The Familiness Effect on CSR of Privatley Owned SMEs: Empirical Evidence from German Mittelstand Firms

Abstract

Recent research has shown that Corporate Social Responsibility (CSR) of family business’s behavior should be analyzed in a differentiated way compared to earlier studies, by using a multidimensional framework for CSR. The few studies using multidimensional measures have often been applied to data samples of large, publicly listed family businesses (e.g. Block and Wagner 2014), leaving research of privately owned family SMEs largely unobserved. Furthermore, as family ownership or management has been the main defining trait of family businesses, other important characteristics of such businesses have often been neglected. We have tried to fill this gap by conducting research into how family influence in general affects the CSR of privately owned SMEs. Therefore, in our research we used the Family Influence Familiness Scale (FIFS) of Frank et al. (2017), which is a concept based on systems theory, and measures the interrelations between the subsystems: family and firm. We examined CSR towards employees and customers, as well as towards social and non-social stakeholders and explained SME specifics due to the concept of social capital (Putnam 1995). To test our hypotheses, we used data from an online survey sample conducted between November 2017 and February 2018, consisting of N = 213 privately owned SMEs, which represent the largest segment of the German Mittelstand. Our study results show positive effects of familiness on all three CSR dimensions. These results are contrary to previous findings using data samples of large, publicly listed family businesses, and moreover, show that familiness has a bigger influence on the CSR of SMEs than initially expected. This implies, that future research regarding CSR should focus on the different incentives of privately owned family SMEs and publicly listed large family firms. Also managers and policy makers should bear in mind that there are differences between large, publicly listed and smaller-sized, privately owned family businesses.