maintain a commitment to SEW and avoid
actions that may put SEW in danger. Path dependence has been used to explain future
advantages and challenges of family firms (e.g., Anderson & Reeb, 2003; Bertrand & Schoar,
2006). Some family firms refer to their historical path dependence as part of their organizational
narrative (Jaskiewicz et al., 2019; Sasaki, Kotlar, Ravasi & Vaara, 2020). Sasaki et al. (2020), for

FAMILY OWNERS AND RISK 25
example, document how Japanese family firms that have lasted for centuries enshrine their
values and principles from the past in corporate mottos and publications, with top executives
continuing to refer to those when announcing major strategic decisions.
For firms with a successful path dependence, high SEW intensity could heighten the
belief that past success is due to unchangeable, unique family attributes and steadfastness. Thus,
past success may further justify the desire to maintain SEW. This may strengthen the tendency
towards an entity-based implicit theory. As SEW intensity increases, family owners may become
more resistant to change (the proverbial “If it is not broken, don’t fix it”), viewing their firm as
fixed and optimal. This aligns with the concept of path dependence in family firms, where
historical decisions and successes shape future strategies (Anderson & Reeb, 2003; Bertrand &
Schoar, 2006). In other words, past success justifies the desire to maintain SEW as “there is little
to worry about.” As SEW intensity increases, these narratives may become more central to the
firm, potentially strengthening an entity-based implicit theory orientation.
We thus propose that successful path dependence strengthens SEW intensity and a
commitment to maintain it. This, in turn, reinforces and/or fosters an implicit entity theory
orientation among family owners. That is, from a path-dependent view, a history of success
increases commitment to a specific strategic course of action that becomes increasingly difficult
to reverse. This leads family owners to view their firm’s characteristics and strategies as fixed,
which in turn fosters an entity theory orientation. This successful path dependence may constrain
the owners’ orientation toward incremental theories of the firm. Family firms with a favorable
path dependency are thus less likely to see the firm and its strategic approach as malleable. The
protection of the belief in the foundation of past successes may mire family owners “in a single
way of seeing and doing things” (Miller, 1993: 122) and thus discourage changes that might

FAMILY OWNERS AND RISK 26
jeopardize both the financial welfare of firm owners and SEW. For instance, strong prior
successes may lead to decisions that rely on a variant of past solutions rather than attempting a
novel approach to exploit potential opportunities (Zahra, 2005). Conversely, those with less
successful path dependency may be more inclined to engage in numerous search behaviors that
reflect an incremental-based implicit theory orientation. Lacking a history of past success likely
coincides with a search for solutions to past failure, opening the door to considering novel
solutions. These family firms may be more open to viewing their organization as malleable and
adaptable, seeking new strategies and approaches to achieve success. In formal terms:
Proposition 4: Family owners with a more favorable path dependence are more likely to
possess an entity rather than an incremental-based implicit theory orientation toward the
malleability of their firms.
IMPLICIT THEORY ORIENTATIONS AND FAMILY FIRM RISK TAKING
Firm risk taking is generally portrayed as the adoption of strategic choices with promising
yet uncertain outcomes (Hoskisson et al., 2017) or a firm’s willingness to devote scarce
resources to projects with unknown probabilities of success (Anderson et al., 2015). From this
perspective, firms are faced with a choice between strategies with differential levels of
uncertainty. In much of financial economics, firms are expected to formulate strategies with
projected financial returns that are commensurate with risk; that is, firms are expected to select
strategic choices whereby high uncertainty is offset by high expected financial returns or low
expected returns are associated with low outcome uncertainty (Barberis et al., 2015).
We propose that the implicit theory orientations held by family owners directly influence
their firms’ risk-taking behaviors, or a disposition to take chances when the outcome is
unpredictable. That is, we argue that family owners’ belief about their firms’ malleability is
likely to influence the desire to pursue or avoid novel actions that increase uncertainty. This
relationship between implicit theory and family firm risk taking parallels findings in individual-

