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The influence of clan culture on local family businesses. Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “Regional culture: the role of the invisible hand in shaping local family firms’ top management team”, by Yu, X.; Zhang, Y.; Cheng, X.; Li, H.; Chen, Y. and Zhou, W. (2022), in which authors carry out a study to know how clan culture and regional culture affects family businesses.

There are plenty of studies on family and non-family businesses, and the vast majority have focused on the differences between both when it comes to choosing candidates to fill top management positions. 

Compared to non-family businesses, family companies are more concerned with objectives such as maintaining family control, altruism within their group, improving the family’s reputation, among others. In other words, they tend to prioritize family interests. 

And by virtue of this, they can introduce people into the management team more easily than in non-family companies, even if they do not have enough talent for the management of the company. 

From the above, it is understood that the operation and management of family businesses and the maintenance and coordination of their internal relations depends not only on the rules and regulations of the company, but also on the local cultural concepts associated with the family. 

This is the idea to which studies on the differences between family and non-family firms have not paid enough attention: what is the impact of regional culture on family firms? Does this culture affect as an “invisible hand” that influences entrepreneurial behavior?

Specifically, this study focuses on the effect of the so-called “clan culture”. In Chinese businesses, clan culture embodies the salient characteristics of traditional Chinese culture. Therefore, exploring the influence of traditional values may be useful to understand the cultural basis of family business behavior and motivation. 

First, authors briefly review the existing literature in the field of clan culture and family firms. 

Previous studies suggest that family firms differ from non-family firms in that family companies have two organizational systems: business and family. And, therefore, family patterns are also one of the reference points of behavior and decision making.

Compared to non-family firms, family companies rely on both business logic and family logic to make operational and strategic decisions. 

All this should not surprise us, since, according to the psychology of the individual, we humans tend to show altruistic behaviors for the family members with whom we share genetics. 

A very positive point about family businesses is that people tend to participate much more actively in helping to achieve the family’s goals, as involvement in the management of the business is beneficial to the emotional satisfaction of family members in terms of belonging, security and identification. 

For family members, the company is not only a place of work but also a symbol of family status and glory. For this reason, it is believed that family members working for family businesses generally do not ask for high financial remuneration. 

On the other hand, if there is a high financial risk, family businesses with a weak clan culture may try to improve their financial situation rather than emphasizing the maintenance of family control. Conversely, under the influence of a strong clan culture, family executives tolerate risks and losses because they believe in the cohesion and unity of family members and maintain enthusiasm.

The worse the financial situation of a family business, the more prominent the family concept tends to be in the individual’s mind. 

To analyze all these ideas, authors conducted a study including data from 625 growing companies in China. 

The obtained data tell us that, in areas where the clan culture prevails, family members involved in the business are willing to accept lower remuneration. The reason for this phenomenon is that both the company and the worker understand that it is not only the economic returns that matter, but also the psychological ones.

The more the clan culture prevails, the lower the remuneration demanded by the family members.

In addition, it seems that when family firms have already obtained generous financial returns, they focus more on obtaining psychological returns, and when financial returns are not sufficient, they will weaken the pursuit of psychological benefits. 

Due to the complexity of the subject, authors explain that it is necessary to continue studying the behavior of family firms in different sociocultural contexts to better understand their functioning and dynamics.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English. Ask us about our grants!

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Do parental divorce and other adverse circumstances affect adolescent consumer behavior? Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “Revealing differences in brand loyalty and brand engagement of single or no parented young adults”, by Morkunas, M. (2022), in which the author carries out an investigation to know whether adverse circumstances such as parental divorce or a context of orphanhood would affect the consumer behavior of adolescents and young adults.

Central and Eastern European countries are characterized by a high number of divorces. This is a circumstance that places children in an insecure social position, which is amplified by numerous factors, such as possible financial fragility, intolerance or bullying in schools. 

On the other hand, the number of children raised in single-parent families, or even by relatives, increased significantly in some countries in this part of Europe after joining the European Union. 

It has been shown that the prolonged absence of at least one parent has a significant impact on the socio-psychological development of the child at various levels. For example, the situation affects the maturation of their character, their cognitive abilities, and even the economic rationality of their actions.

However, although there are indications to think that people who have grown up in families with these circumstances may have different behaviors than people with typical situations, no substantial scientific efforts have been made to reveal the impact of orphanhood, single parenthood, or divorce on consumer behavior. Therefore, this article aims to help reduce that gap in the literature.

In general, it is considered that the longer a person lives, the more he/she adjusts to the environment around him/her, and forms his/her habits according to the existing social norms and rules, showing a behavior of social conformity. Then, in order to better understand the effect of the lack of a parent during childhood on consumer behavior, the scope of the study focused on young adolescents, who have been exposed to this phenomenon of social conformity for some time.

