Exploring the family effect on firm performance

Abstract

Purpose – The purpose of this paper is to investigate how internal social capital – as a part of the familiness resources– affects family firm performance. The social capital theory states that internal social capital within family businesses is composed of three dimensions: the structural dimension, the relational dimension, and the cognitive dimension. The aim of the paper is to study the relationship between each dimension of internal social capital and family firm performance. Design/methodology/approach – The paper employs an empirical investigation which is based on a sample of 114 Tunisian family firms. Findings – Results demonstrate that the structural and relational dimensions are positively associated with financial and non-financial family firm’s performance. However, the cognitive dimension has a significant positive effect on financial performance but not on non-financial family firm performance. Originality/value – The proposed model aims to test the direct effect of internal social capital dimensions on financial and non-financial family firm’s performance. Besides, there is a lack of empirical evidence aiming at understanding the impact of structural, cognitive and relational social capital on the performance of family firms.

Social Capital in the Family Business Literature: A Systematic Review and Future Research Agenda

“…The studies highlighted the consequences of bonding SC, bridging SC, and family SC. Bonding SC was found to positively affect firm performance (Campbell & Park, 2016; Herrero, 2018; Y. Mani & Lakhal, 2015; Tasavori et al, 2018).…”

“…The ISC-FB construct was also used by Tasavori et al (2018) and Y. Mani and Lakhal (2015), who, however, treated the three first-order constructs of Carr et al (2011) as separate.…”

“…Y. Mani and Lakhal (2015) distinguished the type of performance and dimensions of SC and found that the structural and relational dimensions of bonding SC positively influenced financial and nonfinancial performance of FBs, while the cognitive dimension only improved their financial performance. Bonding SC was found to be positively related to dynamic capabilities (Wang, 2016) and decision-making quality (Mustakallio et al, 2002).…”

“…Carr et al (2011) developed and validated the ISC-FB scale, a second-order construct comprising traditional structural, cognitive, and relational dimensions of bonding SC (Nahapiet & Ghoshal, 1998). The ISC-FB construct was also used by Tasavori et al (2018) and Y. Mani and Lakhal (2015), who, however, treated the three first-order constructs of Carr et al (2011) as separate.…”

How can family businesses survive disruptive industry changes? Insights from the traditional mail order industry

“…From a family firm resource view (Sirmon and Hitt 2003;Uhlaner et al 2013), it is argued that under conditions of limited financial resources, family firms will focus on innovation strategies with a short-term return horizon instead of disruptive innovation strategies that require a long-term return horizon (Sharma and Salvato 2011; Singh and Gaur 2013). Furthermore, family firms possess the social capital to react quickly to innovation opportunities and to tolerate a degree of risk in doing so, which creates an advantage for disruptive innovation activities (Mani and Lakhal 2015;Zahra 2003). However, other studies have found that family social capital might also cause a limited perspective that prevents new resources and novel information, which are essential for adopting disruptive innovations, from entering the family firm (Herrero and Hughes 2019).…”