Contextualizing small family firms: How does the urban–rural context affect firm employment growth?

• Analysis of how the corporate governance structure affect firm employment growth across the urban–rural context.
• Family ownership per se does not affect firm employment growth.
• Family firms exhibit greater employment growth in rural regions.

This paper studies the effects of family governance and ownership on firm employment growth, extending existing knowledge by including in the analysis the regional context in which firms are located. We create a regional taxonomy to capture the urban–rural dimension and combine this with the corporate governance structure of the firm. Our results show that, being a family firm per se does not influence employment growth. However, when corporate governance structure and regional context are combined, the urban–rural context influences family firm and nonfamily firm employment growth differently, with family firms exhibiting greater employment growth, compared with nonfamily firms, in rural areas.