Narrow-Framing and Risk Preferences in Family and Non-Family Firms

Building upon prospect theory's concept of narrow-framing, we explore family firms' risk preferences across multiple decisions in corporate entrepreneurship. We argue that family firms' decisions are less likely to be narrowly framed (more likely to be made as a group rather than in isolation) compared to non-family firms. Examining the interaction between two risky decisions (internationalization and R&D investment) in two samples of publicly traded firms in the USA and China confirms our hypotheses. Family firms appear more likely than non-family firms to diversify risk when making multiple decisions concerning corporate entrepreneurship. However, given inferior performance, risk taking across multiple decisions in family firms is positively related.