Analysing the external social capital of family firms

Abstract

We examine an important yet overlooked aspect in research on social capital: the familial bonding that interorganizational relations may hold. We argue that the social identity of a family member is likely to reframe how they behave within social relations and towards actors outside the firm that are within or not within the family, changing the conditions for trust, knowledge exchange, and value creation. Drawing on a family and nonfamily classification of interorganizational relations, we examine: (1) the extent to which relationships with family members located in other related firms, which we have defined as external family social capital (EFSC), affect firm performance; (2) its interaction with relationships with members of other firms not bearing a family connection, referred to as external organizational social capital (EOSC); and (3) the varying levels of trust required to extract value from EFSC and EOSC. We test and find support for our predictions in an empirical analysis. The study contributes to the literatures in social capital, social identity and family firms a new category of external social capital, distinguish family versus organizational social capital and their complementary effects, and moderators of these forms of social capital on firm performance.