Family involvement in ownership and management on business performance: evidence of an emerging market

Abstract

PurposeEmerging markets are unstable and uncertain environments, particularly for small and medium-sized enterprises, which are often family-owned. In these businesses, family presence influences decision-making and, consequently, their performance. The objective of this paper is to determine whether family involvement in ownership or management has a positive impact on firm performance, particularly in small and medium-sized enterprises operating in uncertain environments.Design/methodology/approachTo achieve this objective, two samples of small and medium-sized enterprises (between 11 and 250 employees), one family-owned and the other non-family-owned, were compared using statistical analysis. In family businesses, the family owns more than 50\% of the shares, and a family member serves as the chief executive officer. Other variables mobilised included gender, first-to-second-generation, second-to-third-generation, age, business size, and business activity. Performance was measured in terms of return on investment. To ensure an unstable and uncertain environment, three geographical regions of Mexico were considered.FindingsThe results underscore the significance of family involvement in the business, particularly in uncertain environments. Better firm performance is observed when the family is involved in both ownership and management, particularly in the case of first-to second-generation businesses. These results are robust, as confirmed by other analyses. Firm size and activity also have a positive impact.Practical implicationsThe results have several implications: for family (considering strategic advantage in uncertainty, generational transitions focus and leveraging family strengths); for policy or support organisations (targeted support for family SMEs, facilitating succession and understanding uncertain environments); and for business education (curriculum on family business, contextualising business strategy and succession planning education).Originality/valueThis study contributes to the understanding of the influence of family involvement on performance in small and medium-sized enterprises by examining the interplay between family ownership and management. The economic value of family involvement in an emerging economy is highlighted from the perspective of familiness. The results contribute to filling gaps in the literature and raise several implications.