FAMILY OWNERS AND RISK 27
level research, where implicit theories have been shown to affect risk taking in various domains,
such as academic challenges (Dweck & Leggett, 1988) and entrepreneurial endeavors (Pollack,
Burnette & Hoyt, 2012). Family owners with an incremental orientation are likely to see their
organization as adaptable and perceive change as inevitable. This perspective aligns with
research showing that individuals with growth mindsets are more likely to embrace challenges
and persist in the face of setbacks (Dweck, 2006; Yeager & Dweck, 2012). In the context of
family firms, this may translate to a greater willingness to engage in strategic risk taking on the
promise that risk and returns are positively associated (Chirico et al., in press; Hoskisson et al.,
2017). Owners with an incremental orientation are more inclined to view risk as an inherent part
of growth and adaptation, necessary for the long-term success of the firm.
Conversely, family owners with an implicit entity theory orientation should be less
inclined to take risks, since they anticipate that novel strategic initiatives are less likely to be
rewarded in a world that they view as largely unchangeable. In other words, they believe that the
downside consequences of risk-taking exceed any upside potential it might offer. This aligns
with findings that individuals with entity-based orientations tend to avoid challenges that might
reveal limitations or lead to failure (Dweck, 1996; Dweck, 2006). In family firms, this may
manifest as a preference for maintaining the status quo and avoiding strategies that could
potentially destabilize the firm's current position. Moreover, the implicit theories held by family
owners may influence how they interpret and respond to market information and opportunities.
Those with incremental orientations may be more likely to see potential in new ventures or
market expansions, while those with entity orientations may be more skeptical of changes to
their established business model. As such, we propose:

FAMILY OWNERS AND RISK 28
Proposition 5: Family owners with an incremental-based theory orientation toward the
malleability of their firms are more likely to take risks than family owners with an entity-
based theory orientation.
Performance Hazard
While SEW is crucial for family firms, it cannot exist independently of the firm’s
financial viability. This interdependence suggests that as SEW intensity increases, family owners
may become more protective of both their socioemotional and financial investments in the firm
(Gómez-Mejía et al., 2011), potentially reinforcing entity-based views about the firm’s core
characteristics. However, if the firm’s owners are faced with a performance hazard—significant
performance threats or a higher probability of failure (for instance, proximity to bankruptcy)
(Shapira, 1995)—family owners with an entity orientation shaped by organizational features
associated with higher SEW intensity may be willing to change their posture to consider
dramatic actions that will hopefully reverse the negative financial situation and thus,
concomitantly, preserve SEW. That is, the upside of the risk begins to outweigh the downside as
performance hazard increases (Gomez-Mejia et al., 2014, 2018). Said differently, family owners
may consider strategic choices that carry a higher probability of failure and large potential losses
because of their prescience regarding the catastrophic consequences of firm failure if a
downward performance trajectory is not arrested.
That is, the status quo is not a practicable option under bleak performance conditions, and
embracing change—and higher risk strategic choices that enable change—becomes not only
acceptable but may be perceived by family owners as inevitable (see Wiseman & Bromiley,
1996). In other words, as the probability of failure looms larger, the threat to the viability of the
firm (as well as SEW) may buffer against the psychological impact of potential further losses
resulting from change and risk-taking actions. Under pressure, individuals within groups may

FAMILY OWNERS AND RISK 29
tend to blame others, and trust breaks down (Gómez-Mejía, Welbourne & Wiseman, 2000;
Schaubroeck, Lam & Peng, 2011). Stress can also accentuate misunderstandings and conflicts,
leading to more unconventional actions that thus deviate from what is typically accepted or
expected (Driskell, Salas & Driskell, 2018). This means that under negative performance
conditions, the collective mindset of owners in a SEW-intensive family firm may shift from an
entity to a more incremental implicit orientation.
Conversely, family owners with an incremental-based implicit theory orientation, driven
by organizational features associated with lower SEW intensity and a stronger focus on
preserving financial wealth, may become more cautious and soften their risk-seeking behavior as
performance hazard increases, threatening the firm’s financial viability—a key concern for them
(Sundaramurthy & Kreiner, 2008). That is, besides SEW, a salient form of firm-specific wealth
for these family owners is financial in nature. As threats to their performance increase, they are
likely to focus their attention on mitigating financial losses because the potential financial
benefits of risk taking are likely to be lower than the potential returns, whose prospects are dim.
Reducing risk may provide these family owners the chance to mitigate anticipated losses under
negative financial prospects (Gómez-Mejía et al., 2023). In the context of underperformance, an
incremental orientation may be viewed as ineffective and held responsible by the family for
unfavorable outcomes, endangering financial stability. We thus predict that while these family
owners are generally more inclined to take risks because their incremental implicit theory
orientation suggests that risks will, on average, be rewarded, they may shift to a more
conservative, calculated risk-taking approach as the probability of failure and magnitude of
potential losses rise, leaning towards an entity orientation to avoid a financial meltdown. In sum,

