Unveiling the Direct Effects of Family Firm Heterogeneity on Environmental Performance

ABSTRACT

By combining agency theory and the resource- and capabilities-based view, this paper aims to unveil the influence of family firm heterogeneity on environmental performance. Previous results are inconsistent about how the specific features of this type of business contribute to better environmental protection performance. We analyse a number of variables related to the management, ownership and corporate governance characteristics of the family business and their individual influence on environmental performance. We test our hypotheses using a database of 748 family firms in the Spanish tourism sector. This economic sector, which is mostly composed of family businesses, puts great pressure on the environment. As such, family firms must take an active role in the resolution of the environmental problems that afflict society. We find that the effects of a family-controlled ownership and management structure on environmental performance are negative. Family-founder firms with a high degree of family control also are shown to have a negative relationship with environmental performance. However, the existence of a formal management mechanism, such as a management committee, emerges as the most powerful structural factor in facilitating the achievement of environmental objectives. The conclusions drawn from this study allow us to outline future lines of research as well as recommendations for practitioners. Our study responds to the call made in the literature to delve deeper into the heterogeneity of the family business, and specifically to determine which of its characteristic features allow this type of business to achieve better environmental performance.