Contextualizing employment outcomes in family business research: current findings and future research avenues

Most the research in family business falls in this quadrant (Quadrant A in Table 1) and to better understand its content we re-organize the retrieved article in two sub-groups based on how the context was interpreted: context by sampling (those articles that use one single country) and context by comparing (those articles that use two or more countries)

There are 39 articles (almost 60% of the retrieved articles—see Table 3) contextualizing the relationship between family firms and employment at the firm level by sampling the phenomenon of analysis in a specific country. While developed countries represent the prominent research context (e.g., the United States, Italy and Belgium), only two studies cover emerging economies (e.g., China, Korea). In these contributions, family dimensions, as a micro-context, are more important than the meso- and macro-contexts implicitly defined by the origin of the sample. Regarding family dimensions, most of the articles use the demographic approach when measuring family involvement (e.g., family owned, family managed, family controlled, and generation involved) (Basco 2013) to capture family effects on employment outcomes, while only two articles (Ensley et al. 2007; Khanin et al. 2012) focus on essence dimensions (e.g., culture) of family involvement.

Regarding the theoretical background, while there are several articles that rely on a data-driven approach to explore and explain employment outcomes in family and non-family firms (e.g., Bassanini et al. 2013; Bennedsen et al. 2019), the rest of the articles focus on two important specificities of family firms that may affect employment outcomes. First, the internal familiness emerging from the interrelationship between the family and the firm (e.g., Rutherford et al. 2008) make family firms unique in their behaviour toward their employees because of the family’s long-term perspective (e.g., Blanco-Mazagatos et al. 2018), the close involvement of the family in the firm (e.g., Powell and Eddleston 2013), and the family’s commitment (e.g., McLarty et al. 2018). Most of these studies are related to well-stablished theories applied to family businesses, such as upper echelon theory (Pittino et al. 2019), stewardship theory (Neckebrouck et al. 2018), and behavioural agency theory (Gomez-Mejia et al. 2018). Second, the external relationship between the family firm and its surroundings is based on identity theory and related concepts, such as social identity (e.g., Barnett et al. 2009) and social embeddedness (e.g., Khanin et al. 2012), among others. The latter are related to family owners’ image, sense of pride, and community ties, all of which enable family firms to achieve different employment outcomes from that of non-family firms. Even though family business scholars have highlighted the importance of familiness in its effect on employment outcomes, this external relationship is gaining in importance, so future research should combine both theoretical streams to achieve a holistic perspective of the phenomenon.

Next, we analyse the contributions of the retrieved articles by considering three main clusters of employment outcomes: employment growth, downsizing, and employment quality. First, most of the articles rely extensively on employment growth as the general measure of firm performance (Eddleston et al. 2013) and corporate social responsibility (e.g., Block 2010). The empirical evidence shows conflicting results for the relationship between family involvement dimensions (e.g., ownership, management, governance and succession) and firm employment growth. The family ownership dimension is one of the main determinants affecting employment growth for listed family firms (Amore et al. 2017), family-owned small and medium-sized enterprises (Becchetti and Trovato 2002), and venture capital–backed family firms (Martí et al. 2013) in the United States, Italy, and Spain, respectively. However, the aforementioned relationship is negative for the case of family entrepreneurial start-ups in the context of Denmark (Coad and Timmermans 2014). In disentangling the family effect by considering family ownership, family management, and family generation (Astrachan et al. 2002), whereas Rutherford et al. (2008) did not find evidence that family involvement affects employment growth in the US context, in a sample of Belgian family firms, Pittino et al. (2019) find that increased generational involvement in ownership positions affects firms’ employment growth.

To address the contradictory results emerging from studies exploring the direct effect of family involvement on employment growth, an alternative research path focuses on conditional effects (moderation and mediation as a contingency approach). For instance, the impact of family ownership on firm growth may be more complex depending on firm-specific characteristics. From this perspective, Bjuggren et al. (2013) reveal that family ownership negatively influences the probability that a firm will be have high-growth, but this negative effect disappears when a longer time period is considered. Additionally, succession is another determinant of employment growth. Based on a sample of small and medium Austrian family firms, Diwisch et al. (2009) find that firms that plan their succession have higher employment growth than firms that lack a formal succession plan. However, the effectiveness of succession planning may depend on the generation involved. For instance, Eddleston et al. (2013) reveal that succession is more conducive to growth for the first, third, and later generations. Unlike previous studies, mediating variables explain the different propensity of family and non-family firms to grow in terms of employment. For instance, Ensley et al. (2007) show that, compared to their non-family counterparts, pay dispersion in top management teams produces stronger negative behavioural dynamics that adversely affect employment growth. An additional example of mediation is presented by Stenholm et al. (2016), based on a sample of Finnish firms, who find that the relationship between innovation and employment growth is mediated by entrepreneurial activity only in family firms.

