The Moderating Effect of Family-Ownership on Firm Performance: An Examination of Entrepreneurial Orientation and Social Capital


  • JEffery M. Campbell The University of South Carolina
  • Nathan Line The University of Tennessee, Knoxville
  • Rodney C. Runyan The University of Tennessee, Knoxville
  • Jane L. Swinney Oklahoma State University


Within the small business literature, a number of recent studies have examined the importance of entrepreneurial orientation (EO) and the development of social capital (SC) as each contributes to a firm's performance. While it is generally accepted in previous studies that each of these constructs positively affects firm performance, relatively less attention has been paid to potential moderating factors that can affect these relationships. The purpose of our research is to address one such moderator, family ownership. Using structural equation modeling (SEM) to test the moderating effect of family ownership on the relationships among entrepreneurial orientation, social capital, and firm performance, our results show that the effects of EO and SC vary depending upon whether the firm is family-owned or non-family owned. Implications of these findings and future research directions are provided.


Adler, P., & Kwon, S.K. (2002). Social capital: Prospects for a new concept, The Academy of Management Review, 27(1): 17-40.

Anderson, J. C., & Gerbing, D. W. (1988). Structural equation modeling in practice: A review and recommended two-step approach, Psychological Bulletin, 103(3): 411-423.

Arregle, J-L, Hitt, M., Sirmon, D., & Very, P. (2007). The Development of organizational social capital: Attributes of family firms, Journal of Management Studies, 44(1): 73-95.

Baird, S., & Thomas, H. (1985). Toward a contingency model of strategic risk taking, The Academy of Management Review, 10(2), 230-243.

Barney, J. (1991). Firm resources and sustained competitive advantage, Journal of Management, 17(1): 99-120.

Bourdieu, P. (1980). Le capital social, Actes de la Recherche en Sciences Sociales, 31: 2-3.

Browne, M.W., & Cudeck, R. (1993). Alternative ways of assessing model fit. In K.A. Bollen & J.S. Long (Eds.), Testing structural equation models (pp.136-162). Newbury Park, CA: Sage.

Bubolz, M. (2001). Family as source, user, and builder of social capital, Journal of Socio-Economics, 30(2), 129-131.

Busenitz, L. (1999). Entrepreneurial risk and strategic decision making: It's a matter of perspective, The Journal of Applied Behavioral Science, 35(3), 325-340.

Byrne, B. (2001). Structural equation modeling with AMOS: Basic concepts, applications, and programming. New York: Taylor & Francis Group.

Chrisman, J., Chua, J., & Sharma, P. (2005). Trends and directions in the development of a strategic management theory of the family firm, Entrepreneurship: Theory & Practice, 29(5), 555-575.

Chrisman, J., Steier, L., & Chua, J. (2008). Toward a theoretical basis for understanding the dynamics of strategic performance in family firms. Entrepreneurship Theory and Practice, 32(6), 935-947.

Chua, J., Chrisman, J., & Sharma, P. (1999). Defining the family business by behavior, Entrepreneurship: Theory and Practice, 23(4), 19-39.

Cole, A. (1946). An approach to the study of entrepreneurship: A tribute to Edwin F. Gay, The Journal of Economic History, 6 (Supplement: The Tasks of Economic History): 1-15.

Conant, J., & White, J. (1999). Marketing program planning, process benefits, and store performance: An initial study among small retail firms, Journal of Retailing, 75(4), 525.

Cooke, P., & Wills, D. (1999). Small firms, social capital and the enhancement of business performance through innovation programmes, Small Business Economics, 13(3), 219-234.

Covin, J.G., & Slevin, D.P. (1989). Strategic management of small firms in hostile and benign environments, Strategic Management Journal, 10(1), 57-75.

Dillman, D. (2000). Mail and Telephone Surveys: The Tailored Design Method, 2nd ed. New York, NY: John Wiley and Sons.

Dess, G., & Robinson Jr., R. (1984). Measuring organizational performance in the absence of objective measures: The case of the privately-held firm and conglomerate business unit, Strategic Management Journal, 5(3), 265-273.

