Organizational Determinants of Firm Performance in Family Businesses: Organizational Commitment to Employees, Budgetary Support and Teamwork

Abstract

Organizational processes related to commitment to its employees (OCE), budgetary support, and teamwork are critical for firms to build tacit knowledge and respond effectively to complex external environments. We study the impact of these organizational processes and how they interact with the firms’ entrepreneurial orientation and founders’ influence to affect firm performance in two major cities in Malaysia and the U.S. Responses from 113 Malaysian and 52 US SMEs are used to test four hypotheses. The study results show that all three organizational processes directly influences firm performance. Additionally, budgetary support positively interacts with the founders’ influence and entrepreneurial orientation to affect firm performance while founders’ influence and OCE negatively interact to affect performance. The findings suggest that founders’ influence on OCE versus budgetary support can have offsetting effects in family-run SMEs, and that the effect of entrepreneurial orientation on firm performance can be amplified with increasing level of budgetary support.