Are performance differences between family and non‐family SMEs uniform across all firm sizes?

Abstract

Purpose

The purpose of this study is to examine the impact of firm size on performance (measured as profits, growth, efficiency and liquidity) differences between family and non‐family small‐ to medium‐sized enterprises (SMEs).

Design/methodology/approach

The samples of 441 family and 473 non‐family firms were divided into four size groups and performance differences analysed for each size group using MANOVA.

Findings

The findings indicate that family SMEs perform at least as well as non‐family SMEs. Although the two types of firms shared several similar performance characteristics at the small level, certain differences were evident. Performance differences between family and non‐family SMEs became prominent at the critical growth phase (20‐49 employees), reached an optimum at 50‐99 employees and narrowed again thereafter. For family firms, the benefits of higher gross margins and efficient use of assets began to wane after 100 plus employees but the disadvantages of lower employee performance continued.

Research limitations/implications

The study could be improved by a longitudinal examination of the same firms across various growth stages. Further, the findings may be industry‐specific and not generally applicable.

Practical implications

The findings show that greater resources do not necessary lead to better performance and that non‐family firms could benefit from more efficient use of resources. The findings also confirm that the benefits of the informal system are not sustainable at larger firm sizes and that larger family firms would benefit from improved management of employee performance.

Originality/value

The pattern of performance differences observed between family and non‐family SMEs is unique to the paper. The paper shows that differences in performance between the two types of firms noted in the literature do no hold at all firm sizes.

Citation

Kotey, B. (2005), "Are performance differences between family and non‐family SMEs uniform across all firm sizes?", International Journal of Entrepreneurial Behavior & Research, Vol. 11 No. 6, pp. 394-421. https://doi.org/10.1108/13552550510625168