Abstract
This paper looks at the socioemotional wealth (SEW) priorities to reveal how family involvement in the firms affects their use of heritage as a marketing signal, thereby leading to a corporate heritage identity. Built considering the distinction between extended and restricted family’s SEW framework, we find a direct relationship between the presence of a family CEO and the use of heritage, that is moderated by the family involvement in the board and by the generational stage. Our empirical analysis employs a quantitative approach applied to a sample of medium- and large-sized firms examined over the period from 2000 to 2016.
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1 Introduction
Firms that choose to use heritage as a marketing signal are able to generate their corporate heritage identity. Heritage is not just history (the past), but an active use and consideration of history (the past and present) (Spielman et al., 2022). Further, heritage is considered as a legacy and a collective identity that persists and is preserved over time (Anheier & Isar, 2011; Macdonald, 2013). Consequently, we consider family firms as the appropriate context to reveal the antecedents and processes for the use of history to build the corporate heritage identity.
In this study, the use of heritage as a marketing signal is firmly rooted in the acknowledgment of managers’ custodial role in corporate identity, a concept previously highlighted by such scholarship as Balmer (1995) and Balmer and Greyser (2002, 2003). Later empirical research, including the works of He (2008) and He and Balmer (2007, 2013), underscores the criticality of management cognitions and self-understanding in the realm of corporate identity management and implementation.
Importantly, we distinctly emphasize this aspect within the context of family firms. In this setting, the cognitive aspects of managers can be heightened, either because of their familial connections or due to the necessity for an external manager to align with the family’s values and expectations. In both scenarios, the role of the manager as a custodian of corporate identity not only becomes inherent but also holds strategic significance in family firms. This nuance adds significant depth to our exploration, recognizing that the cognitive dimensions of managers are uniquely intertwined with the familial dynamics (Humphrey et al., 2021; Labaki & D’Allura, 2021).
Extending the existing marketing literature on corporate heritage to family firms, scholars have suggested that family firms are positioned in a truly exceptional situation to leverage family-based corporate brand identity to gain competitive advantages (Craig et al., 2008). First, the family needs to create and protect their “family brand name” to develop the social capital between the family and other firm stakeholders (Dyer, 2006). In fact, depending on the extent to which the family is able to make the firm after their personality, the family name can positively influence the perceptions of customers, suppliers, and the other stakeholders (Miller & Le Breton Miller, 2003). Furthermore, in family firms the firm’s past directly relates to the intimates of the individuals presently controlling the firm and, thus, it potentially credits relevance to the incoming generation that may manage it in the future. Finally, by adopting the socioemotional wealth perspective, the family use of heritage is considered a trait to preserve or increase the family firms’ socioemotional endowments coherently with four of the five SEW dimensions proposed by Berrone et al. (2012): a) identification of family members within the firm; b) presence of binding social ties; c) emotional attachment of family members; and d) renewal of family bonds to the firm through dynastic succession.
To our knowledge, quite surprisingly no published study has heretofore attempted to reconnect the SEW view to family firms’ corporate heritage use. To investigate this aspect, we take the SEW view shedding light on the impact of family priorities on the decision to use the heritage to build a corporate heritage identity, such as investing to enhance the family reputation with stakeholders or investing in the community to secure a profusion of willingness toward the family and its business (Cennamo et al., 2012). The involvement of the family members in the succession process has been recognized as a way to retain family control over the firm and speed up the firms’ development with the intention to increase the family wealth (Upton et al., 2001). Consequently, the presence of a family CEO and the presence of the family in the board significantly influence the firm succession process (Fitz-Koch & Nordqvist, 2017), and the use of heritage to build corporate heritage identity is a manifestation of this family presence. However, we are also aware that family involvement evolves over time and this condition may shift family SEW from the extended to the restricted version and vice versa (Miller & Le Breton Miller, 2014).
Based on these premises, this paper proposes the following research question: what is the link (if any) between family involvement in their firms’ governance and family firms’ use of heritage to build their corporate heritage identity? To detect this link, we refer to the firms’ decision-making process, and thereby to the CEO (Westphal & Zajac, 1995). The CEO reports to the board and, for this reason, we also consider the composition of the board in terms of family and non-family members. The evaluation of family Socioemotional Wealth (SEW) from the extended to the restricted version, and vice versa, entails the examination of the disparities between family and non-family CEOs, as well as the diverse composition of the board, including both family and non-family members. To the same goal, we also consider the firm generational stage, distinguishing between family firms in which the founder holds the CEO or chair position (1st generation family firms), and family firms in which the founder does not hold such role (2nd or later-generation family firms).
A panel data analysis conducted on a sample of 519 Italian family firms across the 2000–2016 timeframe yields findings consistent with the hypotheses advanced. Thus, the family CEO is more likely to build a corporate heritage identity, and this relationship is negatively moderated by the family involvement in the board and positively moderated by the second or later generation involved in the family firm.
The contribution of this paper is threefold. Firstly, it serves as one of the pioneering inquiries with a distinct focus advancing the corporate heritage literature by unveiling its pertinent connections to family involvement in firm governance. This groundwork holds particular significance for family firms with an extended SEW seeking to perpetuate their core values across generations while maintaining adaptability over time and flexibility in space (Magrelli et al., 2022; Sasaki et al., 2020). This exploration not only contributes to the academic understanding of corporate heritage in family firms (or how it works), but also offers some valuable insights for management practitioners, providing them with a more nuanced perspective on leveraging heritage within family firms for strategic and sustainable development (or how to build effective boards).
