Impact of Outsiders on Firm Performance over Different Generations of Family-Owned SMEs

Authors

  • Amaia Maseda,

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    • Amaia Maseda is PhD in economics at University of the Basque Country, UPV/EHU.
  • Txomin Iturralde,

    Corresponding author
    • Address correspondence to: T. Iturralde, UPV/EHU—Departamento de Economía Financiera II, Avda. Lehendakari Agirre 83, E48015 Bilbao, Spain. E-mail: txomin.iturralde@ehu.es.

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    • Txomin Iturralde is PhD in economics at University of the Basque Country, UPV/EHU.
  • Blanca Arosa

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    • The authors would like to thank Family Business Centre of the University of the Basque Country for financial support (DFB/BFA and European Social Fund). This research has received financial support from the UPV/EHU (Project UPV/EHU 12/22).
    • Blanca Arosa is PhD in economics at University of the Basque Country, UPV/EHU.

  • The author would like to thank two anonymous referees and editors for their helpful comments and suggestions. Any remaining errors are our own.

Abstract

From the perspective of agency, resource-based view, and resource-dependence theories, we explore the impact of the presence of outside directors on firm performance in family small and medium-sized enterprise (SMEs). Using survey data from 369 Spanish family SMEs, our findings show an inverted U-shaped relationship between the proportion of outsiders on the boards of first- and second-generation family firms and firm performance. The results show that a balanced presence of outside directors contributes to value creation in family SMEs and confirm that the composition and the roles of the board of directors differ from generation to generation in family firms.

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