Beyond the different academic perspectives (e.g., management, family business, business economics) used to investigate the phenomenon, several theories have been applied to interpret the relationship between family involvement and employment outcomes. There are two main theoretical justifications. First, there is an external link between the firm and its surroundings created by family involvement. The presence of this connection is supported by complementary approaches, such as social identity theory and social capital and stakeholder perspectives. According to these approaches, family firms are deeply embedded in their local surroundings because of their connections with the community over time, resulting in social pressure to contribute to the future wellbeing of the community itself (Bassanini et al. 2013; D’Aurizio and Romano 2013). Second, there is an internal link between family and firm created by the interaction between family and business systems. The presence of this link is supported by the resource-based view, stewardship theory, and the socio-emotional wealth approach. From this perspective, the renewal of family bonds through dynastic succession leads family firms to proactively engage employees as internal stakeholders (Cennamo et al. 2012).

An alternative group of dependent variables in the articles retrieved is downsizing. Most empirical evidence on this topic shows that that there is a negative association between family involvement and the likelihood of downsizing, at least in the United States (Block 2010; Stavrou et al. 2007), France (Bassanini et al. 2013), Germany (Kappes and Schmid 2013) and Denmark (Bennedsen et al. 2019). The main theoretical rationale for explaining this finding comes from social identity theory (Block 2010), stakeholder theory (Stavrou et al. 2007), and the socio-emotional wealth approach (Colombo et al. 2014). Unlike non-family firms, family owners are more likely to care about their social identity and reputation in the community they are embedded in and thus tend to avoid reputation-damaging behaviour, such as layoffs. In other words, the relationship between family firms and their employees seems to be driven by normative commitment and moral principles rather than merely financial considerations (Stavrou et al. 2007). A number of contributions show that the relationship between family firms and employee turnover is mediated by different factors. For instance, Hu and Schaufeli (2011) reveal that job insecurity (i.e., past downsizing and current remuneration) affect turnover intentions via employee wellbeing (i.e., burnout and work engagement). Further, based on a sample of family-owned businesses, Khanin et al. (2012) find that family-business embeddedness and work centrality reduce family employees’ turnover intentions by magnifying their job satisfaction. More recently, Vardaman et al. (2019) show that friendship ties between family and non-family members negatively influence non-family employee turnover indirectly through organizational identification. However, the negative association between family firm status and turnover is contingent on firms’ size, with only small family firms showing distinctive behaviour toward employees (Kölling 2020).

Finally, further evidence suggests that, despite having less incentive to downsize, family firms are associated with low-quality employment resulting in lower salaries than non-family firms in France (Bassanini et al. 2013) and higher voluntary turnover in Belgium (Neckebrouck et al. 2018). Indeed, there is also evidence showing that job insecurity (Hu and Schaufeli 2011) in China, disaffection (Khanin 2013) in the United States, a low employee relationship orientation in firms (Cameron et al. 2009) in Australia, and superior employment prospects elsewhere (Mahto et al. 2020) affect employees’ turnover intentions in family firms. However, the empirical evidence of employment quality in family firms is contradictory. It was found that some employment practices such as reciprocity is particularly strong in family firms whereby family ties can cross the family domain to encompass non-family employees (Vardaman et al. 2018). For instance, evidence shows that embedding familiness into human resources practices is an effective way to improve employee retention in the Chinese (Deng 2018), Austrian and Hungarian (Pittino et al. 2016), and North American contexts (Khanin et al. 2012). However, the perceived inequity stemming from the asymmetric treatment of family and non-family members may reduce the benefits of human resource practices on firms’ performance (Madison et al. 2018).

We can conclude that aside from differences stemming from the definition of family firm used (i.e., the way the family firm concept is activated/defined to distinguish family firms from non-family firms), current research has focused on determining whether family involvement (captured using demographic or essence dimensions) in the firm affects employment outcomes (i.e., growth, reduction or quality of employment). Current evidence shows that while family firms generally seem to downsize less than their non-family firm counterparts, their effect on employment growth and employment quality is less evident. This evidence could be explained by the lack of theoretical predictability across contexts. That is, even though these findings make important contributions, the limitation lies in the fact that these results are context-less, implying a lack of generalizability. In our analysis of the next two quadrants at the firm level, we explain and interpret the extent to which family business scholars have overcome this context-less limitation.