Second, we extend the application of SEW theory to uncover the antecedents of using heritage to build corporate heritage identity. We posit that the family involvement in the firm, defined by the presence of a family CEO and the presence of the family in the board, affects the decision to use the heritage based on the ensuing dimensions of social emotional wealth: identification of family members with the firm; presence of binding social ties; emotional attachment of family members; and renewal of family bonds to the firm via dynastic succession (Berrone et al., 2012). Further, we add to the literature by evaluating the moderating role of board composition by considering the presence of family or non-family members and the family generational stage (Riviezzo et al., 2016). Both aspects provide an extra layer of contribution, advancing SEW research to a nuanced understanding of its dynamic and fluctuating nature, delving into what SEW is, within whom it exists, and how it evolves over time (Gómez-Mejía et al., 2007; Le Breton-Miller & Miller, 2013).
Last but not least, we bring in a corporate heritage measure; i.e., the Corporate Heritage Index (CHI), drawing from two strands of research. The first originates from Urde et al. (2007), introducing the heritage quotient model related to the firm brand. The second stems from Burghausen et al. (2014a), who focused on the various manifestations and representations of different corporate heritage attributes that constitute a corporate heritage identity (p. 2311). The Corporate Heritage Index goes beyond examining the brand alone and considers it as one of the means through which a firm manifests its corporate heritage awareness. Furthermore, as we explain in detail in the section of the article dedicated to illustrate the methods used, the Corporate Heritage Index has been calculated on a 17-year basis, which makes it a measure of corporate heritage concerning a medium- and long-term business strategy. This index serves as the dependent variable in our empirical model.
2 Conceptual Framework
In the last decade, the concept of corporate heritage has attracted increasing attention of both management researchers and marketing scholars (Balmer et al., 2006; Foster et al., 2011; Hudson, 2011; Suddaby et al., 2010). According to Burghausen and Balmer (2014b; p. 394), corporate heritage concerns “all the traits and aspects of an organization that link its past, present, and future in a meaningful and relevant way”. It denotes the facets of some aspects of an organization’s past that are deemed by current internal and/or external stakeholders to be relevant for contemporary concerns and worth to be preserved for future generations.
Family firms, characterized by robust internal conditions and motives, establish and sustain a profound connection between their past, present, and future, treating corporate heritage as a strategic asset. Unlike non-family firms, family firms often manage their operations to preserve or enhance socioemotional endowments derived from their business legacy rather than purely economic or financial motives (Gómez-Mejía et al., 2011; Humphrey et al., 2021; Labaki & D’Allura, 2021). These socioemotional endowments encompass the identification of family members within the firm, binding social ties, emotional attachment, and the renewal of family bonds through dynastic succession (Berrone et al., 2012). Compared to non-family controlled firms, in such a view the family goal is not simply economic or financial, but is mainly related to family-centric motives (e.g., Beckhard & Dyer, 1983; Newbert & Craig, 2017). The major risk of pursuing such a goal is related to the preservation of the firm’s family control with the clear intent to circumvent profitable investments or initiatives if those would threaten such family control preservation (Miller & Le Breton-Miller, 2014).
The SEW perspective, which is an extension of behavioral agency theory (Wiseman & Gomez-Mejia, 1998), has been pivotal in understanding family firms’ behavior. As follows a developmental decade in the SEW perspective, scholars show to be divided on whether family SEW priorities actually turn positive or negative to family firm outcomes, such as financial performance (Tsao et al., 2021), long term strategic investment (Sun et al., 2019), and dividend payout (Miller et al., 2022). They categorize family SEW priorities, respectively, into “restricted” and “extended” SEW (Bauweraerts et al., 2024; Miller & Le Breton-Miller, 2014), offering contradictory insights on economic outcomes. Restricted SEW is associated with conservative decisions, risk aversion, and a focus on maintaining family control, while extended SEW emphasizes long-term orientation, generous investments, and positive relations with stakeholders. Actually, restricted family-centric SEW priorities, such as nepotism, sentiment-ridden family conflict, as well as the extraction of private benefits (Miller & Le Breton Miller, 2014) produce negative economic outcomes (Tsao et al., 2021). Accordingly, families with a restricted SEW present priorities, such as permanent job security and access to firms’ resources, for all the current family’s members. The focal stakeholders are the immediate family members. In terms of strategic decision, they generally show conservatism and stagnation with sparse investment in the business, risk aversion, and consistent extrication of funds from their own business. Finally, concerning SEW outcomes, they exhibit nepotism, entrenchment, and the need for holding constant control over their business (Miller & Le Breton-Miller, 2014).
However, for families with an extended SEW, the focal stakeholders are the family fate over time, the business fate and, with a broader vision, potentially all their firms’ relevant stakeholders. In terms of governance and in contrast to the case of families with restricted SEW, they include in their firm management not only family members, that are both competent and motivated, but also those who are able to balance family and nonfamily executives and directors. Referring to strategic decisions, families with an extended SEW invest generously in designing and launching new products and processes, with the intention to continuously reinvest resources in their business and in its renewal (Miller & Le Breton-Miller, 2014).
