Family involvement in business and financial performance: A set-theoretic cross-national inquiry

Abstract

Prior empirical research finds positive, negative and neutral relationships between family involvement in business and firm performance. We argue that some of the challenges that have plagued empirical research in this field are related to the measurement of family involvement in business. Real-world family firms are not binary entities. Rather, they can be better characterized by heterogeneous configurations formed by different components of family involvement in the enterprise. These alternative configurations can be systematically captured using set-theoretic methods. Applying this methodology to a cross-national sample of 6592 companies, we identify which particular configurations are associated with superior financial performance. Our results lend support to the configurational hypothesis, which posits that the impact of family involvement in business is not the product of the components of family involvement in isolation but that it is subject to substantial complementarity and substitution effects.