A size-based contingency approach to family firms’ performance: the role of family power

This paper aims to analyze the effect played by firm size, as a fundamental dimension of a firm’s architecture, in shaping the relationship between corporate governance and a family firm’s performance. Specifically, we explore whether and how family power, conceptualized through the three governance dimensions of family ownership, family involvement in the board, and family leadership—namely family CEO and CEO duality—affects the firm’s profitability, contingent upon its size. From a theoretical standpoint, we build on agency theory, stewardship theory, and socio-emotional wealth (SEW) theory to develop a unifying contingency framework on the role of the firm's size in determining both the magnitude and direction of the family power effects on performance. Drawing on a dataset of 548 firm-year observations of Italian-listed family firms in the 2014–2021 period, we find evidence that in smaller family firms, where the preservation of the socio-emotional endowment and family legacy is more pronounced, both the benefits and costs associated with agency and stewardship mechanisms are strengthened.