Family firm exit: A vignette study on selling to an activist versus a steward private equity investor

Selling the family firm to financial investors is a financially attractive exit option for family firm owners, especially those lacking a capable and willing family-internal successor. Building on the socio-emotional wealth (SEW) perspective, we investigate the factors that affect a family firm owner’s preference to sell to an activist private equity investor focused on financial goal maximisation, versus a steward private equity investor focused on upholding family firm values and business stability. We also study the potential moderating effect of portfolio ownership as the literature suggests that exit decisions and SEW considerations depend on family firm portfolio status. Based on our vignette scenario study with 200 responses from family firm owner-managers, we find that greater importance of non-financial considerations, such as family prominence and strong firm financial performance, reduces the preference to sell to an activist private equity investor compared to a steward private equity investor. Moreover, we show that portfolio ownership weakens the proposed positive relationship between an innovation focus and the preference to sell to an activist versus a steward private equity investor. Our findings have consequences for both family firm succession research and SEW research.