Financial performance enhancing strategies: Small family firms vs. small non-family firms

Raj V. Mahto    
Saurabh Ahluwalia    
Dmitry Khanin    
Steven T Walsh    


Advancing prior research on the key determinants of firm financial performance, we identify the internal performance-enhancing strategies (i.e., raising employee commitment and investment in employee training) and external performance-enhancing strategies (i.e., boosting the learning orientation and adopting an emphasis on marketing). We argue that these performance-enhancing strategies will be positively associated with sales and profits, for both small family firms and small non-family firms, yet the effect will be stronger for family firms that often lag behind in these management domains. We test our hypotheses on a sample including 36 family firms and 28 non-family firms. While some hypotheses received support (e.g., investment in employee training was positively associated with sales in family firms), other hypotheses did not receive support (e.g., employee commitment was not associated with sales in family firms, and emphasis on marketing was negatively associated with sales in family firms). We discuss the theoretical and practical implications of our study and outline directions for future research on firm financial performance.

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