The role of family involvement in a firm’s performance

Abstract

This paper investigates the difference in performance between family businesses and non family businesses of small and medium enterprises (SMEs) in Vietnam. It focuses on the differences in how the use of capital and labor and in total factor productivity (TFP) between the two types of firms. The study used statistics on small and medium enterprises in Vietnam over the years 2005, 2007 and 2009.This paper also gives a number of policy implications for small and medium businesses to improve their performance and for the policy-maker to support the Vietnam small and medium enterprises. Based on the Cobb-Douglas production function, we apply the methods OLS, GLS and panel model to estimate. It finds that there are significant differences in the contribution of the two inputs that are labor and capital to output – the value added- between family businesses and non family businesses in Vietnam. On labor, its contribution to output in the family businesses was significantly higher than non-family businesses. In terms of capital, the contribution of this factor in the family business is low compared to their counterparts. Moreover, there are no bases to conclude which kind of firm is more productivity.