Business With a Latin Eye

Spring 2014

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Few researchers produce as much research as Luis Gomez-Mejia. He has authored or co-authored more than 250 papers and some 20 books on a wide range of business issues. He also co-founded an academy to gather together scholars from Spain and Latin America with their U.S. counterparts. In January, the prolific professor traveled from Texas A&M to join the Mendoza College faculty. Here, he talks about networking, compensation and the surprises of examining family firms.

Q: When did you come to the U.S.?

A: In 1965, after the civil war in Santo Domingo, in the Domincan Republic, the U.S. Marines were there. We left in the middle of that turmoil and went to Miami. I was 15. Ironically, I was accepted at Notre Dame in the 1960s, but I couldn’t afford to come. Now it’s come full circle.

Q: You co-founded the Iberoamerican Academy of Management and the journal Management Research. Why?

A: You have a common language, historical background and cultural similarities, and you also have ties between the schools. The idea is to compete in the mainstream. So we are very active with the Academy of Management and hold meetings every year. In the 1990s, there were two or three people from Latin American countries and Spain at the conference. Today, there are probably 500.

Q: You helped initiate the formal study of family firms. Why?

A: Business schools are geared toward large corporations. But that’s a relatively small segment when you look at the number of organizations or the percentage of the population employed. In 2000, when I first started working on this, there was not a single academic paper on family-owned firms. I learned by working in countries like Spain that you cannot ignore that factor. The values of the dominant owners of the firm make a big difference in their policies on things like internationalization, risk-taking and employee treatment. We found in Brazil that the family-owned firms took better care of their employees, with fewer layoffs.

Q: You coined the term “socioemotional wealth”. What does that mean?

A: Family firms are 90 percent of all companies. In Spain, we looked at the decisions that family firms made, and we quickly realized that they not only considered the financial outcomes, but also the social ones, like family pride and image, and the ability to appoint relatives to key positions. We wrapped all that up into that concept of socioemotional wealth. Prestige is only one aspect. Identity, emotions, altruism and legacy are also part of that.

Q: You’ve studied compensation extensively. What have you learned?

A: If you look at the compensation of executives, the main predictor is not performance. It is the size of the firm. Performance only explains about 4 percent of compensation variance. We did a meta-analysis going back to the 1920s, and performance is only that tiny portion.