Overall, in terms of SEW outcomes families with an extended SEW are proud of offerings and generate fruitful relations with stakeholders and their local community. Following this distinction, we observe that the conflicting perspectives about SEW priorities and related economic outcomes may co-exist (Le Breton-Miller & Miller, 2018). Further, family firms are heterogeneous as they may differ in terms of the extent and manner of family involvement in the firms’ ownership and management (Melin & Nordqvist, 2007). Accordingly, the key current challenges family firms’ scholars are facing regards the development of models and frameworks that may be able to capture the changeable degrees of family involvement in their firms’ governance and their effects on the firms’ strategy (Memli & Dibrell, 2019; Neubaum et al., 2019; Nordqvist et al., 2014). As such, we develop the extended SEW view as we consider that the importance of noneconomic goals or family-centric motives to family firms (e.g., Beckhard & Dyer, 1983; Newbert & Craig, 2017) is directly related to the presence of a family or non-family CEO and to the composition of the family firms boards, as specifically regards the presence or non-presence of non-family members (Bammens et al., 2008; Basco & Voordeckers, 2015). Therefore, responding to the call concerning the nature of family governance as a variable that explains those conflicting findings, we test the effect of family CEOs and family involvement in boards on the use of heritage as a marketing signal to build a corporate heritage identity.
CEOs are known to have great power of influence on firms’ outcomes (Bauweraerts et al., 2021; Lubatkin et al., 2006). The same condition occurs in family firms, where the CEO could either be a family member or not. Literature has long investigated this issue and the current consensus is that family CEOs are intensely influenced by family stakeholders and pursue a multiplicity of conflicting economic and noneconomic goals (Kotlar & De Massis, 2013). They make decisions under the pressure of meeting family members’ needs, which may lead them to prioritize family-related goals (Kammerlander & Ganter, 2015).
As such, we contribute to the development of the extended SEW view as we consider that the importance of noneconomic goals or family-centric motives to family firms (e.g., Beckhard & Dyer, 1983; Newbert & Craig, 2017) is directly related, respectively, to the presence of a family or a non-family CEO and the board composition of the family firms, as specifically regards the presence (or not) of non-family members (Bammens et al., 2008; Basco & Voordeckers, 2015) and the family generations.
3 Hypotheses development
3.1 The role of family CEO on the use of heritage to build a corporate heritage identity
According to the literature, a family firm board can be led by a founder CEO, a descendant CEO, or a hired (external) CEO (Anderson et al., 2003; Villalonga & Amit, 2006). Family CEOs often prefer maintaining control of transgenerational succession intentions and this personal characteristic influences family firms’ behaviors (Umans et al., 2021). Accordingly, family CEOs favour the preservation of firm ownership and control inside the family (Berrone et al., 2012). Moreover, if family CEOs care about family legacy, the maintenance of family member ownership across family generations ought to be a priority for their firm.
Regarding the extended SEW motives, theoretical and empirical evidence shows that family members’ socioemotional attachment to their firms binds them together (Chrisman et al., 2005) and the family and the firm’s collective goals, intended as an inherent segment of the family SEW, prevail over individual opportunistic goals of each family member (Ponomareva et al., 2019). This collectively shared identity, which is closely connected with family firm identity, can also reach out to behaviors of non-family employees, thereby reinforcing multiple layers of the organization (Zellweger et al., 2010).
Family CEOs can be especially committed to achieving and maintaining long-term business wealth, as it ensures the prosperity of future generations (Berrone et al., 2012; Rivo-López et al., 2021). As such, we expect that a family CEO may be interested in nurturing their firm with special loyalty, as well as in creating long-term relationships with the firms’ key stakeholders (Miller & Le Breton-Miller, 2011). Further, following Miller et al. (2013), being a family member has the advantage of retaining tacit knowledge and good familiarity with the business that is conversely reduced for a non-family CEO. In our view, this situation generates the inner condition for family CEOs to leverage the firms’ history and to generate value in building a corporate heritage identity.
Actually, regarding corporate heritage, the extended SEW orientation is likely to create and maintain the connection among the firm’s past, present, and future by using them as a marketing signal leading to a corporate heritage identity. Such family owners are motivated to maintain, nurture, and pass on the firm, with its intrinsic value and history, to future generations. This condition happens because the principal desire of family CEOs and directors as regards their family firm is to serve as a source of economic stability for their offspring (Berrone et al., 2012; Miller & Le Breton-Miller, 2005).
Based on the arguments above, the presence of an extended SEW in a family CEO is expected to favour the use of heritage to build a corporate heritage identity in family firms. Therefore, we formulate the following hypothesis:
H1
There is a positive relationship between the presence of a family CEO and the use of heritage as a marketing signal to build a corporate heritage identity.
3.2 The moderating effect of the family involvement in the board of directors
Family CEOs are strongly influenced by family members’ needs, such as family members’ careers, security, rewards (Kammerlander & Ganter, 2015). However, a conceptual dispute emerges on whether the family-influenced orientation tips family CEOs to act altruistically vis-à-vis other family members at any cost, notwithstanding its negative effects on the firm (Schulze et al., 2003). Or if instead they prefer to act as good stewards in the best interests of the firm, as the benefits to the family can be fully realized only through enhancing the firm’s wealth (Arrégle et al., 2007). In fact, family owners have the incentive to act as “good stewards” of their firms’ capital and to present an extended SEW orientation (Miller & Le Breton-Miller, 2014). However, to predict the family CEO impact on the decision to use the family heritage as a marketing signal, we consider the level of family involvement in the board in the light of the change in the disparity appearing when family firms involvement is juxtaposed with a different family involvement in the board, because this situation will affect their SEW priorities.
