Socially responsible downsizing: Comparing family and non‐family firms
| Author | Fernando Muñoz‐Bullón,Maria J. Sanchez‐Bueno,Jose I. Galan |
| Published date | 01 January 2020 |
| DOI | http://doi.org/10.1111/beer.12244 |
| Date | 01 January 2020 |
Business Ethics: A Eur Rev. 2020;29:35–55. wileyonlinelibrary.com/journal/beer
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© 2019 John Wiley & Sons Ltd
1 | INTRODUCTION
The adoption of di fferent socia l initiatives (e.g ., care for work force
relationships, eco‐friendly and sustainable practices, and philan‐
thropy) has receive d growing attent ion in recent years ( Jamali, El
Dirani, & Har wood, 2015), and more specifical ly in the family b usi‐
ness context (e.g ., Berrone, Cr uz, Gomez‐Mejia , & Larraza‐Kintana,
2010; Campopian o & De Massis, 2015; Dou, Zhang , & Su, 2014; Van
Gils, Dibrell , Neubaum, & Craig , 2014; Zientara, 2017). This s tream of
research has st ressed that the firm's ownersh ip structure may con‐
stitute a key fac tor for further advanci ng our understanding of how
best to meet emp loyees’ needs and expecta tions (e.g., Block, 2010;
Stavrou, Kassi nis, & Filotheou, 2007). A s employees are a major re‐
source for most f irms, it is import ant to explore how firms c ontribute
to their well‐bein g. Note that workforce down sizing has been on the
up in recent years in t he United States , Europe, and som e emerg‐
ing economies (e.g ., Block & Wagner, 2014; Brauer & L aamanen,
2014; Cascio & Young, 2003; G andolfi & Lit tler, 2012), despite it s
severely negative consequences for employees (Brockner, Grover,
O’Malley, Reed, & Gl ynn, 1993; Datta, G uthrie, Basui l, & Pandey,
2010; Stavrou et al., 2 007).
Family firms (FFs) accou nt for a high percent age of the overall
stock of companies in the global economy, employing millions of
people (about 60% of the global workforce) (Gomez‐Mejia, Larraza‐
Kintana, Moyano‐Fuentes, & Firfiray, 2018; Neckebrouck, Schulze,
& Zellweger, 2018). In Spain, f amily businesses acc ount for 90% of all
companies and employ 70% of the total workforce (Spanish Institute
of Family Businesse s, the Spanish N etwork of Chair s of Family
Businesses, 2 018). A distincti ve feature of FFs is that they face the
challenge not onl y of ensuring thei r financial viab ility, but also of
engaging in the pursuit of emotional endowment (Berrone, Cruz,
& Gomez‐Mejia, 2012; Deniz‐Deniz, Cabrera‐Suárez, & Martin‐
Santana, 2018; Go mez‐Mejia, Cru z, Berrone, & De C astro, 2011;
Kotlar & De Massis, 2013; Kotl ar, De Massis, Wright, & Frat tini,
2018). The adoption of p ractices th at are damaging to em ployees
may therefore be di scouraged in FFs, co ntributing to greater work‐
force preser vation (Block, 2010; St avrou et al., 2007). Acco rdingly, in
this study, our fir st research question focus es on whether and why
family firms m ay behave differently from non ‐family firms (NFFs) in
terms of their pro pensity to downsize their work force. We draw on
the socioemotional wealth (SEW) approach (Gomez‐Mejia, Haynes,
Núñez‐Nickel, Jaco bson, & Moyano‐ Fuentes, 2007) to d evelop our
Received:14Octo ber2018
|
Revised:12Augu st2019
|
Accepted:13Augu st2019
DOI: 10 .1111/bee r.12244
ORIGINAL ARTICLE
Socially responsible downsizing: Comparing family and non‐
family firms
Maria J. Sanchez‐Bueno1 | Fernando Muñoz‐Bullón1 | Jose I. Galan2
1Departme nt of Business
Administr ation, Universida d Carlos III de
Madrid, Getafe, Spain
2Departm ent of Business
Administration, Universidad de Salamanca,
Salamanca, Spain
Correspondence
Fernando Muñoz‐Bullón, Department of
Business Administration, Universidad Carlos
III de Madrid , Calle Madrid, 126, 2 8903
Getafe, Madrid, Spain.
