The Effect of Family Business Professionalization as a Multidimensional Construct on Firm Performance

Abstract

In family business literature, business professionalization is often simplified into a binary characteristic, that is, the presence of a nonfamily manager. We contend that other professionalization features, which may act simultaneously, can influence firm performance. This study addresses professionalization as a multidimensional construct, as intended by general management literature, and assesses the impact on business performance based on these underlying dimensions. Using a representative sample of 523 private Belgian family businesses, we identify five different dimensions of the professionalization construct by means of an exploratory factor analysis. Further regression results revealed significant positive effects of increasing nonfamily involvement, implementing human resource control systems, and/or decentralizing authority on firm performance. However, nonfamily involvement only seems to improve firm performance if there is sufficient decentralization of authority and an average or even low amount of formal financial control systems.