Only four articles (equal to 6% of the retrieved articles—see Table 4) contextualize the relationship between family firms and firm employment by comparing family and non-family firms operating in different geographical areas. The articles in this quadrant mostly stress the role of the location of the family firm in exploiting the competitive advantages derived from family involvement in the firm. Specifically, these studies address the question of whether the surrounding socio-economic environment influences family and non-family firm employment outcomes differently. The contributions in this quadrant focus on the urban/rural location of family firms in Sweden, and their conclusions are consistent: family firms exhibit better employment growth than non-family firms in rural areas (Backman and Palmberg 2015; Baú et al. 2019; Karlsson 2018). This research line follows the theoretical rationale of social capital approach (Arregle et al. 2007; Pearson et al. 2008), the resource-based view of the firm (Barney 1991), and the local embeddedness/regional familiness perspective (Basco 2015; Stough et al. 2015), suggesting that family firms located in rural areas are better positioned to acquire, allocate, and manage valuable tangible (e.g., financial capital) and intangible resources (e.g., human capital) that positively affect employment growth.

Despite the importance of context for firm behaviour and employment, only the aforementioned studies attempt to compare employment outcomes, specifically employment growth, based on location. Even though these results regarding the urban–rural location of family firms align, all of the firms studied are located in the same country. Indeed, these findings set a precedent for Swedish policymakers (Basco and Bartkevičiūtė 2016), but that does not mean that these results can be generalized. Another limitation of these studies is related to how they measure location by focusing simply on different categorizations of urban–rural areas, which is a rough measure of socio-spatial context. There are so many assumptions (e.g., the type of embeddedness in local municipalities) when categorizations of urban–rural areas are used to explain the mechanisms behind these contexts and the advantages or disadvantages between family and non-family firms. The econometric exercises in these studies oversimplify reality by failing to measure the socio-economic dynamics occurring in these settings, so most of the conclusions are taken for granted. In the next quadrant at the firm level, we explore how current research overcomes some of the aforementioned limitations by measuring context.

There are 19 articles (29% of the retrieved articles—see Table 5) measuring context and its impact on the relationship between family firms and employment outcomes (Quadrant B in Table 1). Most of these studies adopt a cross-country approach in investigating the impact of context in the relationship between family firms and employment outcomes. The most common strategy in these articles consists of using contextual dimensions as moderator variables in the main relationship between family involvement (demographic or essence variables) and employment outcomes. The interpretation of context in this quadrant applies the multi-embeddedness framework for family firms (James et al. 2020) by discriminating between different contexts, such as the family (e.g., Amore et al. 2017), the meso-context (e.g., industry, labour market, or region) (e.g., Bach and Serrano-Velarde 2015), and the country (Chen et al. 2014). Each of these contexts combines existing family business approaches (e.g., socioemotional wealth) with mainstream theories, such as institutional theory (van Essen et al. 2015) and occupational choice theory (Block et al. 2018). Following the structure presented for Quadrant A, we next analyse the contributions of the retrieved articles by considering three main clusters: employment growth, downsizing, and employment quality.

First, as in Quadrant A, most of the articles focus on employment growth and their contributions lie in revealing the contingent effect of context on the relationship between family involvement and employment growth. Regarding the micro-context, while Bjuggren et al. (2013) find that the negative relationship between family involvement and employment growth disappears for medium and large firms in Sweden, particularly when a longer time period is considered, Ernst et al. (2012) find that firm age seems to play a role in employment growth in the Netherlands. In particular, they show that a non-linear relationship exists between family involvement and employment growth across firm age. We did not find any articles measuring the meso-context, such as industry, to contextualize family involvement and employment outcomes, which indicates an opportunity for future research. Finally, regarding the macro-context, the research mainly focuses on formal institutional contexts and economic crises. For instance, in the United States, Lee (2006) find that family management fosters employment stability during economic slowdowns. More recently, based on a sample of Spanish firms, Amato et al. (2020) found that during crises, family firms located in small municipalities have higher employment growth than their non-family counterparts located in the same socio-spatial settings. In a cross-country study, Chen et al. (2014) find that the quality of the regulatory environment negatively moderates the relationship between family ownership and firm employment growth. In another cross-country analysis, Ellul et al. (2018) find evidence of the “substitutability hypothesis” between unemployment insurance offered by the government and that offered by firms. In particular family firms have been found offer more employment protection than non-family firms but only in countries with less generous national insurance policies. Finally, Bennedsen et al. (2019) found that family firms show less labour volatility, particularly in countries with fewer labour market regulations, wherein implicit insurance is most valuable.

The second most important group of articles explores downsizing. Regarding the micro-context, in a study of French family firms, Bach and Serrano-Velarde (2015) find that CEO transition in dynastic firms is associated with less workforce reduction than in non-dynastic firms. Regarding the meso-context, employment in less sensitive to unanticipated sales and value-added shocks from industry in the Swedish (Bjuggren 2015) and French contexts (Sraer and Thesmar 2007). With regard to the macro-context, Kim et al. (2020) study in the United States reveals that family firms are less likely to downsize, particularly when located in less populated areas, where the negative externalities resulting from massive layoffs would be higher. Finally, in a multi-country study, van Essen et al. (2015) find that family firms are more resilient (i.e., less likely to downsize) than non-family firms both before and during crisis periods.