Email: fernando.munoz@uc3m.es
Funding information
Spanish Ministry of Economy and
Competitiveness, Grant/Award Number:
ECO2016‐75379‐R, AEI/FEDER, UE;
Community of Madrid, Grant/Award
Number: S2015/HU M‐3353 (EARLYFIN‐CM) ;
Ibero‐American Chair in Management and
Corporate Social Responsibility/Santander
Bank.
Abstract
This study seek s to investigate whether family fi rms are more likely to downsize their
workforce than the ir non‐family counterpa rts. Drawin g on socioemotional we alth
approach, we firs t explore the ef fect of family pres ence on workforce dow nsizing.
Furthermore, we ex amine the moder ating role of R&D activi ty on the family p res‐
ence–downsizing relationsh ip. Our sample covers a pa nel of manufactur ing SMEs in
Spain over the 1993–2014 period. We find that family firm s are less likely to downsize
than non‐family firm s. Our results als o reveal a negative associat ion between R&D
activity an d workforce downsizing. Finally, the relation ship between family presence
and downsizing is contingent u pon R&D activity, that is, family fi rms engaged in R&D
activities are l ess likely to downsize than non‐innovative family f irms.
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SANCHEZ‐BUENO Et Al.
theoretica l framework and hy potheses. O ne key aspect in wh ich
family firms a re different to n on‐family ones is t heir emphasis on
affective go als over and above financial concern s, and more specif‐
ically, on the prese rvation of their SEW (Gome z‐Mejia et al., 20 07).
Factors linked to SE W include the emotional enga gement of family
members, the desire to perpetuate family values, and the preserva‐
tion of the founde r's legacy (Be rrone et al., 2012; G omez‐Mejia et
al., 2007). Prev ious literature has consiste ntly indicated that SEW is
a vital concern f or FFs, as SEW has become their key cons ideration
when making man agerial choices . We argue that SEW is a c rucial
difference wi th NFFs that in turn leads to dif ferent downsizing deci‐
sions between these two types of businesses.
Our analysis not o nly explores w hether FFs are dif ferent from
non‐FFs in their dow nsizing likelihood (e.g., Block , 2010; Stavrou et
al., 2007), but a lso we address another im portant research q uestion:
do technologic al innovation de cisions affec t the family pr esence–
downsizing relati onship? Therefore , the second pur pose of this
paper is to explo re whether R&D activi ty has a moderating ef fect on
the aforementioned relationship. R&D’s influence on employment
has received incr easing attenti on in recent years , and is currentl y
the focus of growing d ebate (e.g., Dachs & P eters, 2014; Vicente‐
Lorente & Zuñiga‐Vice nte, 2012, 2018; Vivar elli, 2014). However,
this is an under‐examin ed topic in the fa mily business f ield in spite
of the fact that e xisting liter ature has provide d a thorough unde r‐
standing of inn ovation in FFs (e.g., Calabr ò et al., 2018; Colombo, De
Massis, Piva, Ros si‐Lamastr a, & Wright, 2014; De Massis , Frattini,
& Lichtenthaler, 2013; Fils er, De Massis, Gast , Kraus, & Niema nd,
2018; Souder, Zaheer, Sapie nza, & Ranucci , 2017). This stream of
research has sho wn that FFs have emotion al goals (Berron e et al.,
2012; Gomez‐Mejia et a l., 2007)—as well a s specific huma n re‐
sources (Sirmon & Hitt, 2003)—which might impact innovation de‐
cisions. Overa ll, the present paper pr oposes a framework in or der to
integrate the soc ial and strategic behavio ur in FFs in order to better
understand the downsizing effects of FFs’ R&D activity.
To examine these rese arch questio ns, our empiric al evidence is
based on a broad sample of 4,223 Spanish companies (30,174 firm‐
year observations) operating in different manufacturing industries,
and for which we obt ained informat ion for the perio d 1993–2014.
Our results su ggest that FFs differ from N FFs in terms of workforce
downsizing bec ause the former a re less likely to down size than
the latter, in line wit h existing stu dies (Block, 2010). M oreover, our
evidence shows th at R&D activit y has a negative dir ect impact o n
workforce down sizing, and also a negative mo derating effect on t he
family presence–downsizing relationship. Thus, FFs engaged in R&D
activities a re less likely to downsize than no n‐innovative FFs.
