Generational diversity, overconfidence and decision-making in family business: A knowledge heterogeneity perspective

Is generational diversity really “bad” for collective decision-making effectiveness in the family business? We argue that generational diversity reflects collective knowledge heterogeneity, and that through overconfidence as an important collective psychological mechanism, generational diversity may counter-intuitively benefit organizational consequences. Data from sixty decision-making teams in Indonesian family businesses with Chinese kinship relations suggested: first, generational diversity has positive effect on decision-making; second, generational diversity influences on group overconfidence negatively; third, overconfidence influences decision-making negatively; and fourth, overconfidence mediates in the relationship between diversity and decision effectiveness. All theoretical argument and empirical discussions grounded on knowledge heterogeneity perspective generated implications for theory and practices of decision-making in family businesses context.