Although the presence of family principals can provide extended SEW benefits, the pursuit of SEW can also involve family-centered benefits that are not shared with the rest of the shareholders (Miller & Le Breton-Miller, 2014). These “private benefits of control” occur when family members pursue projects that maximize their family socioemotional wealth to the detriment of the firms’ economic performance and non-family shareholders’ concerns (Villalonga et al., 2015). Extant studies have documented that the pursuit of family owners’ interests (such as control preservation, reputation enhancement, and risk aversion) may come at the cost of missing profitable business opportunities (Croci et al., 2011). In addition, family members have been shown to extract private benefits of control through extraordinary dividend payouts (DeAngelo & DeAngelo, 2000), as well as by exercising power beyond their profit rights by using pyramid ownership structures (Peng & Jiang, 2010). Affective endowment in a family may also lead to “bifurcation bias” in the supervision of family and non-family employees (Verbeke & Kano, 2012), the prevalence of nepotistic motives over meritocracy in hiring decisions (Lubatkin et al., 2005), and in engaging in altruistic behaviours towards other family members. The asymmetric treatment of family and non-family employees may, in turn, generate a perception of injustice, thereby decreasing motivation and work effort of nonfamily employees (Barnett & Kellermanns, 2006), thereby ultimately limiting the pool of executive talent available to the firm (Anderson & Reeb, 2003). As a result, families with a “restricted” SEW are less interested in investing in corporate heritage since they are aligned to pursue short-term results. In fact, families with restricted SEW intentions present a narrow, short-term perspective of noneconomic benefits. This condition may be related to lower use of heritage to build a corporate heritage identity since this use is not supported by a family with a true long-term vision and a high sense of stakeholder engagement.
As concerns the conditions that may lead family firms to pursue restricted SEW goals, several studies have shown that a greater level of family involvement in the board can be critical (Sciascia et al., 2013; Zattoni et al., 2015). In fact, it allows the expropriation of the firms’ wealth by majority shareholders, thereby providing the family with access to resources that can be used to pursue family-centric goals at nonfamily shareholders’ detriment. Moreover, the presence of multiple family members in the board, usually referred to as siblings or cousins, incentivizes the allocation of corporate resources to maximize personal utilities and may thus engender intrafamily conflicts (Schulze et al., 2003).
Accordingly, the case of multiple family presence in firm ownership and board may create conflicts between family members with an “extended” SEW and family members with a “restricted” SEW. In addition, anecdotal evidence shows how, as the number of family owners grows, the number of passive owners that are less involved in running the family firms grows as well (Gersick et al., 1997; Le Breton-Miller & Miller, 2018). As such, these family owners are expected to be less committed to the firm and more interested in the firms’ financial reward (Miller et al., 2022). Moreover, conflict and jealousy of other family members involved in the firm may likely arise (Bertrand et al., 2008; Eddleston & Kellermanns, 2007).
As a result, the presence of a family CEO combined with a varying level of family involvement may strengthen or mitigate the SEW priorities of the family, and thus the decision to use heritage as a marketing signal to create a corporate heritage identity. In particular, a higher level of family involvement may push executives to trim down the use of heritage and, consequently, the investment in corporate heritage in order to invest in short-term profitability. This condition falls short to consider that they risk compromising the relationship with the market and their stakeholder, which in turn may lead to the loss of long-term performance (Zellweger & Nason, 2008). Thus, a disproportionate family involvement in the board may enable family owners to dig out a restricted SEW, thereby leading to lower action and the use of their heritage. We thus formulate the following hypothesis:
H2
The relationship between the family CEO and the use of heritage as a marketing signal to build a corporate heritage identity is negatively moderated by the family involvement in the board of directors.
3.3 The moderating effect of the generational stage
From a SEW perspective, a family CEO is considered a guarantor of the nonfinancial aspects of the firm that meet the affective needs of the family, such as identity, the ability to exercise family influence, and the perpetuation of the family dynasty. We consider these aspects and their role in sha** the use of heritage as a marketing signal. According to the SEW perspective, this occurs for two reasons. First, family image increases its importance as the firm moves on through generations (Berrone et al., 2012). Second, as the firm evolves over time, the family name becomes a living symbol of multigenerational achievement (Gomez-Mejia et al., 2003). Thus, the firm generational stage, measured by the presence of the founder in the CEO or chairman position (Burghausen et al., 2014b; Riviezzo et al., 2016) assumes a significant role in the relationship we are investigating.
Actually, family members enhance their sense of identification with the family firm along with their increasing exposure to the business. Murphy et al. (2019) found that, when family members have “learned more” about their family business or have held some managerial position in the business, their sense of identification was reinforced. Consequently, we expected that the second generation or later generations will carry forward the legacy and heritage of preceding ones. Our expectation is grounded in the understanding that, if the identification with the business becomes robust, particularly influenced by what can be termed as a “multi-generational legacy”, the effect on the use of heritage as a marketing signal is positive. In other words, this approach goes beyond considering individual perceptions within a particular generation. Instead, we emphasize the collective perception of the family as a whole, thereby recognizing that the identification process is tied to the family legacy as a whole rather than solely on the individual’s perception within a specific generation.
Likewise, when a family member takes a position in the board, they become intimately involved in the social relationships of the family firm. This exposure not only serves to reinforce their sense of identification, but also strengthens their binding social ties. Concurrently, it enhances their ability to exert familial influence, as outlined by Berrone et al. (2012).
As De Massis et al. (2021) emphasized, family firms exhibit a diverse spectrum of decision-making structures. This spectrum ranges from a more centralized approach led by the CEO to scenarios where strategic decisions involve the collective input of the entire Top Management Team (TMT). Within this spectrum, the CEO plays a pivotal role in sha** the strategic direction of the family firm.Based on these premises, the family CEO is able to decide on the use of heritage as a marketing signal in order to build the family corporate heritage identity.