This study make s several contrib utions to prior li terature and
posits certain practical implications. First , we respond to increas‐
ing calls to invest igate social issues in the sp ecific case of FFs (e.g.,
Campopiano & D e Massis, 2015; Le Breton‐Miller & Mille r, 2016;
Samara & Paul, 2 018; Van Gils et al., 2014; Zientara, 2017). While
many studies se em to focus on famil y firms’ exter nal social re‐
sponsibility—for instance, towards the environment (e.g., Berrone
et al., 2010; Samara , Jamali, Sierr a, & Parada, 2018; Vas hchenko,
2017)—our artic le addresses family fir ms’ commitment to employ‐
ment and how they may co ntribute to minimizing redu ndancy pol‐
icies (e.g., Bloc k, 2010; Neckebrou ck et al., 2018; Stavrou e t al.,
2007). We stress t hat family fir ms’ social respo nsibility in ter ms
of the environmen t may differ from t hat involving the wo rkplace
(Martin Cas tejón & Aroca L opez, 2016). At this point , human re‐
source (HR) pra ctices in family business es, compared to non‐fam‐
ily businesse s, constitute a veritable d istinction. Managing h uman
resources in FFs is us ually more complex than i n NFFs. One reason
for this is that the cl ose interaction between f amily and busine ss
means family f irms tend to appl y less formal Hum an Resource
practices (K idwell, Eddleston, & Kelle rmanns, 2018). It is generally
assumed that fa mily members a re coached and me ntored more
thoroughly co mpared to other em ployees (Matlay, 200 2). In this
setting, ex tant literature prop oses that FFs provide greater jo b se‐
curity (Bass anini, Breda , Caroli, & Rebèr ioux, 2013), and are ge n‐
erally assume d to be good employer s (Miller, Le Breton‐Mil ler, &
Scholnick, 20 08; Pittino, Vi sintin, Lenger, & Sternad, 2016). In fa ct,
some studies co ntend that family businesse s are characterized by
“profound investment in employees’ training, minimum layoff poli‐
cies, employee participation programs, painstaking staff selection,
generous benefits, and miniscule turnover statistics” (Miller & Le
Breton‐Miller, 2006).
Second, our st udy advances t he SEW approa ch by showing
how SEW reveals it s positive or bri ght side by providin g a protec‐
tive mechanism ag ainst workf orce downsizing in FFs. L ess work‐
force downsizing is re garded as a socia lly responsibl e practice, as
FFs face the challe nge not only of ensur ing their finan cial viabilit y
(downsizing as a way to cut cos ts), but also because they pu rsue af‐
fective goals (l ess downsizing reduces the soci al costs of dismissing
staff). C ompared to other t ypes of orga nizations, the p reservati on
of family endowm ent should be ref lected in great er interest in sat‐
isfying soc ial demands. Our analysis is the refore in line with recent
evidence highlig hting family firms’ socially r esponsible behaviour in
other areas, su ch as environment al impact (Berrone et al., 2010) or
dealings with t he community at large (Dou e t al., 2014).
Lastly, we contrib ute to previous studies by exp licitly investigat‐
ing the modera ting effect R&D activ ity has on the family prese nce–
downsizing relationship. In this regard, we extend our understanding
of the impact th at the differe ntial behaviour of f amily versus no n‐
family firms h as on employment p ractices (Bl ock, 2010; Stavro u et
al., 2007), specifically considering technological innovation choices
(Calabrò et al., 2 018; Chrisman & Patel , 2012; Kotlar, Fang, De
Massis, & Fratti ni, 2014). We propose that the di stinguishin g fea‐
tures of FFs in terms of s trong emotional ties over and a bove finan‐
cial concerns (Be rrone et al., 2012; Gomez‐Mej ia et al., 2007) have a
vital impac t not only on several strategic de cisions such as R&D in‐
vestments (Ch risman & Patel, 2012; De Massis, D i Minin, & Frattini,
2015), but also on how th e interaction betwee n family participatio n
in the business a nd R&D activity affect s the inclination to maintain
workforce size. B y including the in fluence the soc ial and strateg ic
dimensions have on t he decision‐mak ing process, ou r analysis will
inform redundancy policies in this type of organizations.
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