FAMILY OWNERS AND RISK 30
we theorize that a firm’s performance hazard can shift family owners’ implicit orientation from
entity-based to incremental and vice versa, thus impacting their risk-taking behavior. Formally:
Proposition 6: Under performance hazard, family owners with an entity (incremental)-
based theory orientation derived from organizational features associated with higher
(lower) SEW intensity are more likely to shift their implicit theory to a more incremental
(entity) orientation, thereby leading to higher (lower) risk taking.
DISCUSSION
Family firms have traditionally been portrayed as risk-averse entities (La Porta et al.,
1999; Morck & Yeung, 2004), with the concentration of family wealth in a single firm
motivating the avoidance of potential hazards that could jeopardize the family's economic
welfare. However, Gómez-Mejía et al. (2007) offered a key insight into this relationship by
suggesting that this traditional agency view considers the financial returns that the family garners
from the business but neglects the SEW that the family gains from the firm. While empirical
research reveals much variance across family firms in terms of risk taking (Mismetti et al., 2024;
Zellweger, 2017), the theoretical rationale for these observed inter-firm differences is generally
lacking. Our theorizing addresses this gap by offering a novel theoretical framework that
integrates SEW theory with implicit theories to explain within family firm risk-taking behaviors.
We argue that the higher the SEW intensity the more likely family owners will adopt an entity
orientation. We propose four key family firm features—family versus business identity salience,
family founder imprinting, generational stage, and favorable path dependence—that exhibit
unique SEW intensity patterns, shaping the formation of family owners’ implicit theory
orientations regarding their firms’ malleability. The implicit orientations of family owners, in
turn, serve as interpretive cognitive filters that influence risk-taking behaviors. Furthermore, we
argue that performance hazard impacts the relationship between family owners’ implicit theories
and risk taking.

FAMILY OWNERS AND RISK 31
Our theoretical model not only explains variations in risk taking among family firms but
also considers both the structural aspects of the firm and the psychological orientations of its
owners. By introducing implicit theories as a mediating mechanism between family firm
characteristics and risk-taking behaviors, we offer a more nuanced understanding of the
cognitive processes underlying strategic decisions in family firms and the conditions under
which family owners are willing (or not) to risk “rocking the boat.”
Theoretical Contributions
Our paper offers important theoretical contributions to the broad literature on firm risk-
taking, with a particular focus on family firms—the most common organizational form globally
(Villalonga & Amit, 2020). First, we develop a novel blended SEW-implicit theory framework to
propose that family owners hold diverse beliefs about their organizational malleability depending
on organizational features associated with varying degrees of SEW intensity. This approach
provides a new lens through which to examine and explain risk-taking behaviors among family
firms (Gómez-Mejía et al., 2023). Our integration of SEW theory with implicit theories offers a
more nuanced understanding of family firm decision-making. This integrated perspective
enriches existing SEW research by introducing a cognitive dimension that helps explain
variations in how family owners pursue their socioemotional goals, which opens up new avenues
for future research.
Second, we contribute to the research on family firm risk-taking by offering insights into
the factors that can explain variations in family owners’ willingness to take risks (Chirico et al.,
in press; Hoskisson et al., 2017; Mismetti et al., 2024). Family firm literature still presents a
fragmented understanding of how family firms differently approach risk-taking (Hoskisson et al.,
2017; Mismetti et al., 2024). While some studies suggest that family firms exhibit greater risk

