Family businesses: How to measure their performance

Abstract

Numerous studies on family businesses have drawn on the theory of resources and capabilities and have employed the concept of familiness as an indicator of family influence on businesses. A literature review shows that to measure the performance of this type of organization, it is necessary to use indicators that reflect both business variables and socio-economic factors related to family involvement in a company and its duality family and business. This paper presents a performance measurement scale for family firms that accounts for all of these considerations. It then examines its utility using a sample of 501 Spanish family businesses. Key words: Family businesses, performance measure, resource-based vision. INTRODUCTION Research on family businesses has advanced in recent years, and the appearance of new issues, theories, and publications in this field indicates the results of completed studies and gives a general sense of the field’s progress (Zahra and Sharma, 2004). As the discipline reaches maturity, researchers are formalizing concepts such as that of the family business and family influences on such companies. However, there is a need for further research on the measurement of performance in this context because previous studies have used indicators that do not cover the specific features of family businesses (Hienerth and Kessler, 2006). In addition to common variables such as profitability, productivity, or growth, it is necessary to study the socio-emotional variables that influence family businesses’ expectations while not dealing exclusively with profitability. Studies that do not include these variables in their performance measures cannot yield results that accurately depict the chara-cteristics of family businesses because they ignore the possibility that such firms might be willing to overlook financial success to improve other issues. Therefore, research on family businesses must consider family goals in addition to the drive for success. The concept of family goals highlights a number of variables that affect strategy in these organizations. The *Corresponding author. E-mail: pnunez@ujaen.es. perception of performance in a family business is influenced by many different factors, which must be identified and measured. Additionally, Tagiuri and Davis (1996) stated that the characteristics of family businesses respond to the duality that results from the interaction between a family and its business. Thus, this duality should be addressed in studies that measure the performance of family businesses. Therefore, it is necessary to develop suitable indicators for family businesses that account for the special characteristics of the family-business duality. The aim of this work is to present a measurement scale for family business performance that incorporates all of the above-mentioned considerations. To achieve our goal, the remainder of the paper is structured as follows. After the introduction, the study discusses the study’s theoretical framework and the state of current research. Thereafter, the study defines the research problem and the hypothesis, followed by the methodology, measurements, and results. Finally, the study was discussed and concluded. THEORETICAL AND CONCEPTUAL FRAMEWORK The measurement of family business performance requires us to pay attention to numerous considerations, including the variables connected to our chosen theoretical framework. One of the most common approaches in the study of family businesses is the