The Invisible Hand of Evolutionary Psychology: The Importance of Kinship in First-Generation Family Firms

Abstract

While previous studies focus on differences between family and nonfamily firms regarding CEO selection and executive compensation, this study investigates differences among family firms with different types of kinship ties. We find that, compared with family firms with close kinship ties, those with distant kinship ties are more likely to appoint a nonfamily CEO and to pay nonfamily executives lower salaries. This relationship is moderated by firm performance and family ownership. Based on evolutionary psychology, we propose that family firms with close versus distant kinships have different motivation levels to preserve socioemotional wealth.