FAMILY OWNERS AND RISK 32
aversion (e.g., Gómez-Mejía et al., 2018), other studies indicate a tendency towards risk
tolerance characterized by increased patience in investments (e.g., Chirico, Gómez-Mejia,
Hellerstedt, Withers & Nordqvist, 2020). By introducing owners’ implicit theories as an
unexplored element influencing risk-taking, we deepen our understanding of why some family
firms engage in greater risk than others. In particular, implicit theory allows us to peer inside the
black box of family firm decision making to suggest that family firm owners may develop
implicit orientations that guide and even restrict their worldview. We propose that certain family
firm features, associated with varying levels of SEW intensity, foster specific implicit
orientations. These orientations, together with a firm’s performance hazard, in turn, determine
the level of risk that family owners as a group are willing to take. Our focus on implicit theories,
in conjunction with SEW theory, offers a unique perspective that differs from other theories of
psychological attributes or firm leadership that seek to explain: (1) the influence of psychological
attributes on firm decision making (e.g., theories of individual personality or regulatory focus) or
(2) agent risk preferences and firm risk taking (e.g., agency theory, with its emphasis on
incentives, or upper echelon theory, which focuses on individual characteristics within
contextual constraints). Implicit theories also differ from organizational theories that place less
emphasis on the collective attributes of a group of influential decision-makers (e.g., institutional
theory, the behavioral theory of the firm, or the structure-conduct-performance model). Our
theorizing extends beyond the typical comparison of family versus non-family firms concerning
the role of SEW in either supporting or hindering venturing risk (Andersen et al., 2007; Barberis
et al., 2015; Fama & French, 2016; Gómez-Mejía et al., 2023).
In particular, the study of family firm risk taking has leveraged the mixed gambles
iteration of BAM, where decision-makers are argued to make risk choices shaped by the ratio of

FAMILY OWNERS AND RISK 33
potential losses to prospective gains in the decision making calculus (Bromiley, Rau & St. John,
2012; Martin, Gómez-Mejía & Wiseman, 2013). Higher prospective gains relative to losses in a
decision-making context make risk taking more likely (Tversky & Kahneman, 1992). Family
business scholars have argued that, under normal circumstances, family owners are risk-averse to
protect their current SEW, as they are suggested to be strongly influenced by the potential SEW
loss. However, when faced with performance hazards, family owners are argued to take more
risks to hopefully improve future financial wealth, or turn around an unsatisfactory situation
(Gómez-Mejía et al., 2014; Gómez-Mejía et al., 2018). That is, “family firms are willing to trade
risk reduction for SEW conservation when performance hazards are higher” (Gómez-Mejía et al.,
2010: 232). In contrast, our theory elucidates the conditions under which a firm’s performance
hazard may also cause family owners to become less, rather than more, likely to accept riskier
choices. By incorporating implicit theories with the SEW logic, we detail how the owners’ initial
implicit orientation matters. If family owners hold an entity-based orientation, shaped by
organizational characteristics associated with higher SEW intensity, then performance hazards
will likely push them towards an incremental orientation, leading to increased risk-taking. This
aligns with the mixed gamble approach to predicting how potential SEW losses affect risk
taking. However, if family owners have an incremental-based orientation linked to lower SEW
intensity, they are more likely to shift their orientation towards a more entity-based approach.
This nuances the expectation from the BAM and mixed gamble literature that family owners
pursue higher risks under performance constraints (Hoskisson et al., 2017). In doing so, we
extend the family firm literature, leveraging BAM and mixed gambles to predict the impact of
SEW endowment upon risk taking when under financial duress.

