Abstract
This dissertation investigates the first strategic response to performance decline (i.e., the retrenchment stage in the turnaround process) in family-owned businesses (FOBs). Specifically, I study how the interplay between financial and non-financial objectives in FOBs affects the strategic preferences of family-owners when circumstances put the wealth (financial and non-financial) of the family at stake. In this three-essay dissertation, I employ the behavioral agency model (BAM) or the socioemotional wealth (SEW) preservation perspective to explain and predict the effect of SEW on an FOB's retrenchment strategies. While the SEW construct was used by previous studies, its direct measurement and the methodologies to capture its multi-dimensional nature became available only through recent advances in the literature. Thus, this dissertation builds on these latest findings to directly investigate whether or not SEW considerations affect a family-firm's response to performance decline. Additionally, this study is the first to investigate the differential effect of SEW dimensions on the response of an FOB to performance decline. The hypotheses were tested on a panel of US publicly-traded family-firms in need of turnaround. The data analysis was performed though the Feasible Generalized Least Square (FGLS) on 416 firm-observations. The results suggest that the desire to preserve SEW significantly affects an FOB's decisions concerning its response to performance decline. Additionally, there is evidence, which shows that each SEW dimension affects the family-firm's response to the decline in financial performance in a different manner. By integrating the BAM with insights from other theoretical lenses, this dissertation provides significant contributions and meaningful implications for theory and practice.