It is important to know three concepts: brand engagement (BE), brand loyalty (BL), and brand evangelist, which could be understood as a person who feels devotion to the brand and communicates it to the world. 

In general, it is assumed that brand engagement (BE) is directly related to brand loyalty (BL), the latter being considered more complex. However, there are many experts who consider BE to be the more important of the two concepts. When studying brand satisfaction, it seems that identification with the brand through value congruence is one of the most important points that most affects BE and BL.

On the other hand, other experts consider that brand-based consumer interactions are also a highly relevant antecedent for these two concepts. 

BL is typically seen as one of the most important parts of brand evangelism, although other experts point to brand satisfaction and experience as the most relevant components. 

It is important to briefly understand these data to better interpret the results of the study, which can be viewed in detail in the original article. 

The data needed for the study were collected in two processes. First, a control group was recruited through an online questionnaire shared through social networks. On the other hand, data for the study group were obtained through social support divisions of five Lithuanian municipalities and other organizations in the area that provide social support to people with complicated social situations. 

In total, 341 people were surveyed for the control group and 224 for the study group. 

The results showed that there appeared to be statistically significant differences between the two groups. 

Adolescents who experienced a childhood in a single-parent family, in an orphaned situation or, in general, with the absence of one or both parents, are more prone to emotional connectivity with their favorite brands. This should lead to higher satisfaction or higher perceived quality of these brands, as high emotional connectivity is considered an indicator of both. 

On the other hand, although they show some emotional attachment to the brand, they are rarely inclined to spread their positive opinion about it, which is interesting, because if the person loves the brand, he or she is more willing to speak positively about it, even if only moderately. 

The author believes that these findings can be considered relevant not only for Central and Eastern Europe, but for all countries where labor migration is an important issue, with a considerable social, economic and cultural footprint and high divorce rates. Furthermore, he urges other experts to continue to study the subject in order to draw even more solid conclusions.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Master of Science in Behavioral Economics, a 100% online program that you can take in Spanish or English. Ask us about our grants!

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How do important events affect a couple’s life and their compromise with the environment? Behavioral Economics Blog

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Friends of the Behavioral Economics Blog, this week we present the paper “Romance and the ozone layer: panel evidence on green behavior in couples”, by Köbrich León, A. and Schobin, J. (2022), in which authors make an analysis with couples to know how the important events in their lives have affected their compromise with the environment as a couple.

It is a reality that romantic relationships are usually the center of people’s social life and, therefore, influence many aspects of our personality.

For example, previous studies on conjugal relationships identify similarities in aspects as disparate as the perception of risks, participation in the stock market or tobacco consumption. Some, even, have studied pro-environmental behavior.

However, few talk about the synchronization that happens between the members of the couple and if it is marked by important life events.

As interested in behavioral economics, we are also interested in anything that influences people’s decision-making and behavior shaping, so we are going to delve into this topic and see what authors have to tell us about it.

They mention the investment model of attachment to society. This suggests that the quality of relationships is an economic good that the couple co-produces, by aligning their behaviors in the life cycle, by socializing their preferences through daily interaction.

In addition, it predicts that the commitment that the couple has with society is the product of a reduction in the heterogeneity of preferences, because people who are highly committed to each other give up personal preferences to adapt to the interests of others.

The literature on this model shows that the strength of the commitment depends on the stage of the couple’s relationship. That is, pro-environmental behaviors will change over the course of life. Therefore, authors are on the right track when they decide to study how important events in couples’ lives affect their behavior, such as marriage or the birth of children.

Many of the pro-environmental behaviors end up becoming habits, and this is an important fact to keep in mind because important life events review habits and can establish new practices that replace them.

To explore all this, authors conducted surveys in two waves of a total of 6,349 couples, that is, 12,698 individuals.

They considered major life events (changes in marital status, pregnancy and childbirth, acquisition of real estate…) as the main variables. Beliefs about the need for action against climate change were also taken into account, in addition to socioeconomic factors, such as age, education and income.

Obtained results provide important information. For example, getting married was not found to exert a statistically significant influence on the couple’s alignment process, but the pro-environmental behavior scale scores of couples who had divorced became more similar than the ones of those who remained together.

An interesting fact is that couples who divorced but did not change their address and continued sharing their home, became more similar than couples who remained together, even if they were not married.

Regarding pregnancies and births, it shows that differences in pro-environmental behavior significantly decreased over time in couples who did not have children. For couples who did have, the opposite occurred after the baby was born.