FAMILY OWNERS AND RISK 34
Third, our research expands the emerging literature on collective-level implicit theories
by examining their role in family firm ownership groups. We theorize how these shared
cognitive frameworks can significantly influence strategic decision-making processes,
particularly in the context of collective attitudes to risk, as manifested in firm risk-taking
behaviors. Our application of implicit theories to family firms provides novel insights into how
collective beliefs develop and operate within organizations characterized by complex family
dynamics and long-term orientations. Our work responds to Murphy and Reeves’ (2019) call for
research on the interplay between organizational characteristics and the expression of collective
mindsets. Specifically, we theorize how distinctive family firm features and their corresponding
SEW intensity can uniquely shape the formation and manifestation of collective implicit
theories. By doing so, our paper not only enhances our understanding of family firm behavior but
also contributes more broadly to organizational theory by illuminating how specific
organizational attributes can cultivate and reinforce particular collective mindsets.
Practical Implications and Future Research
While we have focused on the implications of the optics used by family owners in
perceiving and interpreting opportunities and threats (i.e., incremental versus entity orientations),
implicit theory also provides a framework for exploring why some firms may derive higher
returns from risk taking than others. We have noted above that those with an outlook consistent
with entity theory are reluctant to acknowledge changes in social reality, prefer structure over
flexibility, and are more likely to be negatively affected by a perception of vulnerability (Dweck
& Leggett, 1988). This suggests that decision makers with this view are likely to suffer from
inertia and are less inclined to make investments with potentially high returns but with a high
probability of failure. This may reduce risk and enhance cash flow in the short term, but it also

FAMILY OWNERS AND RISK 35
may create a ceiling on longer-term firm performance, thus providing a more nuanced
explanation for family firm dissolution (Chirico et al., 2020).
Risky investments, such as product innovation or international joint ventures, have the
potential to provide new sources of growth that could lead to future performance gains or ensure
long-term survival if core markets experience decline (Delbufalo, Poggesi & Borra, 2016).
Likewise, R&D and capital investment are considered important drivers of future performance,
yet they have been associated with increases in firm risk as well as the potential for future
performance gains (Martin et al., 2013). We have noted above that those owners with an
incremental perspective are more prone to accepting such risks, which in turn suggests that their
potential for achieving superior firm financial performance may increase. Yet, by accepting these
risks, they also increase the variance of their prospective outcomes, as the possibility of failed
risk-taking increases accordingly. Alternatively, holding an incremental orientation may also
correspond to a willingness to adapt in the face of environmental change, thus enhancing the
probability of firm survival. In sum, we offer a cognitive explanation and important managerial
insights for why some family owners embrace the risks associated with change more than others
leading to differences in intergenerational transition success.
Understanding how family firms approach risk-taking is critical, as their risk preferences
can have far-reaching implications for their strategic decisions in areas such as diversification,
innovation, internationalization, and mergers and acquisitions. These decisions can either
enhance the firm’s competitive position or expose it to vulnerabilities, influencing both the
firm’s future success and its contribution to the broader economy. Importantly, family owners’
risk-taking attitudes, as well as their entity/incremental orientations and SEW endowments, may
vary depending on the potential payoffs (prospective losses and gains) associated with the

FAMILY OWNERS AND RISK 36
specific risk-taking action being considered (e.g., green innovation versus general innovation,
mergers and acquisitions versus greenfield, or product extensions versus product development).
We encourage future scholars to direct more research efforts towards exploring these distinctions
in risk-taking types.
It is also important to note that research suggests implicit theories themselves are
malleable (Burnette, O'Boyle, VanEpps, Pollack & Finkel, 2013; Yeager & Dweck, 2012). We
have noted that performance conditions may induce family owners to move from an entity to an
incremental orientation or vice versa. This malleability opens other interesting possibilities for
family firms and presents new research opportunities. If family owners can become aware of
their implicit theory orientations and understand how these theories influence their risk
perceptions and decision-making, they may be able to intentionally shift their orientations when
necessary. For instance, a family firm with a strong entity orientation facing significant market
changes might benefit from cultivating a more incremental perspective to enhance adaptability.
Conversely, a firm with an overly incremental orientation might benefit from adopting some
entity-like stability in certain core areas. This potential for change in implicit theories suggests
that family firms are not permanently bound by their current risk-taking tendencies. Instead, they
can potentially adjust their approach to risk and change over time, which could be crucial for
long-term survival and success across generations.
Our insights regarding the roles of ownership structure and risk have other important
theoretical implications for future research. While avoiding risks, family owners are also argued
to pursue the goal of nurturing their business across generations, requiring long-term success or,
at a minimum, continued survival (Berrone et al., 2012; King, Meglio, Gomez-Mejia, Bauer &
De Massis, 2022). These dual family firm features—long-term orientation and risk aversion—

