James J. Chrisman is a Professor in the Department of Management & Information Systems and Director of the Center of Family Enterprise Research, Mississippi State University, Mississippi State, MS 39762-9581. He also is a Senior Research Fellow at the Centre for Entrepreneurship and Family Enterprise, University of Alberta.
Nonfamily Managers, Family Firms, and the Winner's Curse: The Influence of Noneconomic Goals and Bounded Rationality
Article first published online: 22 MAR 2013
© 2013 Baylor University
Entrepreneurship Theory and Practice
Volume 38, Issue 5, pages 1103–1127, September 2014
How to Cite
Chrisman, J. J., Memili, E. and Misra, K. (2014), Nonfamily Managers, Family Firms, and the Winner's Curse: The Influence of Noneconomic Goals and Bounded Rationality. Entrepreneurship Theory and Practice, 38: 1103–1127. doi: 10.1111/etap.12014
This work was supported by a grant from the Family Owned Business Institute. The authors thank Jess Chua, Hanqing Fang, Daniel Holt, Franz Kellermanns, Allison Pearson, Chris Penney, ETP Editor Don Neubaum, and two anonymous reviewers for their comments on earlier drafts of this article.
- Issue published online: 3 SEP 2014
- Article first published online: 22 MAR 2013
- Family Owned Business Institute
We explain why family-centered noneconomic goals and bounded rationality decrease the willingness and ability of small- and medium-sized family firms to hire and provide competitive compensation to nonfamily managers even in a labor market composed of stewards rather than agents. Family-centered noneconomic goals attenuate the ability to attract high-quality, nonfamily managers by promoting inferior total compensation packages, fewer opportunities for advancement, idiosyncratic strategies, and higher performance expectations. Furthermore, bounded rationality limits nonfamily managers' ability to meet performance expectations when hired. The result is the “winner's curse,” where neither the economic nor noneconomic goals of family owners are fully achieved.