Social proximity and firm performance: The importance of family member ties in workplaces

Abstract

This study empirically assesses the role of social proximity, defined as the concentration of family members (FM) in firms, on firm performance. Based on longitudinal micro-data for the period 1995–2010 connecting information on workers and their workplaces in the Swedish labour market, the effects of FM (parents, children, siblings and grandparents) on per capita productivity in 15,359 firms were analysed. The results indicate that FM positively affect firm performance. In particular, the results suggest that in specialized regions (mainly small regions) FM have a positive influence on performance and can thus compensate for relative shortage of regional agglomeration economies.