These findings largely mirror the results of family psychology studies of changes in relationship quality and attachment during the transition to parenthood. Current literature identifies the birth of the first child as a particularly dynamic phase in the development of the couple’s division of labor and in the allocation of economic resources.

This literature suggests that most couples invest in relationship quality and attachment before delivery to buffer the decline in quality that will follow. In other words, the period of preparation for the first child is characterized by a very strong commitment to the couple. This may explain the high concordance between the pro-environmental behaviors of prenatal couples. After childbirth, divergences appear to adapt to the demands of rearing.

In short, major life events drive alignment in couples’ pro-environmental behavior, at least to some extent. The finding is consistent with previous literature, however, authors point out the need to continue investigating the subject.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

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Behavioral Economics and Parent Participation in an Evidence-Based Parenting Program at Scale. Behavioral Economics Club

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Friends of the Behavioral Economics Club, this week we present the paper “Behavioral Economics and Parent Participation in an Evidence-Based Parenting Program at Scale” by Hill, Z.; Spiegel, M.; Gennetian, L.; Hammer, K. A.; Brotman, L. y Dawson-McClure, S. (2021) in which authors try to apply behavioral economics’ methods in order to improve the attendance levels of families to parenting programs.

If there is something that parents care about, is knowing how they can contribute to make their children develop in a healthy, happy and complete way.

That is why evidence-based parenting programs exist. These programs have demonstrated they strengthen parents’ capacity to support their children’s development.

In fact, it has been shown that group-based, culturally relevant parenting programs increase warm, nurturing parent-child interactions, and involvement in children’s learning, besides decrease parent stress and produce long-lasting favorable impacts on children’s academic and health outcomes.

But a little problem exists: previous research of parenting programs in schools, show lower levels of attendance in families with few economic resources, racialized minorities, families with little social support and/or with high levels of psychological stress.

Moreover, some prejudices exist about parenting programs, such as that they are for “bad parents”.

That is why authors try to apply the behavioral economics’ approach to this topic, in order to optimize the participation of all families in parenting programs, no matter their circumstances.

Behavioral economics, as we already know, gathers theories and concepts of psychology and economics to understand, in this case, how context and personal circumstances, as poverty or racism, can affect decision-making.

Namely, behavioral economics starts from an understanding of human decision-making as a function of evaluating costs and benefits, as proposed in conventional economics. And, as economics considers money and time as finite resources, so does behavioral economics with cognitive resources.

The implications of finite cognitive resources are that allocation of such resources to one aspect of family life (for instance, paying rent) may drain cognitive resources for other aspects of family life (for example, reading or playing with a child).

Authors try to focus behavioral economics in how actual and previous experiences with poverty, financial instability, structural inequality and/or discrimination can shape or undermine intentions.

That is why authors and their researchers decided to use behavioral economics’ approach to improve parents participation in a program called “ParentCorps”.

This program, focused on families, is designed as a compliment to improve pre-kindergarten education. It is a public proposal in order to strengthen parents’ and teachers’ capacity to support the children’s development against difficulties.

What authors wondered was, firstly, if behavioral economics’ concepts could be applied successfully to strategies of the program. The second aim was to examine how testable components of the behavioral economics’ strategies influenced parents’ participation in the program, with the hypothesis that parents receiving behavioral economics’ outreach would, on average, have higher levels of program attendance.

The study was carried out with a total of 621 families of nine different districts in the selected zone. In four of these districts, behavioral economics’ tools were applied; but they weren’t in the other five.

It is important to mention that more of the 70% of the families that participated, lived below the poverty line.

Parents’ participation was measured using data collected through a signature sheet at the entrance where each session of the program took place, which lasted 14 weeks.

Obtained results weren’t what authors expected. Even though the districts in which behavioral economics’ materials and strategies were implemented had a prediction of greater participation by families, the reality is that the results did not overcome the barrier of statistical significance.

Families of the districts in which behavioral economics was applied, obtained an attendance percentage of 38%; the other families obtained 33%.

Nevertheless, it seems that with the information that authors had at their reach, they were unable to exactly determinate why this variation, this difference between one and other percentage, appeared.

This study has some limitations that is convenient to point out. One would be, for instance, that the proposal’s design for the experiment was useful for other contexts, but not for this one.

That is why authors mention the need of future research to delve into aspects like understanding contexts that may be affecting the behavior and decision-making of people. In this way, it would be possible to correct the limitations of the current paper.

If you want to know more about Behavioral Economics and how to apply it to human behavior, take a look to our Certificate in Behavioral Economics, a formative program, in English or Spanish, 100% online and certified by Heritage University (USA). Now, with discounts for members of this club.

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