Local institutions and the productivity of family and non-family firms: Evidence from the Italian manufacturing industry

Abstract

Empirical studies comparing productivity between family and non-family firms have produced contradictory results, which traditional managerial theories have struggled to explain. To address this research gap, we employ a context-theorizing approach to explore whether the quality of local institutions and place connections influence the productivity of family firms vis-à-vis their non-family counterparts. We develop a theoretical model that integrates corruption-trust theory and place attachment theory to examine the impact of the local context on both family and non-family firms. Our findings, based on a sample of Italian manufacturing firms, reveal that family firms are more productive than non-family counterparts in low-quality institutional contexts. However, this advantage diminishes as the quality of local institutions improves. Contrary to expectations, place attachment is negatively associated with productivity on average. This negative association is concentrated among non-family firms, whereas family firms appear largely unaffected. For family firms, the impact of place attachment is contingent on institutional quality. In low-quality institutional environments, place attachment further reduces the productivity of family firms, suggesting a lock-in effect. In contrast, in high-quality institutional contexts, place attachment becomes a source of productivity advantage for family firms. • Family firms show productivity advantages especially under low institutional quality. • Family firm productivity advantages narrow as local institutional quality improves. • Impact of place attachment on family firms is contingent on institutional quality. • Under low institutional quality, place attachment lowers family firm productivity. • Under high institutional quality, place attachment raises family firm productivity.