Assessing family firm performance using frontier analysis techniques: Evidence from Italian manufacturing industries

• The literature on the relationship between family governance and performance shows mixed results.
• New evidence is found by using the non-parametric frontier methodology Data Envelopment Analysis.
• Family firms show higher profitability.
• Family businesses show lower efficiency and a significant tendency to overuse labour and capital.

This article provides new evidence on the performance differentials between family and non-family firms. Unlike previous studies based on accounting or market performance measures we used a flexible “data oriented” approach, known as Data Envelopment Analysis (DEA), to evaluate the performance of a set of peer entities. We argue that the use of DEA is consistent with the rationale of benchmarking and, as such, with the theoretical foundations of agency framework, which is often evoked in studies on family business. Consistently with prevailing literature, we find evidence of higher profitability of family firms. However, advancing with respect to the existing literature, we reveal a systematic lower efficiency and a significant tendency to overuse labour and capital for family businesses.