Droege, S.B., & Dong, L.C. (2008). Strategic entrepreneurship: Imitation versus substitution. Journal of Small Business Strategy, 19(1), 51-62.

Droge, C., Jayaram, J., & Vickery, S. (2004). The effects of internal versus external integration practices on time-based performance and overall firm performance, Journal of Operations Management, 22(6), 557-573.

Florin, J., Lubatkin, M.H., & Schulze, W. (2003). A social capital model of high-growth ventures. Academy of Management Journal, 46(3), 374-384.

Fornell, C., & Larker, D. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39-50.

Gorodesky, R., & McCarron, E. (2003). Independent restaurant survival in a mega-chain world, restaurant report. (accessed November 10, 2006).

Gudmundson, D., Hartman, E., & Tower, C. (1999). Strategic orientation: Differences between family and nonfamily firms, Family Business Review, 12(1), 27-39.

Habbershon, T., Williams, M., & MacMillan, I. (2003). A unified systems perspective of family firm performance, Journal of Business Venturing, 18(4), 451-465.

Hausman, A. (2005). Innovativeness among small businesses: Theory and propositions for future research. Industrial Marketing Management, 34(8), 773-782.

Ibrahim, N., Angelidis, J, & Parsa, F. (2008). Strategic management of family businesses: Current findings and directions for future research. International Journal of Management, 25(1), 95-110.

Ireland, R.D., Hitt, M.A., & Sirmon, D.G. (2003). A model of strategic entrepreneurship: The construct and its dimensions. Journal of Management, 29(6), 963-989.

Jreskog, K.G., & Sorbom, D. (1988). LISREL 7: A guide to the program and applications. Chicago: SPSS, Inc.

Kline, R. (2005). Principles and Practices of Structural Equation Modeling. 2nd Edition. New York, NY: The Guilford Press.

Kreiser, P., & Davis, J. (2010). Entrepreneurial orientation and firm performance: The unique impact of innovativeness, proactiveness, and risk-taking, Journal of Small Business & Entrepreneurship, 23(1), 39-51.

Lee, J. (2004). The effects of family ownership and management on firm performance. SAM Advanced Management Journal, 69(4), 46-53.

Levy, M., & Weitz, B. W. (2003). Retailing Management. New York: McGraw-Hill Irwin.

Lin, N. (2001). Social Capital: A Theory of Social Structure and Action. New York: Cambridge University Press.

Litz, R. (1995). The family business: Toward definitional clarity, Academy of Management Best Papers Proceedings: 100-104.

Lumpkin, G.T., & Dess, G.G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance, Academy of Management Review, 21(1), 135-172.

Lumpkin, G.T., & Dess, G.G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle, Journal of Business Venturing, 16(5), 429-451.

Macpherson, A., & Holt, R. (2007). Knowledge, learning and small firm growth: A systematic review of the evidence, Research Policy, 36 (2), 172-192.

Manev, I.M., Gyoshev, B.S., & Manolova, T.S. (2005). The role of human and social capital and entrepreneurial orientation for small business performance in a transitional economy, International Journal Entrepreneurship and Innovation Management, 5(3-4), 298-318.

Maurer, I., & Ebers, M. (2006). Dynamics of social capital and their performance implications: Lessons from biotechnology start-ups, Administrative Science Quarterly, 51(2), 262-292.

McPherson, M., Smith-Lovin, L., & Cook, J. (2001). Birds of a feather: Homophily in social networks, Annual Review of Sociology, 27(1), 415-444.

Miller, D. (1983). The correlates of entrepreneurship in three types of firms, Management Science, 29(7), 770-791.

Miller, D., & Friesen, P.H. (1982). Archetypes of strategy formulation, Management Science, 24(9), 921-933.

Miller, D., Le Breton-Miller, I., & Scholnick, B. (2008). Stewardship vs. stagnation: An empirical comparison of small family and non-family businesses. Journal of Management Studies, 45(1), 51-78.

Miller, D., & Shamsie, J. (1996). The resource-based view of the firm in two environments: The Hollywood film studios from 1936 to 1965. Academy of Management Journal, 39(3), 519-543.

