Cognitive Antecedents of Family Business Bias in Investment Decisions: A Commentary on “Risky Decisions and the Family Firm Bias: An Experimental Study based on Prospect Theory”
Abstract
Lude and Prügl explored “family business bias,” a cognitive tendency where the family nature of a firm can often reduce investors’ perceived risk in investments. As a result, investors would display lower risk-avoidance in the gain domain and reinforced risk-seeking in the loss domain. We expanded the authors’ work by introducing four cognitive factors (anchoring, representativeness, stereotype heuristic, and information availability) that can explain the underlying mechanisms behind the prevalence of “family business bias” and other cognitive misperceptions surrounding family businesses when it comes to investment decisions.
Get full access to this article
View all access and purchase options for this article.
References
Bowen M. (1993) Family therapy in clinical practice, Lanham, MD: Jason Aronson.
Chua J. H., Chrisman J. J., Steier L. P., Rau S. B. (2012) Sources of heterogeneity in family firms: An introduction. Entrepreneurship Theory and Practice 36(6): 1103–1113.
Duran P., Kammerlander N., Van Essen M., Zellweger T. (2016) Doing more with less: Innovation input and output in family firms. Academy of Management Journal 59(4): 1224–1264.
Gigerenzer G., Gaissmaier W. (2011) Heuristic decision making. Annual Review of Psychology 62: 451–482.
Hammond J. S., Keeney R. L., Raiffa H. (1998) The hidden traps in decision making. Harvard Business Review 76(5): 47–58.
Hauswald H., Hack A. (2013) Impact of family control/influence on stakeholders’ perceptions of benevolence. Family Business Review 26(4): 356–373.
Iyer G. R. (1999) The impact of religion and reputation in the organization of Indian merchant communities. Journal of Business & Industrial Marketing 14(2): 102–121.
Kahneman D. (2003) Maps of bounded rationality: Psychology for behavioral economics. The American Economic Review 93(5): 1449–1475.
Kahneman D., Tversky A. (1972) Subjective probability: A judgment of representativeness. Cognitive Psychology 3(3): 430–454.
Kahneman D., Tversky A. (1979) Prospect theory: An analysis of decision under risk. Econometrica: Journal of the Econometric Society 47(2): 263–291.
Li H. (2010) Reputation, accounting information and debt contracts in Chinese family firms. China Journal of Accounting Research 3: 95–129.
Lude, M., & Prügl, R. (2019). Risky decisions and the family firm bias: An experimental study based on prospect theory. Entrepreneurship Theory and Practice43(2), 386–408.
Morck R., Yeung B. (2004) Family control and the rent-seeking society. Entrepreneurship Theory and Practice 28(4): 391–409.
Nadeau R., Cloutier E., Guay J. H. (1993) New evidence about the existence of a bandwagon effect in the opinion formation process. International Political Science Review 14(2): 203–213.
Sageder M., Mitter C., Feldbauer-Durstmüller B. (2016) Image and reputation of family firms: A systematic literature review of the state of research. Review of Managerial Science 12(1): 335–377.
Siau K., Wand Y., Benbasat I. (1997) The relative importance of structural constraints and surface semantics in information modeling. Information Systems 22(2&3): 155–170.
Simon H. A. (1990) Invariants of human behavior. Annual Review of Psychology 41(1): 1–20.
Steinfeld J. (2015) Little emperors and material girls: Youth and sex in Modern China, London: IB Tauris.
Tversky A., Kahneman D. (1974) Judgment under uncertainty: Heuristics and biases. Science 185: 1124–1131.
Zellweger T., Kammerlander N. (2015) Family, wealth, and governance: An agency account. Entrepreneurship Theory and Practice 39(6): 1281–1303.
Biographies
Hanqing “Chevy” Fang is an Assistant Professor in the Department of Business and Information Technology (BIT) at the Missouri University of Science and technology. His work has been published in leading academic journals such as Entrepreneurship Theory & Practice, Global Strategy Journal, Journal of Product Innovation Management, Asia Pacific Journal of Management, Small Business Economics, Journal of Small Business Management, Journal of Sustainable Tourism, among others. He is a member of Editorial Review Board of Entrepreneurship Theory and Practice and Journal of Family Business Strategy.
