Internal social capital and entrepreneurial orientation in family firms: A double-edged sword

Family bu sinesses are uniquely capable of holding two distinct forms of social relations: family social capital and non-family social capital. Family social capital represents the familial relationship between family members and their external networks. Non-family social capital refers to social relationships in an organizational context. Researchers have often acknowledged that family social capital is a “good thing.” However, previous research suggests that family social relationships can transmit dysfunctional family traits to the broader family business network. As a result of these mixed findings, the question has shifted from discussing whether family firms have more entrepreneurial orientation than non-family firms to investigating the circumstances under which family firms portray more entrepreneurial orientation because of their social relationships. To shed light on this paradox, we try to answer the following question: “How does the internal social capital resulting from the mutual interactions between family and business systems affects entrepreneurial orientation in family businesses?” Based on a qualitative approach, our study’s findings reveal that when families adopt business-oriented thinking, significant internal social capital flows between the family and the business are formed, and these flows are strongly related to entrepreneurial outcomes. However, when a family-oriented mentality is applied, the weak interaction between the family system and the business system leads to the adoption of more conservative business strategies, thus reducing the entrepreneurial orientation of these family businesses.