The determinants of family firms' subcontracting: A transaction cost perspective

Abstract

In this article we compare the governance choices of family and non-family firms regarding their subcontracting tendencies. Based on transaction cost theory, we argue that family firms are less likely to engage in subcontracting than non-family firms and that kinship ties, the extent to which a family firm's production activities are important, and cost minimization concerns influence the extent to which family firms utilize subcontractors. Using a sample of small, established firms, we find support for our hypotheses as well as for the use of transaction cost theory logic to explain family firm behavior.Transaction cost theory Family business Subcontracting