Does family employment enhance MSEs performance?
Integrating socioemotional wealth and family embeddedness perspectives
, Rachida Justo
, Julio O. De Castro
Instituto de Empresa Business School, Pinar 7, Bajo, 28006, Madrid, Spain
Instituto de Empresa Business School, Maria de Molina 12, Bajo, 28006, Madrid, Spain
Babson College, 201b Blank center, 231 Forest Street, Babson Park, MA 02457, United States
article info abstract
Received 17 June 2008
Received in revised form 28 July 2010
Accepted 28 July 2010
Available online 23 September 2010
Field Editor: P. Phan
This paper analyzes the effect of family employment on performance in micro and small
enterprises (MSEs) by combining two research perspectives that, until now, have been
conducted separately: the family embeddedness perspective of entrepreneurship (Aldrich and
Cliff, 2003) and the socioemotional wealth (SEW) approach to family business (Gomez-Mejia
et al 2007). Our integrated perspective allows us to highlight how the nature of the employment
relationships in MSEs enhances the beneﬁts derived from the socioemotional endowment
associated with family labor, and reduces the opportunity costs of employing relatives.
Moreover, we assert that this relationship is moderated by speciﬁc family characteristics that
determine the ﬁrm's ability to preserve the SEW, while at the same time pursuing ﬁnancial
goals. Our results provide partial support to the enhancing role of family labour on MSEs
performance: employing family members increases sales but decreases proﬁtability as
measured by ROA. This effect also results in improved performance for women-led ﬁrms and
for ﬁrms that have received family funding, but impairs MSEs performance when the business is
the main source of the owner´s household income.
© 2010 Elsevier Inc. All rights reserved.
Micro and small enterprises
1. Executive summary
Despite the overwhelming signiﬁcance of family employment for micro and small enterprises (MSEs), studies trying to
untangle its net effect on performance have found inconsistent results (Olson et al., 2003). We argue that part of this controversy
reﬂects the traditional approach that dates to Parson's work (Parsons, 1952) to separate the kinship-oriented family from the
proﬁt-driven business. However, this notion that the family is antithetical to the functioning of the business does not apply to the
case of micro and small ﬁrms in which the business and the family are so closely interrelated as to justify the use of the term
“family economic unit” (Baines and Wheelock, 1998).
Acknowledging this, we adopt a family embeddedness perspective and draw on the family business literature that has stressed
the non-economic beneﬁts that result from family ties in organizations (Schulze et al., 2003b; Stafford et al., 1999; Tagiuri and
Davis, 1996)—the so called socioemotional wealth, SEW (Gómez-Mejia et al., 2007). The family embeddedness perspective
analyzes the role of the family on entrepreneurial decision making and outcomes (Aldrich and Cliff, 2003; Heck and Trent, 1999;
Zahra, 2003). The socioemotional perspective of family business deals with the unique characteristics brought by the presence of
family ties in contractual relationships in organizations (Berrone et al., 2010; Gómez-Mejia et al 2010).
Journal of Business Venturing 27 (2012) 62–76
⁎ Corresponding author. Tel.: + 34 917453492; fax: +34 917452148.
E-mail addresses: firstname.lastname@example.org (C. Cruz), email@example.com (R. Justo), Jdecastro@babson.edu (J.O. De Castro).
Tel.: + 34 917452415; fax: +34 917454769.
0883-9026/$ – see front matter © 2010 Elsevier Inc. All rights reserved.
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