FAMILY OWNERS AND RISK 37
create a challenge that is difficult to overcome: that of engaging in a level of risk taking that
enables the renewal necessary to sustain long-term success. Our paper offers a richer
understanding of the antecedents and contingencies under which some family owners can take
the necessary risks to avoid the inertia, complacency, and performance declines that may
potentially threaten this ownership form (Miller, Le Breton-Miller & Scholnick, 2008).
Given our paper’s theoretical framework, future research may look to reevaluate the role
that risk through an entity or incremental orientation plays within family firms. Our theorizing
offers important insights to explain both risk-averse and risk-tolerant preferences, since these
may vary according to the implicit theory mechanisms within a focal family firm. For example,
while extant research attempts to explain risk taking by family firms broadly, future work may
consider how a family’s influence, in terms of both ownership and management, may impact
their risk preferences. Our theoretical framework may also help explain differences in family
owners’ abilities to avoid threats to SEW. Future research may consider how different
dimensions of family influence (e.g., multifamily ownership; Chirico et al, 2022; 2025), in part,
may determine the family’s ability to preserve SEW and the corresponding governance
configurations that may enable or limit the family’s ability to deflect such threats to SEW
(Gómez-Mejía & Herrero, 2022).
Additionally, our theory refines the darker portrayal of family control often found in the
existing literature. The logic behind that negative view of family control is that dominant family
owners and their managers impose an “expropriation tax” upon minority shareholders (Fan &
Wong, 2002; Shleifer & Vishny, 1997) while others argue that family owners are more prone to
suffer agency problems (Lubatkin, Ling & Schulze, 2007; Schulze et al., 2001). Beside the
opportunity costs of risk aversion for family firms (Anderson, Duran & Reeb, 2009), it has been

FAMILY OWNERS AND RISK 38
suggested that family owners take advantage of minority shareholders because the family is
likely to find ways to extract private benefits, such as the employment of family members
(Schulze et al., 2001), generous compensation (Gómez-Mejía, Larraza-Kintana & Makri, 2003),
and a failure to remove family members as they would non-family executives (Gómez-Mejía,
Nunez-Nickel & Gutierrez, 2001). Favoritism toward family members may result in non-family
employees withholding effort, which creates additional headwinds for family firm performance
(Lubatkin et al., 2007; Neckebrouck, Schulze & Zellweger, 2018). In addition, the preservation
of non-financial utilities may occur at the expense of financial wealth; for instance, family
owners may invest in costly projects that enhance the family’s image in the community (Berrone,
Cruz, Gómez-Mejía & Larraza-Kintana, 2010). In summarizing this negative view, Schulze and
colleagues (2001: 101) conclude that family owners are prone to having “an agency problem
with themselves.” We offer additional qualification to this negative framing of family ownership
by suggesting the conditions under which family firms’ risk taking or risk adverse
predispositions prevail. Future research may look to explore both internal and external
contingency factors that may enhance the broader understanding of risk and potential firm
outcomes in the family firm context .
We also focus on four organizational features of family firms that influence SEW
intensity, thus inducing an entity (when SEW is high) or an incremental (when SEW is low)
implicit orientation. Future empirical research may explore other organizational aspects that may
be related to SEW and thus to the adoption of particular implicit theories, and subsequently to
risk taking among family firms. These may include, for instance, firm size, incentive systems,
managerial involvement, publicly traded versus private firms, ownership concentration, national
culture, and environmental risk, among others (Berrone et al., 2012; Gómez-Mejía, Mendoza-

