Family Management and Firm Performance in Family SMEs: The Mediating Roles of Management Control Systems and Technological Innovation

Daniel Ruiz-Palomo,Antonio Duréndez,Julio Diéguez-Soto,José António C Santos

doi:10.3390/su11143805

Abstract

The aim of this research is to analyze the mediating role of the use of management control systems (MCS) and the achievement of technological innovation (TI) in the relationship between family management and firm performance in family small and medium-sized enterprises (SMEs). A questionnaire was conducted by 617 managers of family SMEs in Spain, and our model was tested using partial least squares. Our findings show that both MCS and TI play crucial mediating roles in the understanding of the relationship between family management and firm performance. As a result, family-managed firms that utilize MCS and produce TI are much more likely to generate better performance. These results encourage family managers to use formal MCS because in that way they will contribute to obtaining better firm performance, directly and indirectly through TI. We focus on private family SMEs, because these specific firms contribute significantly to the economies worldwide. This paper contributes to resolve the controversy regarding the relationship between family management and firm performance introducing MCS and TI as mediating factors.

Highlights

Previous research literature highlights the importance of family firms in developed economies due to their importance to promote employment, to drive economic activity, and to contribute to wealth generation in countries through gross domestic product [1,2]
We initially explained in two steps how family management impacts on firm performance through the use of management control systems (MCS): Firstly, we justified how family management influences the use of MCS, and secondly, we showed how MCS impacts on firm performance
Once we demonstrated the effect of family management on MCS, we focused on the effect of family management on technological innovation (TI) through the implementation of MCS

Summary

Introduction

Previous research literature highlights the importance of family firms in developed economies due to their importance to promote employment, to drive economic activity, and to contribute to wealth generation in countries through gross domestic product [1,2]. This is the reason for the broadening of a recent, but already well established, family businesses research field. Recent literature has emphasized the importance of considering the differences between the types of SMEs [10] and taking into account the high level of heterogeneity within the small and medium family firms, concerning innovation and its role as a driver of SME performance [8,11,12]

Objectives

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Conclusion