The impact of small- and medium-sized family firms on economic growth
- 2.1k Downloads
Drawing on family business studies and the knowledge-based view of economic growth, we develop and test a model of how the prevalence of small- and medium-size enterprises (SMEs) under family control affects economic growth. Specifically, we propose there is an inverted U-shaped relationship between family SMEs’ proportional representation and economic growth owing to their relative strengths and limitations vis-à-vis non-family SMEs. Using state-level data from the US between 2004 and 2010, we find support for our hypothesis and the underlying contention that economic growth is maximized when an economy includes a balanced mix of family and non-family SMEs.
KeywordsFamily business Economic growth Family firms SMEs Knowledge asymmetry
JEL ClassificationsD82 asymmetric information L26 entrepreneurship O47 empirical studies of economic growth O51 US
Compliance with ethical standards
The authors declare that their manuscript is compliant with ethical standards and they have no conflict of interest.
- Acs, Z. J., Brooksbank, D., O’Gorman, C, Pickernell, D. & Terjesen, S. (2007). The knowledge spillover theory of entrepreneurship and foreign direct investment. Jena Economic Research Papers, 2007-059.Google Scholar
- Astrachan, J. H., & Shanker, M. C. (2003). Family businesses’ contribution to the U.S. economy: A closer look. Family Business Review, 16(3), 211–219.Google Scholar
- Audretsch, D. B., & Feldman, M. P. (1996). R&D spillovers and the geography of innovation and production. American Economic Review, 86(3), 630–640.Google Scholar
- Author, W. B. (1994). Increasing returns and path dependence in the economy. Ann Arbor, MI: The University of Michigan Press.Google Scholar
- Benedict, B. (1968). Family firms and economic development. Southwestern Journal of Anthropology, 24(1), 1–19.Google Scholar
- Bennedsen, M., Perez-Gonzalez, F., & Wolfenzon, D. (2010). The governance of family firms. In K. H. Baker & R. Anderson (Eds.), Corporate governance: A synthesis of theory, research, and practice (pp. 371–389). Hoboken: Wiley.Google Scholar
- Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the family business by behavior. Entrepreneurship Theory and Practice, 23(4), 19–39.Google Scholar
- De Massis, A., Kotlar, J., Campopiano, G., & Cassia, L. (2013b). The impact of family involvement on SMEs’ performance: Theory and evidence. Journal of Small Business Management. doi: 10.1111/jsbm.12093.
- Fuchs, V. (1968). The service economy. New York: Columbia University Press.Google Scholar
- Gersick, K. E., Davis, J. A., Hampton, M. M., & Lansberg, I. (1997). Generation to generation: Life cycles of the family business. Boston, MA: Harvard Business School Press.Google Scholar
- Harkavy, I., & Zuckerman, H. (1999). Eds and Meds: Cities’ Hidden Assets. Washington, DC: The Brookings Institution Survey Series.Google Scholar
- Hicks, J. (1969). A theory of economic history. Oxford: Clarendon Press.Google Scholar
- Morck, R. K., Stangeland, D. A., & Yeung, B. (1998). Inherited wealth, corporate control and economic growth. The William Davidson Institute Working Paper Number 209.Google Scholar
- Oppenheim, A. N. (1966). Questionnaire design and attitude measurement. New York: Free Press.Google Scholar
- Rothwell, R., & Zegveld, W. (1982). Innovation and the small and medium sized firm. University of Illinois at Urbana-Champaign’s Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship.Google Scholar
- Schumpeter, J. (1934). The theory of economic development. Cambridge: Harvard University Press.Google Scholar