What drives productivity in family-owned businesses in emerging economies? The case of Egyptian manufacturing firms

Abstract

Purpose We investigate the contribution of four bundles of organizational resources, namely, managerial and workforce skills, innovative capacity, access to finance and social capital, as determinants of productivity in Egyptian manufacturing family-owned businesses (FOBs). Design/methodology/approach We use firm-level data derived from the standardized World Bank Enterprise Surveys and apply ordinary least squares regressions to examine the effect of the independent variables on productivity in FOBs versus non-family-owned businesses (NFOBs). We employ two approaches to operationalize “familiness”: (1) a fixed (50%) threshold of family ownership concentration and (2) a regime-generating approach that econometrically estimates the ownership threshold beyond which a firm exhibits the FOBs productivity profile. Findings We find that in the context of Egyptian manufacturing firms, FOBs exhibit lower labor productivity (LP) but higher total factor productivity (TFP) compared to NFOBs. The productivity regime characteristic of FOBs emerges when a single family holds as little as 7% ownership in the firm. Additionally, we find that LP and TFP are influenced by different sets of factors. Moreover, training, product innovation, access to finance, political connections and business connections are not significantly associated with either LP or TFP in FOBs. Originality/value We contribute to the still-limited literature on productivity drivers in FOBs in emerging countries. Notably, our use of a regime-generating approach to econometrically estimate the ownership threshold at which a firm adopts the FOBs productivity profile is a first in the FOBs literature.