Do family firms contribute to job stability? Evidence from the great recession

• Published in: Journal of family business management 2022-02, Vol.12 (1), p.152-169
• Main Authors: Rivo-López, Elena, Villanueva-Villar, Mónica, Vaquero-García, Alberto, Lago-Peñas, Santiago
• Format: Article
• Language: English
• Subjects: Coronaviruses; COVID-19; Econometrics; Economic growth; Employees; Employment; Family owned businesses; GDP; Generations; Great Recession; Gross Domestic Product; Hypotheses; Medical research; Recessions
• ISSN: 2043-6238; 2043-6246
• DOI: 10.1108/JFBM-06-2020-0055

PurposeThe purpose of this paper is to analyze if choices made by family businesses (FBs) regarding job stability in economic recessions are different, on average, to those made by nonfamily firms. Moreover, the study tries to elucidate if this potential difference depends on the family generation that is in charge. The analysis relies upon a sample of 55,091 Spanish firms, as Spain is one of the countries that suffered the greatest impact of the 2008 Great Recession.Design/methodology/approachTo test the hypotheses, the authors built a database of 55,091 Spanish firms, 45,351 family firms and 9,740 nonfamily firms, for the period 2007–2015. Based on the socioemotional wealth (SEW) approach, this article sheds light on the question of whether family identification, binding social ties and long-term vision lead FB to behave differently from nonfamily businesses in human resource management.FindingsIn times of crisis, FBs do maintain jobs to a higher extent than nonfamily businesses, and this effect is especially intense when the first generation is in charge. According to the SEW approach, the emotional links between ownership and management make the firm more prudent when hiring during good times and when firing in times of crisis. This makes employment in FBs more stable than in private ones. This result has two positive effects. Higher job stability is an additional contribution of family firms to social welfare and happiness. Furthermore, a larger share of family firms involves stronger automatic macrostabilizers to deal with the business cycle, supplementing fiscal macrostabilizers, such as personal income tax (PIT) or unemployment insurance.Practical implicationsFamily firms maintained employment more than nonfamily firms did during the crisis. The emotional links between ownership and management and the long-term vision make the firm more prudent when hiring during good times and when firing in times of crisis. These features could make family firms more cautious in terms of hiring and firing and thus enable them to offer their employees implicit employment protection and stability. This positive effect decreases as firm age advances, due to the minor linkage between ownership and employees, in spite of maintaining identification and long-term vision.Social implicationsFrom a policy perspective, greater job stability is an additional contribution of family firms to social welfare and happiness. Hence, a larger share of family firms would involve stro