Emotional wealth in family firms influences their decision to implement big data

The Department of Financial Economics I at the University of the Basque Country (UPV/EHU) has analysed why family firms in general are reluctant to use big data technology. The UPV/EHU has concluded that family firms’ decisions regarding whether or not to implement big data technology depends on their reference point in decision-making: when family control and identity and emotional attachment are more salient, firms are less willing to implement big data; however, when social ties and the renewal of family bonds through dynastic succession are more prominent, they are more likely to adopt this technology.

Unai Arzubiaga. Photo: Mitxi. UPV/EHU

Despite the important contribution made by big data, or the management of extensive amounts of data, to economic growth and social development throughout the world, it continues to be an issue that is largely ignored by the majority of family firms. ‘This lack of interest in adopting big data technology is concerning, because family firms are aware of its growing importance for sustaining growth and ensuring long-term survival in the digital era,’ explains Unai Arzubiaga, a researcher at the Department of Financial Economics I. Indeed, 44% of family firms believe that data storage and analysis constitute a key part of their digitalisation process and pose a critical technological challenge.

‘The majority of companies in the Basque Country, Europe and the world are family firms. They account for between 60% and 80% of all businesses. Moreover, they are all different in terms of behaviour,’ adds Arzubiaga. ‘In most cases, the family’s wealth is tied up in the firm, meaning that a wrong decision will not only influence the business, but the family’s entire livelihood also. All this has a major impact on the decisions made in this type of business, and most tend to adopt a fairly conservative outlook’. In comparison with other nonfamily businesses, whose decisions are driven by purely economic factors, family firms ascribe to a decision-making process in which nonfinancial aspirations take precedence over economic prerogatives.

Five aspects

In collaboration with other international researchers, Dr Unai Arzubiaga, an expert in family firms, has analysed, from the perspective of socioemotional wealth, the factors on which family firms base their decisions regarding whether or not to adopt big data technology. As Arzubiaga explains, ‘socioemotional wealth is comprised by aspects which go beyond economic rationales, such as family control, family identity, binding social ties, emotional attachment and the renewal of family bonds’.

The research group has concluded that family firms assess the possibility of implementing big data technology in different ways, depending on the socioemotional aspect that is predominant in the business. In other words, ‘we have concluded that this decision is influenced by the socioemotional aspect that is taken as a reference for decision-making. When family control and influence, family identity and emotional attachment are more salient, family firms’ inclination to protect their socioemotional wealth makes them less willing to implement big data. However, they are more prone to adopting big data technology when binding social ties and the renewal of family bonds through dynastic succession are more prominent,’ he adds.

It is therefore clear that the emotional needs of a family firm shape the decision to implement big data. ‘Bearing in mind the increasing importance of digitalisation for the long-term survival of family businesses, we hope this article will encourage future research and serve as a reference point for these firms as they consider the aspects on which they base their decisions,’ comments Arzubiaga. The researcher also suggests that the study may be useful to public institutions: ‘Family firms make up between 70% and 80% of the economy, and if they are having trouble adapting to new technologies, then public institutions need to know this in order to offer them training, subsidies and other similar resources’.

Source: University of the Basque Country

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