Finally, we ought to consider the dynastic perpetuation represented by the emphasis placed on the continuation of family legacy and traditions (Berrone et al., 2012). Dynastic perpetuation depends in turn on the family control over the firms’ decision-making process, via succession by subsequent generations (Naldi et al., 2013). As such, the ultimate goal is to preserve the family tradition and this will be higher according to the investiture of the founder and the closeness of the family (Naldi et al., 2013). Consequently, based on Gomez-Mejia et al. (2003) and Berrone et al. (2012), we expect that the relationship between the family CEO and the use of heritage as a marketing signal to build a corporate heritage identity is positively moderated by the second or later generation involved in the family firm.
We thus formulate the following hypothesis:
H3
The relationship between the family CEO and the use of heritage as a marketing signal to build a corporate heritage identity is positively moderated by the firm generational stage.
4 Methods
4.1 Data collection
The sample selected from the AUB Observatory is composed by Italian firms whose annual sales exceeded the threshold of Euros 50 million in the fiscal year 2016. This threshold is typically used to characterize medium- and large-sized companies in the Italian context (Amore et al., 2011). The initial sample from which we started is made of 2,026 family firms. Then, we excluded from the sample all the firms born as branches of foreign companies (485 firms), as well as those for which it was not possible to find information due to the lack of a website (186).
Finally, we excluded firms established after the year 1992 (430 firms), as continuity over time is a necessary condition – although not sufficient – for the creation of a heritage value. “Longevity” was already indicated as a key element of corporate heritage – able to influence many other aspects – by Urde et al., (2007; p. 10). Subsequent studies have also defined a minimum term—for example, three generations, corresponding roughly to 50 years (Balmer, 2013; p.308) – in order to recognise a firm as a potential carrier of heritage. We opted for a threshold of 25-years because empirical evidence suggests that usually this is the first significant corporate anniversary celebrated by a firm and an occasion for a more focused examination of meaningful events in company history. The 25 years threshold also allows for the inclusion in the analysis of corporate heritage activities carried out by the first generation in the case of family firms.
Notwithstanding that, the definition of family firms is considered an undefined issue in scholarly debate (Miller et al., 2007). We rely on existing works (Miller, Le Breton-Miller et al., 2013; Minichilli et al., 2014) that defined family firms as those non-listed firms in which one or two families control a stake of 50 percent (+ 1 share) (Miller et al., 2013). Consistent with other studies, we reduced this threshold to 25% for family firms listed in the stock market (Amore et al., 2022; Andres, 2008; Miller et al., 2013). According to the above-listed screening criteria, 638 firms can be defined as family-controlled firms.
We assembled the data set using detailed and updated information from various sources providing information about Corporate Heritage, governance and financial data. Concerning Corporate Heritage, for each firm we manually collected information from a mix of sources including the corporate web sites, SAN (Sistema Archivistico Nazionale),Footnote 1 “Archivio Centrale dello Stato”,Footnote 2 Corporate Monographs Observatory (OMI),Footnote 3 and the website termed “Cultural Internet”.Footnote 4 The “AUB Observatory”provided governance data using official public filings obtained from the Italian Chambers of Commerce. The financial data come from the Italian Bureau van Dijk database (AIDA), a business information service provider.
Then, we merged our sources and dropped observations with missing values in the key explanatory variables and observations with a negative or zero book value of assets. The result is a sample of 519 firms that have been observed for an uninterrupted 17th-year period, from 2000 to 2016.
4.2 Variables
To measure the level of corporate heritage use, we calculated for each year the Corporate Heritage Index. To be sure, the idea of creating an index allowing some evaluation of brand heritage traces back to Urde et al., (2007; p. 9), who proposed the recognition of “five major elements that indicate whether and how much heritage may be present or potentially found in a brand.” Their proposal of an embryonic model of “heritage quotient”, however, remained in a rather marginal position in subsequent debate about corporate heritage. Though that, the key dimensions reported in the model remain as a reference point for subsequent work with qualitative emphasis and theory building. Building on the research of Burghausen et al., (2014a, p. 2311), which provide an insightful qualitative framework of “actionable categories of activities related to the management and implementation of substantive corporate heritage dimensions,” we define the Corporate Heritage index as the sum of the six partial scores attributed to each of the following variables: a. company website; b. historical archive; c. historical brand; d. corporate monograph; e. business museum; f. foundation (for a specific description, see Table 1).In particular, an incremental point was assigned to some partial scores corresponding to: i) the year of publication of a monograph; ii) the year of the celebration of an anniversary; iii) the opening year of the company museum; iv) the year in which a retro marketing operation was carried out; v) the year the family foundation was created (see Table 2). This is the very first quantitative measure aimed to estimate the many ways in which corporate heritage is present in a firm’s corporate image and in its strategy.
To capture the variability of the Corporate Heritage Index from 2000 to 2016, we calculated the scoring of the corporate heritage index for each of the 17 years included in our panel data (from 2000 to 2016). To develop our composite Corporate Heritage Index, the six scores were standardized and summed. The inter-component correlation Cronbach alpha resulted quite low (below 0.4), which is an appropriate figure given the multidimensional nature of a formative index in which non-redundant components are intended to contribute in run-downing the overall level of nonconformity (Bollen & Lennox, 1991; Diamantopoulos & Winklhofer, 2001). The index thus obtained was again standardized and transformed on a scale from 0 to 10 using the following formula:
The second key variable used to test Hypotheses 1 is Family CEO, measured as a dummy variable which equals to 1 when the CEO belongs to the controlling family (and 0 otherwise) (Cambrea et al., 2023). We also considered as CEO the Executive Chair in the absence of a formal CEO (Miller et al., 2013, 2018). Family members are those with blood or marital ties to the owning family, identified through surname affinity (Amore et al., 2014).