FAMILY OWNERS AND RISK 39
Lopez, Cruz, Duran & Aguinis, 2024a; King et al., 2022; Tosi et al., 1999). In particular, we
recognize the critical role that social interactions, communication styles, and broader social
contexts play in shaping cognition, as emphasized in the literature from social psychology,
family science, and child psychology. Future research should explicitly recognize these broader
social influences as a foundational basis for cognition. We suggest that family business dynamics
may shape implicit theories and cognitive orientations more significantly at later life stages,
particularly for family members who take on active ownership roles as adults. Additionally,
family business influence is likely to be more pronounced for family members involved in
governance or leadership, while comparatively less so for those with minimal involvement.
Future research should empirically investigate how the timing and extent of family business
involvement shape cognitive orientations. This research could differentiate between family
members deeply involved in business governance versus those with more peripheral roles,
exploring the potential variations in SEW-driven cognitive orientations across these sub-groups.
Finally, future research could explore further the role of mixed gambles and the
importance of the initial starting point (entity versus incremental-based orientation) to examine
the relationship between implicit theories and risk taking in family firms. Starting with an
incremental orientation would tend to magnify the perceived upside of the gamble while
mitigating the perceived downside and thus lead to more risk-taking in family firms. On the other
hand, beginning with an entity orientation would tend to weaken the perceived upside of the
gamble while magnifying the perceived downside, reducing the attractiveness of risk-taking
(e.g., Sarasvathy, Simon & Lave, 1998). However, the related predictions will be reversed under
specific negative circumstances, such as performance hazards. We believe that more nuanced

FAMILY OWNERS AND RISK 40
connections between implicit theories and risk-taking can be developed from theories of decision
making such as cumulative prospect theory.
Conclusions
We offer a cognitive model of family firm risk preference heterogeneity. Specifically, our
model shows how various key factors lead to either an entity or an incremental implicit
orientation. Implicit orientations are then argued to influence risk preferences subject to the
firm’s performance hazard. Given the importance of risk to firm outcomes, recognizing
differences in family firm risk taking promises to open new theoretical avenues for exploring
family firm success, growth, and survival.

FAMILY OWNERS AND RISK 41
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Table 1
A Comparison of Entity-Based and Incremental-Based Implicit Theories
Aspect
Entity-Based Implicit Theories
Incremental-Based Implicit
Theories
Selected
References
Belief about
Firm
Malleability
Believe that the firm’s
characteristics, culture, and
capabilities are fixed and
unmalleable
Believe that the firm can evolve,
improve, and adapt over time
Dweck (1999),
Chiu et al.
(1997)
Response to
Challenges
Embrace a risk-averse and
conservative approach, avoiding
changes that might destabilize the
firm
Embrace challenges and see them
as opportunities for growth and
improvement
Dweck (2006),
Blackwell et al.
(2007)
Strategic
Focus
Focus on maintaining the status quo
and preserving existing resources
and capabilities
Focus on innovation, adaptation,
and exploring new opportunities
Blackwell et al.
(2007), Molden
& Dweck
(2006)
Perception
of Mistakes
View mistakes as indicative of
incompetence and a threat to
stability
View mistakes as a learning
opportunity and a path to
improvement
Dweck (1999),
Shih (2009)
Effort and
Investment
Perceive that effort is unlikely to
lead to significant changes or
improvements
Perceive effort and dedication can
lead to significant growth and
success
Blackwell et al.
(2007), Miele
& Molden
(2010)
Goal
Orientation
Seek to demonstrate and validate
the firm’s existing strengths
Seek to develop new capabilities
and improve existing ones
Dweck &
Leggett (1988),
Park & John
(2014)
Adaptation
to Market
Changes
Exhibit strategic rigidity, sticking to
familiar and proven strategies
despite changing market conditions
Foster a culture of strategic
flexibility, encouraging the firm to
pivot and adapt in response to
market changes
Dweck (2006),
Grant & Dweck
(2003)
Note: Adapted from Jain and Weiten (2020).

FAMILY OWNERS AND RISK 50
Figure 1
A Blended Socioemotional Wealth-Implicit Theory Framework