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The Impact of Family Involvement on SMEs’ Performance: Theory and Evidence

Authors

  • Alfredo De Massis,

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    • Alfredo De Massis is director of the Centre for Family Business and reader in Family Business and Innovation at IEED, Lancaster University Management School, and professor of Family Entrepreneurship at the University of Bergamo.
  • Josip Kotlar,

    Corresponding author
    • Address correspondence to: Josip Kotlar, IEED, Lancaster University Management School, LA1 4QL, Lancaster (UK). E-mail: j.kotlar@lancaster.ac.uk.

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    • Josip Kotlar is senior research associate at IEED, Lancaster University Management School.
  • Giovanna Campopiano,

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    • Giovanna Campopiano is research fellow at the University of Bergamo.
  • Lucio Cassia

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    • Lucio Cassia is professor of Strategic Management at the University of Bergamo and director of CYFE.

Abstract

By complementing agency theory with behavioral assumptions, we explore the effects of family involvement on small and medium enterprises’ (SMEs) performance. We identify three separate dimensions of family involvement and hypothesize nonlinear, direct, and interaction effects on the performance of an SME. The evidence on 787 SMEs suggests that an inverted U-shaped relationship exists between family ownership and performance, and ownership dispersion among family members negatively affects performance. Balancing family and nonfamily members in the top management team (TMT) is found to be beneficial to SMEs’ performance, but the family ratio in the TMT becomes crucial only at high levels of family ownership.

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