Then, drawing on previous research (Calabrò & Mussolino, 2013; Nam et al., 2018), the second key variable used to test Hypothesis 2 is Family board ratio, calculated as the ratio of family directors on the total number of directors (Debellis et al., 2023; Minichilli et al., 2010). Finally, the third key variable used to test Hypothesis 3 is Second/Later generation. It distinguishes the 1st generation family firms (i.e., the one with the founder sitting as CEO or board chair) and second/later generation family firms (2014b; Amore et al., 2022; Burghausen et al., 2014a; Miller et al., 2022). When there is more than one generation involved in the firm, it has been considered the generation of the largest owner.
Based on a comprehensive review of prior studies (Rubino et al., 2017), we included several control variables. Firm assets, which was measured as a logarithmic transformation of assets (Miller et al., 2018), and captures the firm size. Larger firms may have greater financial resources to invest in Corporate Heritage, such as the establishment of a museum or the gathering and launch of a firm’s historical archive. Firm age reflects directly the firm age and experience; it is computed as the logarithmic transformation of the number of years since the firm’s foundation. The long-lived companies can enhance their historical experience in a strategic key and survive beyond time (Balmer, 2013; Urde et al., 2007).
Liquidity index was calculated as the ratio of cash and equivalents to total assets since empirical evidence shows the worth of cash stock (La Rocca & Cambrea, 2019; Miller et al., 2022). Leverage ratio represents the ratio between the debt book value and the firm equity book value (Boellis et al., 2016; Graves & Shan, 2014). We also controlled for profitability (ROE) as past performance may influence the firms’ investments and performance (Miller et al., 2022). We controlled for all these indicators given that financial resources can influence a firm’s propensity to undertake corporate heritage endeavors.
We also included several additional control variables such as Listed, a dummy variable which represents the listing status (Pongelli et al., 2021), Female CEO, a dummy variable that equal to one when the firm leader is a woman, as the gender of top executives has an impact on the determination of business outcomes (Amore & Garofalo, 2016), and Number of M&A, a variable which counts the cumulative number of M&A deals carried out by the firm since 2000, as the M&A activity may affect the buyer’s perspective (Bauer & Matzler, 2016).
Since our dataset is panel data, we applied a random effect regression. Actually, using a random effects regression is preferable when within-group variation is little in the main independent variables, thereby making the fixed effect model useless (Beck, 2001; Gormley & Matsa, 2014; Plumper & Troeger, 2007). The Housman test confirms this evidence. Moreover, all models include year and industry dummies to remove the influence of time and industry trends. Finally, all independent and control variables are lagged by one year to shun simultaneity problems.
4.3 Empirical results
Tables 3 and 4 report the descriptive statistics and the correlations figures of the main variables included in our analysis. All correlations are below the 0.5 threshold, signalling little latitude for collinearity problems. Nonetheless, we formally checked for the absence of multicollinearity via a variance inflation factor (VIF), and found that none of them was higher than 2. As the common threshold is 10, we can conclude that multicollinearity is not a quandary in this study (Hair et al., 2006).
Table 5 reports regression results, where the Corporate Heritage Index serves as the dependent variable and Family CEO, along with the two moderating variables; Family board ratio and Second/Later generation are the core explanatory variables.
The first model includes control variables only. The second model also includes the main effect of Family CEO. The regression results show a positive and significant coefficient of Family CEO (0.0014; p < 0.05), hence providing strong support for Hypothesis 1. Thus, Family CEO exerts a positive effect on the Corporate Heritage Index.
Then, in Model 3, we included the Family board ratio and the interaction term with Family CEO. Regression results show that Family board ratio negatively moderates the impact on Corporate Heritage Index (-0.0071; p < 0.01), thus providing strong support for Hypothesis 2.
The coefficient of the interaction between Family CEO*Family board ratio has the same size of the standalone effect of Family CEO (0.0071): it means that the positive effect of Family CEO is totally counterbalanced when the Family board ratio is equal to 1. On the opposite side, the highest effect of Family CEO is reached when the Family board ratio is equal to 0. To grasp this moderating relationship, we plotted Fig. 1 representing the Family CEO in the X axis and the moderating effect is tested by splitting the line according to the extreme values of Family board ratio (0 and 1). Figure 1 graphically shows that the presence of a Family CEO increases the value of Corporate Heritage Index under the lowest level of the Family board ratio (Fig. 1), while the lowest value of Corporate Heritage Index is reached in presence of Non-Family CEO and Family board ratio equal to zero. The same values of Corporate Heritage Index are reached at the highest level of Family board ratio, regardless of whether there is a family CEO in place (as the effect of the Family CEO is totally counterbalanced by the Family board ratio).
Moderating effect of Family board ratio on the relationship between Family CEO and corporate heritage
In Model 4, we included Second/Later generation and the interaction term with Family CEO. The results show a positive and significant coefficient for the interaction term with Family CEO (0.0031; p < 0.05), thus providing strong support for Hypothesis 3. The coefficient of the interaction between Family CEO*Second/Later generation (0.0031) is lower than the size of the moderating variable (-0.0044), while the standalone effect of Family CEO is not significant: it means that the positive effect of Family CEO is not enough to counterbalance the negative effect of Second/Later generation. To grasp this latter moderating relationship, we plotted Fig. 2, showing that the presence of a Family CEO increases the value of Corporate Heritage Index when the second or later generation is involved in the firm governance, but it reaches lower values than in the case of Family CEO in First generation. Figure 2 graphically shows that the highest value of Corporate Heritage Index is reached in presence of Non-Family CEO in First generation, while the lowest effect of Corporate Heritage Index is reached in presence of Non-Family CEO in Second/Later generation.
