The role of culture in family firms

Although family firms are ubiquitous, their prevalence displays major geographic disparities and their performance differs across regions. We review an extensive literature showing that formal institutional factors play a key role in explaining variations in the diffusion of family firms and their performance. We also review a more neglected but rapidly emerging stream of research focusing on culture as a source of these variations. By providing a framework for current theories, findings and methods, we demonstrate how cultural elements such as trust, religion, family values and collectivism provide useful answers to where and why family firms exist, and how well they perform. Who owns businesses? Evidence suggests that entrepreneurial families are the most common type of corporate owners. However, the presence of families in business appears to be far more common in some areas than others. What explains these differences? Many researchers confronted this question by focusing on factors relating to the institutional context. In addition to reviewing this literature, we discuss a neglected stream of research advancing the notion that differences in culture also can explain the heterogeneous geographic diffusion and performance of family firms. We conclude by outlining research opportunities that leverage differences in cultural values, norms and institutions to answer some of the most important yet unresolved questions in family business research.