Keng L. Siau is Chair of the Department of Business and Information Technology (BIT) at the Missouri University of Science and Technology. Professor Siau is Editor-in-Chief of the Journal of Database Management and served as the North America Regional Editor of the Requirements Engineering Journal from 2010-2016. He also served as the Vice President of Education for the Association for Information Systems and served as the AIS representative on the Board of Partnership for Advancing Computing Education (PACE) from July 2011-June 2014 (i.e., 3-year term). Professor Siau has more than 250 academic publications. According to Google Scholar, he has more than 10,000 citation counts. His h-index and i10-index, according to Google Scholar, are 51 and 125 respectively. Professor Siau is consistently ranked as one of the top information systems researchers in the world based on h-index and productivity rate. Professor Siau has received numerous teaching, research, service, and leadership awards including the prestigious International Federation for Information Processing (IFIP) Outstanding Service Award in 2006, IBM Faculty Awards in 2006 and 2008, and IBM Faculty Innovation Award in 2010.
Esra Memili, PhD, is an Associate Professor of Entrepreneurship and Margaret Van Hoy Hill Dean's Notable Scholar at the Bryan School of Business and Economics at the University of North Carolina-Greensboro. She is the author of accepted and/or published manuscripts that have appeared in the entrepreneurship and family business journals such as Entrepreneurship Theory and Practice, Global Strategy Journal, Long Range Planning, Family Business Review, Journal of Small Business Management, Journal of Family Business Strategy, and Small Business Economics. She is an Associate Editor at Journal of Family Business Strategy and a member of the Editorial Review Board of Journal of Management Studies, Family Business Review, Journal of Leadership and Organizational Studies, Journal of Tourism and Hospitality, International Journal of Financial Studies, and International Journal of Management and Enterprise Development.
Junsheng Dou is an Associate Professor of Family Business and Entrepreneurship in the School of Management, Zhejiang University, China, where he serves as the Associate Director of the Institute for Entrepreneurs. His work has been published in leading academic journals in China and appears in several international academic journals such as Family Business Review, Business and Society, Asia Pacific Journal of Management, Journal of Business Research, Journal of Business Ethics, among other outlets.
Cite article
Cite article
Cite article
OR
Download to reference manager
If you have citation software installed, you can download article citation data to the citation manager of your choice
Information, rights and permissions
Information
Published In
Article first published online: September 3, 2018
Issue published: March 2019
Keywords
Authors
Metrics and citations
Metrics
Journals metrics
This article was published in Entrepreneurship Theory and Practice.
VIEW ALL JOURNAL METRICSArticle usage*
Total views and downloads: 1637
*Article usage tracking started in December 2016
Altmetric
See the impact this article is making through the number of times it’s been read, and the Altmetric Score.
Learn more about the Altmetric Scores
Articles citing this one
Receive email alerts when this article is cited
Web of Science: 16 view articles Opens in new tab
Crossref: 15
- Disentangling the Intention to Use Trade Credit in Family SMEs: The In...
- Diversification Decisions of Family SMEs under Uncertainty: Goals as a...
- Psychological Ownership in Heterogeneous Family Firms: A Promising Pat...
- The Heuristics and Biases of Top Managers: Past, Present, and Future
- Behavioural Phenomena of Family Firm Control Diversity and R&D Investm...
- Family business research in Asia: review and future directions
- Decisions when interacting in customer-supplier relationships
- Behavioural Psychology of Unique Family Firms Toward R&D Investment in...
- Socioemotional Wealth and Entrepreneurial Orientation in Different Fam...
- Owner type, pyramidal structure and R&D Investment in China’s family f...
- Do Family Firms Have Higher or Lower Deal Valuations? A Contextual Ana...
- Experimental studies in family business research
- Is organizational slack honey or poison? Experimental research based o...
- Does Working Capital Affect Family Firms’ Decision-Making in Laos? Evi...
- Doing the unexpected – Why German family firms differ from non-family ...
Figures and tables
Figures & Media
Tables
View Options
Get access
Access options
If you have access to journal content via a personal subscription, university, library, employer or society, select from the options below:
loading institutional access options
USASBE members can access this journal content using society membership credentials.
USASBE members can access this journal content using society membership credentials.
Alternatively, view purchase options below:
Purchase 24 hour online access to view and download content.
Access journal content via a DeepDyve subscription or find out more about this option.