Moderating effect of firm generational stage on the relationship between Family CEO and corporate heritage
Finally, Model 5 includes the interaction between Family CEO and both Family board ratio and Second/Later generation. Empirical results show that Family CEO – standalone – remains significant (0.0046; p < 0.1), while the interaction term shows a negative and significant coefficient for Family board ratio (-0.0064; p < 0.05) and a positive and significant coefficient for Firm generation (+ 0.0028; p < 0.05).
Consequently, we support that the relationship between Family CEO and the Corporate Heritage Index is negatively moderated by Family Board ratio and positively moderated by Second/Later generation.
4.4 Robustness checks
In order to grant robustness to the results presented in the previous section, we performed several additional tests. First, we ran the models using a different econometric approach (i.e., the fixed effect model) and the results of our model with firm fixed effects resulted unchanged (see Table 6).
Second, we employed a different independent variable in order to measure the family involvement, namely the Family control (instead of Family board ratio) calculated as the percentage of shared held by the controlling family. Results reported in Table 7 show that the results are similar to those reported in Table 5, even though the levels of significance are slightly lower.
Third, as our sample is composed mainly of private family firms (97%), we replicated the empirical analysis excluding all family firms listed in the stock market. Arguably, the findings (reported in Table 8) are similar to those reported in our main results. Finally, we tested the same hypotheses we have discussed excluding from the sample those family firms where the “leader” is not formally the CEO (i.e., the Executive Chairman), and we focused only on family firms with CEOs in charge. Also in this latter case, the coefficients and level of significance (in Table 9) are similar to those reported in our main results.
5 Discussion and conclusion
The analysis presented confirms the existence of a significant direct relationship between the presence of a family CEO and the use of heritage as a marketing signal for establishing a corporate heritage identity. Built on socioemotional wealth, this study posits that this relationship is moderated by family involvement on the board and generational stage. As an initial exploration, it provides empirical evidence supporting distinct socioemotional wealth priorities in family firm decisions. Aligned with our goals, this paper contributes to both corporate heritage literature and family business research, paving the way for subsequent discussions on managerial implications. First, regarding corporate heritage literature, this study significantly contributes to the ongoing discourse focused on enhancing the firms’ accumulation and exploitation of their heritage base for the development of a family corporate heritage identity. This pioneering effort represents a novel direction asserting that the effective use and management of history should inform the success of family firms. Notably, while marketing scholars have emphasized corporate heritage as a strategic resource, there remains a lack of conceptual clarity and a clear operational direction in the subject. Addressing this gap, our paper proposes a composite Corporate Heritage Index, offering a specific quantitative measure explicitly designed to assess the incorporation of corporate heritage within family firms’ corporate image and strategy.
Our findings shed light on various dimensions of corporate heritage and how family firms may adopt a range of combinations of corporate heritage identities. These identities, amalgamations of different facets connected socially, spatially, and temporally to institutions, places, cultures, and timeframes, offer family firms the opportunity to employ balanced mixes of identity (e.g., identity continuity, identity change, and time identities). Consequently, these distinct heritage identities emerge as crucial dimensions in building a family firm’s and a family’s collective memory, thereby serving as a significant tool for creating and safeguarding their “family brand name”.
The second contribution the paper advances involves confirming the significant influence of SEW on firm decisions and identifying varying levels and gradations of SEW. Inspired by the SEW literature, the conceptual framework we have proposed suggests that the decision to use heritage as a marketing signal is motivated by factors beyond economic and financial objectives. As earlier mentioned, over time the SEW perspective has bifurcated into two streams, distinguishing between families with restricted SEW, focusing on short-term family benefits, and those with extended SEW, emphasizing long-term benefits for a broader range of stakeholders (Miller and Le Breton Miller, 2014). This distinction is crucial in understanding the decision to use heritage in constructing the family corporate heritage identity, as priorities may conflict with the ones of nonfamily stakeholders and the firm itself over time.
According to previous literature, we know that under restricted SEW the immediate family members are the focal stakeholders, and thus their firms present short-term orientation in the shadow of family (at times egoistic) priorities. Families with a restricted SEW show to have such priorities as instantaneous access to their firms’ resources for all the family members. Conversely, families with an extended SEW are intrinsically motivated by the desire to build and develop the wellbeing of the next generations and are hence oriented mainly to the long term.
The findings also indicate that the impact of having a family CEO on investing in corporate heritage is contingent upon the level of family involvement on the board. The extent of family engagement in the board influences the use of the extended or the restricted version of SEW. Building on Miller and Le Breton-Miller (2014), who emphasized the need to differentiate between restricted and extended SEW, our study reveals a negative effect of family CEOs on corporate heritage investment when there is high family involvement on the board. This observation supports the notion that family CEOs can either effectively reveal the presence of extended SEW or, conversely, inadequately unveil the presence of restricted SEW, depending on the level of family engagement.
Finally, reconnecting both streams of research, our findings show that linking current customers’ and stakeholders’ interests to the firm’s past, present, and future (Balmer, 2011), as well as to the extent to which family firms actually use their heritage, depends on how much SEW family preservation is perceived by the family members involved in the board. As such, the paper provides an important milestone by suggesting that the different use of heritage in building the family corporate heritage identity may be connected to the level of family involvement in the firm (i.e., the first generation vs. the second generation or later generations in family firms).
