Professional HRM practices in family owned-managed enterprises

Abstract

The primary purpose of this study is to examine and explain differences in the professional HRM practices between family and non-family owned and managed firms. We present a model concerning direct and indirect effects of family firm characteristics on the use of professional HRM practices. We find that, based on our sample and model, family firms are less likely to use professional HRM practices than their counterparts. This family firm effect occurs not only indirectly (since family businesses tend to be smaller, and/or less complex than non-family businesses, where complexity stimulates the application of professional HRM practices), but also directly. The direct effects are consistent with predictions consistent with agency theory, which predict less monitoring in the family firm. On the other hand, the results cannot rule out other interpretations offered by organization control theory and/or institutional theory. Furthermore, the indirect family firm effect is consistent with predictions based on the resource-based view although once again, alternative interpretations of the findings cannot be ruled out. We have not examined whether it is actually better or worse for family firms to rely upon less professional HRM practices. Lacking performance data, it is still possible to argue that family firms rely less heavily on professional HRM practices because it is unnecessary to do so, especially in many of the small firms within this study. Thus, future research is needed to examine relations between the use of professional HRM practices and performance for small firms, using family firm as a contingency variable.