Formalized HR practices and firm performance: an empirical comparison of family and non-family firms

Abstract

The influence of the family on human resource (HR) management structures creates important idiosyncrasies with potential implications in terms of firm performance. Based on the agency and socioemotional wealth perspectives, this paper examines the formalization and effectiveness of three basic HR practices – selection, training and compensation – in different contexts of family and non-family firms. Using a sample of 500 Spanish companies, the results show that a higher degree of HR formalization has a positive influence on firm performance, confirming the negative moderating influence of family involvement on the relationship between the formalization of training practices and the firm performance. In addition, the findings indicate that the mediating role of selection practices in the relationship between training and firm performance is smaller in family than in non-family firms.

Keywords:

• Formalized human resource practices
• family vs. non-family firms
• agency theory
• socioemotional wealth perspective
• firm performance

Acknowledgements

Financial support from the Spanish Government under the Research Project ECO2014-54301-P and from Fundación Cajamurcia (Spain) is acknowledged.

Notes

1. The NFI, NNFI, and CFI statistics should be higher than .9 and the RMSEA should be less than .08, as recommended in the literature (Hoyle & Panter, 1995).