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Does family employment enhance MSEs performance?

Author

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  • Cruz, Cristina
  • Justo, Rachida
  • De Castro, Julio O.

Abstract

This paper analyzes the effect of family employment on performance in micro and small enterprises (MSEs) by combining two research perspectives that, until now, have been conducted separately: the family embeddedness perspective of entrepreneurship (Aldrich and Cliff, 2003) and the socioemotional wealth (SEW) approach to family business (Gomez-Mejia et al 2007). Our integrated perspective allows us to highlight how the nature of the employment relationships in MSEs enhances the benefits derived from the socioemotional endowment associated with family labor, and reduces the opportunity costs of employing relatives. Moreover, we assert that this relationship is moderated by specific family characteristics that determine the firm's ability to preserve the SEW, while at the same time pursuing financial goals. Our results provide partial support to the enhancing role of family labour on MSEs performance: employing family members increases sales but decreases profitability as measured by ROA. This effect also results in improved performance for women-led firms and for firms that have received family funding, but impairs MSEs performance when the business is the main source of the owner´s household income.

Suggested Citation

  • Cruz, Cristina & Justo, Rachida & De Castro, Julio O., 2012. "Does family employment enhance MSEs performance?," Journal of Business Venturing, Elsevier, vol. 27(1), pages 62-76.
    • Handle: RePEc:eee:jbvent:v:27:y:2012:i:1:p:62-76
    DOI: 10.1016/j.jbusvent.2010.07.002
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    Citations

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    Cited by:

    1. Hamza Smajić & Ramo Palalić & Irfan Butt & Nisar Ahmed & Veland Ramadani, 2025. "Socioemotional wealth and family firms performance: a framework and future pathways," Review of Managerial Science, Springer, vol. 19(4), pages 1257-1296, April.
    2. Song Lin & Shihui Wang, 2019. "How does the age of serial entrepreneurs influence their re-venture speed after a business failure?," Small Business Economics, Springer, vol. 52(3), pages 651-666, March.
    3. Islam, Nazrul & Wang, Qidong & Marinakis, Yorgos & Walsh, Steven, 2022. "Family enterprise and technological innovation," Journal of Business Research, Elsevier, vol. 147(C), pages 208-221.
    4. Sven Wolff & Christina Guenther & Petra Moog & David B. Audretsch, 2023. "The geography of the continuum of entrepreneurship activities—a first glance based on German data," The Journal of Technology Transfer, Springer, vol. 48(4), pages 1243-1273, August.
    5. Köhn, Philipp & Ruf, Philipp Julian & Moog, Petra, 2023. "Why are non-family employees intrapreneurially active in family firms? A multiple case study," Journal of Family Business Strategy, Elsevier, vol. 14(3).
    6. Andreana Drencheva & Wee Chan Au, 2023. "Bringing the Family Logic in: From Duality to Plurality in Social Enterprises," Journal of Business Ethics, Springer, vol. 182(1), pages 77-93, January.

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