Morck, R., & Yeung, B. (2004). Family control and the rent seeking society, Entrepreneurship Theory and Practice, 28(4), 391-409.

Morris, M.H., Kocak, A., & Ozer, A. (2007). Coopetition as a small business strategy: Implications for performance. Journal of Small Business Strategy, 18(1), 35-55.

Nahapiet, J., & Ghoshal, S. (1998). Social capital, intellectual capital, and the organizational advantage, Academy of Management Review, 23(2), 242-266.

Naldi, L., Nordqvist, M., Sjöberg, K., & Wiklund, J. (2007). Entrepreneurial orientation, risk taking, and performance in family firms. Family Business Review, 20(1), 33-47.

Neubauer, F. & Lank, A. G. (1998). The Family Business - Its Governance for Sustainability. New York: Routledge.

Pearson, A.W., Carr, J.C., & Shaw, J. (2008). Toward a theory of familiness: A social capital perspective. Entrepreneurship Theory and Practice, 32(6), 949-969.

Portes, A., & Sensenbrenner, J. (1993). Embeddedness and immigration: notes on the social determinants of economic action, American Journal of Sociology, 98(6), 1320-1350.

Rauch, A., Wiklund, J., Lumpkin, G., & Frese, M. (2009). Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory & Practice, 33(3), 761-787.

Richard, P., Devinney, T., Yip, G., & Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of Management, 35(3), 718-804.

Rudd, M. (2000). Live long and prosper: collective action, social capital, and social vision. Ecological Economics, 23(4), 131-144.

Runyan, R., Droge, C., & Swinney, J. (2008). Entrepreneurial orientation versus small business orientation: What are their relationships to firm performance? Journal of Small Business Management, 46(4), 567-588.

Runyan, R., Huddleston, P., & Swinney, J. (2007). A resource-based view of the small firm: Using a qualitative approach to uncover small firm resources, Qualitative Market Research: An International Journal, 10(4), 390-402.

Runyan, R., Huddleston, P., & Swinney, J. (2006). Entrepreneurial orientation and social capital as small firm strategies: A study of gender differences from a resource-based view. International Entrepreneurship and Management Journal, 2(4), 455-477.

Schumpeter, J.A. (1934). The theory of economic development, Public Opinion Quarterly, 58: 358-480.

Schutjens, V., & Völker, B. (2010). Space and social capital: The degree of locality in entrepreneurs' contacts and its consequences for firm success, European Planning Studies, 18(6), 941-963.

Sharma, P., Chrisman, J. J. & Chua, J. H. (1996). A Review and Annotated Bibliography of Family Business Studies. Assinippi Park: Kluwer Academic Publishers.

Sirmon, D., & Hitt, M. (2003). Managing resources: Linking unique resources, management, and wealth creation in family firms, Entrepreneurship: Theory & Practice, 27(4), 339-358.

Stam, W., & Elfring, T. (2008). Entrepreneurial orientation and new venture performance: The moderating role of intra-and extraindustry social capital. Academy of Management Journal, 51(1), 97-111.

Teixeira, C. (2011). The craftof prototyping. Strategic Design Research Journal, 4(1), 29-32.

Tsai, W., & Ghoshal, S. (1998). Social capital and value creation: The role of intrafirm networks. Academy of Management Journal, 41(4), 464-476.

Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches, Academy of Management Review, 11(4), 801-814.

Wei-Ping, W., & Alicia, L. (2005). Does a micro-macro link exist between managerial value of reciprocity, social capital and firm performance? The case of SMEs in China, Asia Pacific Journal of Management, 22(4), 445-463.

Westlund, H., & Adam, F. (2010). Social capital and economic performance: A meta-analysis of 65 studies, European Planning Studies, 18(6), 893-919.

Wiklund, J., & Shepherd, D. (2005). Entrepreneurial orientation and small business performance: A configurational approach, Journal of Business Venturing, 20(1), 71-91.

U.S. Census Factfinder. (2004). (accessed December 3, 2004).







How to Cite

The Moderating Effect of Family-Ownership on Firm Performance: An Examination of Entrepreneurial Orientation and Social Capital. (2010). Journal of Small Business Strategy (archive Only), 21(2), 27-46.