Long-term orientation, family-intensive governance arrangements, and firm performance: an institutional economics perspective

Michele Pinelli (), Francesco Debellis () and Alfredo Massis ()
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Michele Pinelli: Ca’ Foscari University
Francesco Debellis: University of Vienna
Alfredo Massis: Free University of Bolzano

Small Business Economics, 2024, vol. 63, issue 2, No 10, 754 pages

Abstract: Abstract In this study, we examine the effect of cultural long-term orientation on the likelihood of adopting more family-intensive governance arrangements (FGAs) and the impact on firm performance. FGAs may impose various costs on the firm, including the extraction of private benefits, conflicts with professional managers, paternalistic human resource management practices, and lower legitimacy. Drawing on institutional economics, we theorize that cultural long-term orientation reduces some of these costs, thereby increasing the relative efficiency of FGAs as a governance option. Thus, we expect FGAs to be adopted more frequently in countries with a more long-term orientation. We also expect FGAs to have a less negative impact on performance in these countries as a result of these lower costs. The results of mixed-effects regressions on a cross-sectional sample of 3221 listed family and nonfamily firms in 19 countries confirm that FGAs are more likely to be adopted in more long-term oriented countries. We also find that FGAs have a negative effect on firm performance, but not that cultural long-term orientation weakens this relationship. However, an interesting mediating effect emerges whereby cultural long-term orientation increases the likelihood of adopting FGAs but negatively affects firm performance.

Keywords: Family business; Governance; Culture; Institutional economics; Long-term orientation (search for similar items in EconPapers)
JEL-codes: G32 G34 L20 L25 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11187-024-00877-4

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