How social capital influences performance in family firms: the moderating role of nepotism

Abstract

Although a large body of research has explored how organizational social capital (OSC) benefits organizational performance, results are not conclusive. Consequently, scholars have called for more research on the factors that may moderate the effects of OSC on organizational performance. We address this research gap and examine the role of nepotism, which is the preferential treatment of family members in human resource management (HRM)-related decisions, such as development or rewards, in the relationship between OSC and organizational performance. Using a sample of 77 family firms in Switzerland, we found that the relationship between OSC and organizational performance is stronger in firms with higher nepotism. This research contributes to the HRM literature by exploring how the preferential treatment of family members in HRM-related decisions (i.e. greater nepotism) can provide benefits to family firms in terms of the impact of OSC on organizational performance.

Keywords:

• family business
• HRM practices
• nepotism
• organizational performance
• social capital

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Given the potential for common method bias in the data, we additionally conducted moderated regression analysis using the same controls and the number of family members on the board as a proxy for nepotistic practices in the organization. Results supported our argumentation. Specifically, the interaction term entered in Step 3 was marginally significant (p <.10), indicating that OSC related to organizational performance more strongly in organizations in which more family members were on the board.