The determinants of family firms’ subcontracting: A transaction cost perspective

In this article we compare the governance choices of family and non-family firms regarding their subcontracting tendencies. Based on transaction cost theory, we argue that family firms are less likely to engage in subcontracting than non-family firms and that kinship ties, the extent to which a family firm's production activities are important, and cost minimization concerns influence the extent to which family firms utilize subcontractors. Using a sample of small, established firms, we find support for our hypotheses as well as for the use of transaction cost theory logic to explain family firm behavior.

Research highlights
► We compare family and non-family firms regarding their propensity to subcontract.
► We find that family firms are less likely to subcontract than non-family firms.
► Kinship ties, importance of activities, and cost concerns affect subcontracting decisions.