The final group of articles covers employment quality related to wages and turnover. Regarding the micro-context, maritally-led firms have lower employment turnover than family and non-family firms in Italy (Amore et al. 2017). Moreover, leadership style, mediated by psychological ownership, is found to play an important role in explaining turnover intesntions among employees in German family firms (Bernhard and O’Driscoll 2011). In terms of the meso-context, Bach and Serrano-Velarde (2015) show that low wages are more common among dynastic family firms and are even more common in presence of the fictional labour market and conflictual labour-employer relations of the French context.

To sum up, our knowledge in this quadrant goes a step further than in the previous quadrants by attempting to measure context at micro-level (e.g., context in which couples work), meso-level (e.g., sales shock at the industry level), and macro-level (e.g., economic crises) to determine their impact on the relationship under study. This quadrant provides more information about when the direct general relationship between family involvement and employment growth (reported in Quadrant A) is positive and negative. In other words, context is interpreted as a moderator dimension that affects the strength and/or the direction of direct relationship and overcomes the conflicting empirical evidence emerging between family involvement and employment outcome (Quadrant A). In other words, context can better explain the nuances of the relationship and thus to make generalization from the results more accurate. The importance of context is also valid for downsizing and measures of employment quality. For instance, even though the research on contextualizing confirms the conclusion made in Quadrant A that family firms downsize less than non-family firms, this conclusion is even more apparent during economic crises. At the same time, family firms are less likely to reduce salaries, which seem to be lower than in non-family firms. Theoretically, the most important contribution of this quadrant is to show how theoretical predictions and the behaviour of the phenomenon itself (e.g., family firm) react to external dimensions at the micro-, meso-, macro-levels. Nevertheless, even with the steps to integrate context in the current research, the methodological approaches have hardly advanced. For instance, with the exception of Block et al. 's study (2018), there is no research using multi-level modelling to consider the nested nature of the data.

There are four studies (6% of the retrieved articles—see Table 6) at the aggregate level of analysis (Quadrant C in Table 1), which are exploratory in nature and use a data-driven approach. The first three, Astrachan and Shanker (2003); Bjuggren et al. (2011); and Andersson et al. (2018), estimate the economic impact of family firms in terms of workforce employed and GDP generated in the US and Swedish economies, respectively. In both studies, the whole estimation process is constrained by the definition of family firm. In the US economy, family businesses account for nearly one-third of the workforce employed if a broad definition of family firm is adopted. Similarly, in the Swedish economy, family firms contribute about one-fourth or one-fifth of the workforce based on the ownership criterion adopted (20% or 50% of family ownership). More recently, by drawing on official data covering the population of workplaces, workers, and their relatives in Sweden, Holm et al. (2018) assess the magnitude and composition of in-house kinship ties. The scholars find a negative association between kinship ties in workplaces and population density. Family firms, which represent a particular type of kinship tie, are particularly common in small marketplaces. However, all these findings come from one single country—Sweden—and they cannot be extrapolated to other developed and developing countries.

Even though this line of research is important for describing the employment role of family firms at country level, any conclusions may be premature because of the lack of comparable measures to identify the phenomenon of study across contexts (e.g., local, regional, and national) and the lack of reliable performance measures to understand the impact of family firms at aggregate level (e.g., aggregate measures of productivity, innovation, or exportation). Additionally, there is no research analysing and comparing the effect of family firms on aggregate employment in two or more municipalities, regions, or countries. Therefore, the most promising future research line for the family business field and subsequent contributions to policymaking is likely to come from this quadrant. Following Basco (2015), the unresolved question that emerges is whether the mere presence of family businesses is good or bad for growth and development at local, regional, and national level.

There is only one article exploring the extent to which family firm aggregate employment creation is affected by contextual dimensions (Quadrant D in Table 1). Mueller and Philippon (2011) found that the prevalence of family ownership is higher in countries in which labour relationships are hostile. This result is in line with the theoretical conception that the quality of the formal institutional environment (i.e., the effective laws, rights, and regulations) enhances ownership concentration and also the ownership held by families as mechanisms to guarantee large investors’ rights (Table 7).

The single article in Quadrant D shows the scarce cross-fertilization of family business studies with more mature disciplines conducting research at meso- and macro-level such as international business and regional studies among others. More research in this quadrant could enhance our understanding of the role that family firms play in different contexts and how the context boosts or hinders their contribution to employment creation. The lack of research on contextualizing aggregate outcomes suggests several possibilities for future lines of research, which we shall discuss in more detail in Sect. 5.

As a visual summary, Fig. 1 provides an integrative model of the relationship of family firm dimensions, contextual dimensions, level of analysis, and employment outcomes.