Does the Bargaining Power of Vertical Parties Improve or Worsen the Effect of Family Influence on Long-Term Performance?: A Socioemotional Wealth View

Introduction

In today's complex, rapidly changing and fiercely competitive environment, long-term performance has become a critical indicator of firm continuity and survival (Diéguez-Soto, Manzaneque, & Rojo-Ramírez, 2016b; Martínez-Alonso, Martínez-Romero, & Rojo-Ramírez, 2019). This is why, there is a vast previous literature focused on the influence of family influence on firm performance (Anderson & Reeb, 2003; O’Boyle, Pollack, & Rutherford, 2012; Villalonga & Amit, 2006, among others). However, the empirical findings obtained up to now regarding the interplay between family influence and firm performance have not been conclusive at all (e.g., Bertrand & Schoar, 2006; Gómez-Mejía, Cruz, Berrone, & De Castro, 2011), especially for private companies (Martínez-Romero, Martínez-Alonso, & Casado-Belmonte, 2020a; Sciascia & Mazzola, 2008). Consequently, the question of how and why family influence impacts on privately held firm performance is still largely unresolved and additional investigation is required (Sharma & Carney, 2012), providing a research avenue for contingent factors that might enlighten the former interplay (Chrisman, Chua, Pearson, & Barnett, 2012; Yeniaras, Sener, & Unver, 2017).

A possible contingent factor in the family influence-performance relationship might be the bargaining power of vertical parties (Porter, 1980). In this regard, bargaining power is usually defined as a function of the required costs to substitute a stakeholder (Porter, 1980). Thus, supplier (SBP) and customer (CBP) bargaining power may be relevant referent marks for family managers, as the particular aims and discretion of the latter might be significantly affected by the level of the former power (Kotlar, De Massis, Fang, & Frattini, 2014a; Urbinati, Franzo, De Massis, & Frattini, 2017). However, to the best of our knowledge, no studies have empirically examined the moderating role that SBP and CBP exert on the family influence–firm performance relationship.

Drawing on the socioemotional wealth (hereafter SEW) approach (Berrone, Cruz, & Gómez-Mejía, 2012; Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007; Martínez-Romero & Rojo-Ramírez, 2016), we argue that, as family influenced firms pursue not only economic but also non-economic goals (Martin & Gómez-Mejía, 2016; Martínez-Alonso, Martínez-Romero, & Rojo-Ramírez, 2018), they will exert a negative effect on firm performance. That is, as family influenced firms tend to prioritize the fulfilment of affective needs over the achievement of purely financial goals (Martínez-Romero, 2018; Martínez-Romero & Rojo-Ramírez, 2017), they will detrimentally affect firm performance. Additionally, we argue that the bargaining power of vertical parties might be considered as a threat for the SEW endowment of family influenced firms, which may perceive that vertical parties might compromise their family wealth (De Massis, Kotlar, Mazzola, Minola, & Sciascia, 2018; Kotlar, Fang, De Massis, & Frattini, 2014b) and their survival in the long-term (Kotlar, De Massis, Frattini, & Kammerlander, 2020; Kotter, 1979), conditioning thus, their performance outcomes.

Therefore, and based on the aforementioned arguments, we intend to answer two questions in the present chapter. First, we revisit the question of how and why family influence impacts on firm performance in a context of private firms. Second, we examine when and to what extent SBP and CBP affect the decision-making processes in family influenced firms and drive changes in firm performance. To that end, we address the moderating influence of SBP and CBP in the family influence-firm performance relationship.