Affiliate directors and perceived risk bearing in publicly traded, family-controlled firms: The case of diversification

Carla D. Jones, Marianna Makri, Luis Gomez-Mejia

Research output: Contribution to journalArticle

166 Scopus citations

Abstract

The present study examines the influence exerted by affiliate directors in the diversification decisions of family-controlled, publicly traded firms. Using a relational view based on the development of social capital, we argue that affiliate directors play a different role in boards of family firms vis-à-vis nonfamily firms. Specifically, we develop a set of hypotheses proposing that affiliate directors stimulate family firms to pursue diversification strategies by sharing their knowledge and experience with family executives, and hence reducing the perceived risk that may be associated with growth strategies. Affiliates can play this advisory role without reducing the control of family owners, and this facilitates the firm's willingness to adopt growth-oriented strategies. Namely, affiliates who are business experts or support specialists would tend to encourage diversification. These effects are supported empirically.

Original languageEnglish (US)
Pages (from-to)1007-1026
Number of pages20
JournalEntrepreneurship: Theory and Practice
Volume32
Issue number6 SPEC. ISS.
DOIs
StatePublished - Nov 1 2008

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics

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