Family involvement, firm size, and performance of private-owned enterprises

Abstract

The debate over the effect of “family involvement” on the performance of private enterprises has existed for a long time. However, most previous research ignored the organizational characteristics. In this paper, we incorporate one of the basic organizational characteristics—firm size—into our analysis by using data from a nationwide sample survey of private enterprises. From the two dimensions of family control and family intension, this work reveals that the agency problem and the resource advantage caused by family involvement were different in private-owned enterprises with different scales. The static positive effect of family involvement decreased as the scale of an enterprise increased. After reaching a certain scale, family involvement would have a negative impact on firm performance.