5.1 Managerial implications
In the light of our theoretical groundwork and empirical findings, a quartet of practical implications of significant relevance emerges. First, the study underscores the pivotal role that family CEOs take in the decision to use corporate heritage as a marketing signal to develop a corporate heritage identity. Firms under the leadership of family CEOs are advised to meticulously decide about the extent of the family involvement in the board over time, given its substantial impact on the efficacy of incorporating corporate heritage. A nuanced comprehension of SEW with a deliberate distinction between restricted and extended SEW priorities, becomes of paramount importance for family CEOs especially when they face the moment of taking strategic decisions pertaining to heritage.
Second, the research posits that the choice between a family and a non-family CEO is swayed by the family’s SEW considerations. Family-owned businesses are urged to assess the prospective benefits and drawbacks related to SEW preservation when they ought to take decisions about hiring a family or a nonfamily CEO. A family CEO may view the incorporation of corporate heritage as advantageous for SEW preservation, whereas a nonfamily CEO may comparatively perceive it as a potential cost with potentially contentious effects on the firm short-term financial performance.
Third, our research challenges the notion that having a nonfamily CEO is always favourable in family firms. It suggests in fact that family CEOs can be beneficial, at least up to a certain level of family ownership and family generational board involvement, thereby contributing to more profitable performance levels. Family firms should therefore carefully assess the impact of family CEOs as a source of heterogeneity and consider their influence in sha** strategic decisions, especially concerning the use of heritage for building a corporate identity.
Finally, the paper proposes a Corporate Heritage Index as a quantitative measure explicitly designed to assess how corporate heritage is embedded in family firms’ corporate image and strategy. The index contributes to addressing the conceptual and operational challenges in measuring corporate heritage, thus providing a valuable tool for practitioners in properly assessing the accumulation and exploitation of firm heritage.
5.2 Limitations and future inquiry
As any other, this study is not free from limitations. First, notwithstanding that we provide support to the extended SEW view with arguments grounded in the family firm domain, we are aware that our data refers ultimately to one single country, Italy. Since Italy is traditionally well known to have an extensive presence of family firms compared to other advanced economies, our findings might not be easily or automatically generalizable to family firms operating in other countries, especially the ones with reduced family ownership.
Second, we focused on the impact of family CEOs and family involvement in the board of directors by providing evidence of these relationships. No other family control proxies that influence family firms’ strategic choices have been examined in this study. As such, further scholarly effort may explore other measures of SEW, by considering the inclusion of other proxies of family control and influence on strategic choices. Additionally, we acknowledge that we have examined the effect of family and nonfamily CEOs in taking strategic decisions in the context of family firms. At the same time, we recognize that in family firms the impact on strategic decisions may not be only credited to the CEO, but can extend to the entire Top Management Team (TMT) (D’Allura, 2019). As highlighted by De Massis et al. (2021), family firms demonstrate a spectrum of decision-making structures, ranging from a more centralized approach led by the CEO to scenarios where strategic decisions involve the collective input of the entire TMT. In such perspective, the significance of delving deeper into the dynamics of TMTs within family firms becomes relevant. Future research may explore the potential role of TMTs as moderating factors in the relationship between family CEOs and the evolution of corporate heritage. This approach may facilitate a deeper understanding of the decision-making processes within family firms and aligns with the idea of broadening the focus beyond individual CEOs.
Third, in studying the family firms’ CEOs and boards, we have mainly focused on the differences between family and nonfamily members, leaving apart other relevant differences that may exist within the board of directors. Future research may open the black box of family firm board processes (Zattoni et al., 2015), by transcending the simple dichotomy of family vs. nonfamily directors to focus on “micro-processes” issues, such as how consensus is achieved within the board and how this consensus-building process may eventually change in firms’ and along boards’ life cycles. Further, the board composition as concerns gender may be an issue to explore by considering how board heterogeneity might affect the family firm decision-making processes and the differences between restricted and extended SEW.
Finally, future advancement may reach the measure of corporate heritage we have introduced. In fact, a more refined version of the corporate heritage index may be built to encompass other important internal aspects of corporate heritage that, in its current version, are not considered. Consequently, we encourage future research to extend this study by using additional variables and data, which may yield further fresh evidence in such a significant direction of inquiry.
Notes
SAN was promoted by “Direzione Generale per gli Archivi” (DGA), which is one of the Departments into which the Ministry of Italian Culture is organized and carries out the functions and tasks, relating to the protection of archival assets.
The Central State Archives is an institution of the Ministry of Culture with special autonomy, subject to the control and supervision of the General Directorate for Archives, and represents the depositary archival institution of the documentary memory of the unitary State.
OMI was born from Mario Magagnino’s commitment to business communication and, more specifically, to the institutional communication tool par excellence used by family firms: the monograph (http://www.monografieimpresa.it/il-progetto/).
Cultural Internet is an original database created by the Italian Minister of Culture to provide unique and integrated access to the patrimony of Italian libraries. The primary goal of this database is to promote knowledge of the heritage of Italian libraries by offering cultural insights into book collections by means of digital and multimedia resources, dedicated to literary—scientific and musical culture (http://www.internetculturale.it/opencms/opencms/it/main/chisiamo/).
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D’Allura, G.M., Quarato, F., Dagnino, G.B. et al. Detecting the key role of the family in explaining corporate heritage use in family firms. J Manag Gov (2024). https://doi.org/10.1007/s10997-024-09709-9
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DOI: https://doi.org/10.1007/s10997-024-09709-9