Does Size Matter? The Moderating Effects of Firm Size on the Employment of Nonfamily Managers in Privately Held Family SMEs

• Published in: Entrepreneurship theory and practice Vol. 40; no. 5; pp. 1017 - 1039
• Main Authors: Fang, Hanqinq "Chevy", Randolph, Robert V.D.G., Memili, Esra, Chrisman, James J.
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA Blackwell Publishing Ltd 01-09-2016; SAGE Publications; SAGE PUBLICATIONS, INC
• Subjects: Appointments & personnel changes; Family owned businesses; Managers; Small & medium sized enterprises-SME; Studies
• ISSN: 1042-2587; 1540-6520
• DOI: 10.1111/etap.12156

Family firms’ decisions to hire nonfamily managers are influenced by agency costs, socioemotional wealth concerns, and the availability of high–quality nonfamily managers in the labor pool. We hypothesize that owing to these factors, family ownership and intrafamily succession intentions will be negatively associated with the proportion of nonfamily managers in private small– and medium–sized (SME) family firms. However, firm size is hypothesized to positively moderate those relationships because as family firm size increases, the benefits of hiring nonfamily managers rise faster than the costs. Tobit regression analyses of 7,299 private SMEs support our hypotheses.