Urbanization economies, proximity dimensions and productivity

Abstract

Family business scholars have mainly focused on the specificities that the family brings into the business, making it a unique form of organisation and explaining differences in family and non-family firm performance. Even though some of these differences originate from the interrelationship between the family and business domains, family business research is contextless. To address this limitation, in this chapter, we follow the regional familiness approach and theorise that family-managed firms have advantages over their non-family counterparts when operating in small municipalities. While family firms are in a superior position to benefit from proximity in small municipalities due to their emotional and social connections, their competitive advantages tend to disappear in large urban settings. We test our conjecture on a large panel dataset of Spanish manufacturing firms covering the 2002–2015 period. We find a negative association between municipality size and family-managed firms’ productivity. In particular, being located in a large urban setting is a source of diseconomies of agglomeration for family managed-firms. As such, family-managed firms are better suited to exploit highly embedded contexts, such as small municipalities.