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Family firm competitiveness and owner involvement

Family firm competitiveness and owner involvement In many countries, small and medium-sizes enterprises (SMEs) are primarily responsible for wealth, economic growth, innovation and research and development. In this paper, the authors examine the impact of family ownership and owner involvement on the financial performance of unlisted Finnish SMEs.Design/methodology/approachThis is an empirical paper using a random sample of 1,137 non-listed Finnish SMEs. Through regression analyses and robustness tests, the authors examine the effects of family management, family and employee ownership and involvement.FindingsUsing profitability measures, the authors find family-owned and controlled SMEs perform significantly better than non-family firms. The number of family members actively involved in daily business operations bears a significant negative relation to firm performance. In contrast, non-family firms in which owners are actively involved, provide comparable returns to family firms, suggesting that in non-family firms active involvement contributes to performance. The authors find that employee ownership in SMEs does not provide an efficient way to compensate employees since more dispersed ownership does not lead to higher performance.Research limitations/implicationsSME employee ownership does not provide an efficient way to compensate employees since more dispersed ownership does not lead to higher performance.Practical implicationsIn the case of Finland, family ownership is an effective organisational structure. As the depth of the COVID pandemic remains uncertain, firms with committed ownership are key to the economic recovery.Originality/valueThe authors approach the family ownership and involvement issue from a different angle. Unlike earlier studies, the authors examine the impact of both family ownership and involvement on the financial performance of privately owned SMEs. This paper helps shed light on the role of family ownership and involvement as a possible explanatory factor of overall economic performance. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Accounting Research Emerald Publishing

Family firm competitiveness and owner involvement

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0967-5426
DOI
10.1108/jaar-11-2021-0317
Publisher site
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Abstract

In many countries, small and medium-sizes enterprises (SMEs) are primarily responsible for wealth, economic growth, innovation and research and development. In this paper, the authors examine the impact of family ownership and owner involvement on the financial performance of unlisted Finnish SMEs.Design/methodology/approachThis is an empirical paper using a random sample of 1,137 non-listed Finnish SMEs. Through regression analyses and robustness tests, the authors examine the effects of family management, family and employee ownership and involvement.FindingsUsing profitability measures, the authors find family-owned and controlled SMEs perform significantly better than non-family firms. The number of family members actively involved in daily business operations bears a significant negative relation to firm performance. In contrast, non-family firms in which owners are actively involved, provide comparable returns to family firms, suggesting that in non-family firms active involvement contributes to performance. The authors find that employee ownership in SMEs does not provide an efficient way to compensate employees since more dispersed ownership does not lead to higher performance.Research limitations/implicationsSME employee ownership does not provide an efficient way to compensate employees since more dispersed ownership does not lead to higher performance.Practical implicationsIn the case of Finland, family ownership is an effective organisational structure. As the depth of the COVID pandemic remains uncertain, firms with committed ownership are key to the economic recovery.Originality/valueThe authors approach the family ownership and involvement issue from a different angle. Unlike earlier studies, the authors examine the impact of both family ownership and involvement on the financial performance of privately owned SMEs. This paper helps shed light on the role of family ownership and involvement as a possible explanatory factor of overall economic performance.

Journal

Journal of Applied Accounting Research – Emerald Publishing

Published: Mar 14, 2023

Keywords: SMEs; Ownership; Family firms; Firm performance; Family involvement

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