When Do Second-Generation Returnees Affect Family Firms’ Entrepreneurial Risk-Taking? The Moderating Role of Managerial Discretion

ABSTRACT

We posit that the dual identities of second-generation returnees present a complex situation regarding their influence on family firms’ entrepreneurial risk-taking (ERT). On one hand, their status as returnees may have a positive effect on firms’ ERT. On the other hand, their potential successor role may limit their ability to exert influence on ERT due to constraints imposed by the first generation, the firm and the home environment. To unravel the puzzling relationship between second-generation returnees and a family firm’s ERT, we examine conditions under which second-generation returnees promote or inhibit a firm’s ERT. In order to frame these conditions, we draw upon the upper echelon theory and the concept of managerial discretion. Our study of 270 family firms in China reveals that second-generation returnees holding higher managerial positions, operating in high-growing markets, or in institutionally underdeveloped regions are empowered to have a stronger positive impact on a family firm’s ERT. This research contributes to our knowledge of generational involvement, returnee executives, and the upper echelon theory.

KEYWORDS:

• Family firms
• entrepreneurial risk-taking
• managerial discretion
• second-generation returnees
• generational involvement

JEL:

• L21
• L26
• M12

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Authors’ Contributions

Ying Fu: Conceptualization, Data curation, Writing – original draft & editing, Chien-Chiang Lee: Writing – original draft, Writing – review & editing, Weiqi Dai: Writing – original draft; Emma Su: Revision of the manuscript and proofreading.

Notes

1. To validate the direct effect results, we also perform several other analyses. First, we categorize the sample into high-tech and non-high-tech firms. Second, we divide the sample into big and small firms based on the median size of the firm. Third, to reexamine the findings, we also employ a micro-econometric method called propensity score matching (PSM). Across all these analyses, the results remain consistent, indicating that the direct effect of second-generation returnees on a firm’s entrepreneurial risk-taking is not statistically significant.

Additional information

Funding

This work was supported by the National Social Science Foundation of China [22CGL049], and the National Natural Science Foundation of China [72072159, 71962019], and the Jiangxi University Humanities and Social Sciences Research Project [GL20222]. We extend thanks to the questionnaire collection team led by Professors Ling Chen and Junsheng Dou of Zhejiang University for their outstanding work