Abstract
This study empirically assesses the role of social proximity, defined as the concentration of family members (FM) in firms, on firm performance. Based on longitudinal micro-data for the period 1995–2010 connecting information on workers and their workplaces in the Swedish labour market, the effects of FM (parents, children, siblings and grandparents) on per capita productivity in 15,359 firms were analysed. The results indicate that FM positively affect firm performance. In particular, the results suggest that in specialized regions (mainly small regions) FM have a positive influence on performance and can thus compensate for relative shortage of regional agglomeration economies.
Highlights
In the regional science literature it is widely recognized that proximity is essential for understanding spatial differences in economic performance
Our results indicate that in-house concentration of family members (FM) positively affect performance even when jointly regressed with both firm- and regional level factors
Our results indicate that FM ties facilitate firm performance
Summary
In the regional science literature it is widely recognized that proximity is essential for understanding spatial differences in economic performance. Following Boschma’s (2005) critical overview it is argued that there is more than geographical proximity that influences the performance of firms. Whereas much attention recently has been paid to the role of cognitive proximity in the literature on related variety (e.g., Boschma, Eriksson, & Lindgren, 2009, 2014; Frenken, van Oort, & Verburg, 2007) and how this interacts with geographical proximity (e.g., Eriksson, 2011), less attention has been paid to how social proximity may influence firm performance. Social proximity of different kinds (e.g., family members (FM), co-workers, friends, etc.) can affect economic outcomes in many ways. Firm performance is affected by socially embedded relationships present in the firm (Boschma, 2005). Firm performance is affected by socially embedded relationships present in the firm (Boschma, 2005). Maskell and Malmberg (1999) posit that for firms to learn they may require some kind of social ties because trust-laden social relationships facilitate the exchange of tacit knowledge, which is more difficult to transfer through the market mechanism.
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