SEW and Family Firm Total Value: a mathematical / formal model

Abstract

There is much criticism on the assumptions of economic rationality and of the supposed sole objective of maximization of financial benefits that when applied to the field of study of family firms results in inferences that are not empirically observed. Reconciling to some extent these two approaches is theoretically relevant because it would help to explain intertemporally the utility function and value of a family firm based on socioemotional wealth approach and economic assumptions. Drawing on microeconomics assumptions in general and on the utility theory in particular along with the Socioemotional wealth approach, we propose through a formal mathematical model a more nuance theoretical explanation of the family owner utility function. Likewise, we provide microeconomic support and extra guiding theoretical explanation for perceived family firm total value in the eyes of the owner-manager from an intertemporal approach.