They Are Not All the Same! : Investigating the Effect of Executive versus Non-executive Family Board Members on Firm Performance

Basco, Rodrigo and Campopiano, Giovanna and Calabrò, Andrea and Kraus, Sascha (2020) They Are Not All the Same! : Investigating the Effect of Executive versus Non-executive Family Board Members on Firm Performance. Journal of Small Business Management, 57 (Suppl.). pp. 637-657. ISSN 0047-2778

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Abstract

Drawing on faultlines and challenging the assumption that family board members form a homogenous subgroup, we hypothesize that the distinction between executive and non-executive family board members can create faultlines that affect firm performance. We propose that the discrepancy between results and goals can activate and exacerbate faultlines. Using a sample of 421 family small and medium-sized enterprises (SMEs), we find a U-shaped relationship between the ratio of family executive board members and firm performance showing the consequences of relationship-based and task-related faultlines. Moreover, we find that the U-shaped relationship occurs when firms perceive that they under-achieve their objectives, whereas a reverse J-shaped relationship appears when firms over-achieve their objectives.