Family Control, Political Risk and Employment Security: A Cross‐National Study

Abstract

AbstractCombining insights from the socioemotional wealth and institutional perspectives, we hypothesize that firms controlled by families offer greater job security to employees relative to non‐family firms, and this positive employment effect is amplified in riskier institutional environments around the world. Using an unbalanced panel of 3181 listed firms from 33 countries over a 10‐year period, we provide strong support for our hypotheses: family‐controlled firms on average are less likely to reduce their workforce compared to their non‐family counterparts, and this differential effect is magnified in weak institutional environments characterized by high political risk. These findings indicate that socioemotional wealth in family firms has a positive impact on employee welfare and that the use of a cross‐country design serves to bridge discrepancies or inconsistencies in single country studies that have been done in the past. From a practical perspective we conclude that the beneficial role of socioemotional wealth on employment relations is more evident when it is needed the most, namely under a dysfunctional institutional environment.