IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v14y2022i11p6773-d829751.html
   My bibliography  Save this article

Complexity of Family Businesses in El Salvador: A Structural Equation Model

Author

Listed:
  • Edwin Ricardo Flores-Hernández

    (Business School, Alberto Masferrer Salvadorean University, San Salvador 2053, El Salvador
    José Simeón Cañas Central American University, San Salvador 1168, El Salvador)

  • María Luisa Rodero-Cosano

    (Quantitative Methods, Universidad Loyola Andalucía, 41704 Sevilla, Spain)

  • Ana Evelyn Perla-Cartagena

    (Business Administration Departament, José Simeón Cañas Central American University, San Salvador 1168, El Salvador)

Abstract

Family businesses play an important role in sustainable development in Latin American countries, providing economic benefits and leading to a reduction in violence. Until now, family businesses, their characteristics, and the factors that influence their economic development have not been studied in this region. Identifying the appropriate variables contributing to successful family businesses in this region and clarifying the relationships between these variables are important for developing a management model that supports the stability and growth of these businesses and their influence on sustainable development in the region. To this end, this study aims to understand the complexity of family businesses classified as small and medium-sized companies located in San Salvador, El Salvador. This study represents a first approximation and application of this model in one of the representative economies of Latin America. Our literature review allowed us to establish a basic management model incorporating the complexity of family businesses in this regional context. Using a partial least squares structural equation model (SEM-PLS) and a database of 181 family firms, we identify the variables that best explain the management model through the following structures: financial management, business management, family complexity, and company complexity. The results show that in conditions where high interest rates coexist with political conflicts and a complex economic situation, family businesses constitute a pillar for the development of the country towards sustainability. This study has practical implications for entrepreneurs and professionals. This research proposes a management model that allows us to identify the variables that increase or decrease the complexity of family businesses and guides entrepreneurs in taking concrete actions to reduce this complexity. In general terms, this model explains that financial performance depends on business management, the complexity of the family, and the complexity of the company. Finally, based on the results obtained in El Salvador, a clear direction for future research is established, through which it is possible to study the variables that may reduce the complexity of the family and the company in other countries with similar socioeconomic characteristics.

Suggested Citation

  • Edwin Ricardo Flores-Hernández & María Luisa Rodero-Cosano & Ana Evelyn Perla-Cartagena, 2022. "Complexity of Family Businesses in El Salvador: A Structural Equation Model," Sustainability, MDPI, vol. 14(11), pages 1-18, June.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:11:p:6773-:d:829751
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/14/11/6773/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/14/11/6773/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Vahlne, Jan-Erik & Johanson, Jan, 2021. "Coping with complexity by making trust an important dimension in governance and coordination," International Business Review, Elsevier, vol. 30(2).
    2. Roberto Frenkel, 2003. "Globalizacion y Crisis Financieras en America Latina," Brazilian Journal of Political Economy, Center of Political Economy, vol. 23(3), pages 437-455.
    3. Vandekerkhof, Pieter & Steijvers, Tensie & Hendriks, Walter & Voordeckers, Wim, 2019. "The effect of nonfamily managers on decision-making quality in family firm TMTs: The role of intra-TMT power asymmetries," Journal of Family Business Strategy, Elsevier, vol. 10(3), pages 1-1.
    4. Bernd W. Wirtz, 2020. "Business Model Management," Springer Texts in Business and Economics, Springer, edition 2, number 978-3-030-48017-2, June.
    5. Bernd W. Wirtz, 2020. "Types of Business Model Management," Springer Texts in Business and Economics, in: Business Model Management, edition 2, chapter 11, pages 183-188, Springer.
    6. Alberto Gimeno & Gemma Baulenas & Joan Coma-Cros, 2010. "Family business models," Palgrave Macmillan Books, in: Family business models, chapter 3, pages 57-77, Palgrave Macmillan.
    7. Block, Joern H. & Jaskiewicz, Peter & Miller, Danny, 2011. "Ownership versus management effects on performance in family and founder companies: A Bayesian reconciliation," Journal of Family Business Strategy, Elsevier, vol. 2(4), pages 232-245.
    8. Bernd W. Wirtz, 2020. "Correction to: Business Model Management," Springer Texts in Business and Economics, in: Business Model Management, edition 2, pages C1-C2, Springer.
    9. Andersson, Fredrik W. & Johansson, Dan & Karlsson, Johan & Lodefalk, Magnus & Poldahl, Andreas, 2017. "The Characteristics and Performance of Family Firms: Exploiting information on ownership, governance and kinship using total population data," Working Papers 2017:1, Örebro University, School of Business.
    10. Vazquez, Pedro & Rocha, Héctor, 2018. "On the goals of family firms: A review and integration," Journal of Family Business Strategy, Elsevier, vol. 9(2), pages 94-106.
    11. Laura Hougaz, 2015. "The Complexity of the Family Business," Management for Professionals, in: Entrepreneurs in Family Business Dynasties, edition 127, chapter 2, pages 11-26, Springer.
    12. Daniel Magalhães Mucci & Ann Jorissen & Fabio Frezatti & Diógenes de Souza Bido, 2021. "Managerial Controls in Private Family Firms: The Influence of a Family’s Decision Premises," Sustainability, MDPI, vol. 13(4), pages 1-21, February.
    13. David G. Sirmon & Michael A. Hitt, 2003. "Managing Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms," Entrepreneurship Theory and Practice, , vol. 27(4), pages 339-358, October.
    14. Brenes, Esteban R. & Madrigal, Kryssia & Molina-Navarro, German E., 2006. "Family business structure and succession: Critical topics in Latin American experience," Journal of Business Research, Elsevier, vol. 59(3), pages 372-374, March.
    15. Timothy G. Habbershon, 2006. "Commentary: A Framework for Managing the Familiness and Agency Advantages in Family Firms," Entrepreneurship Theory and Practice, , vol. 30(6), pages 879-886, November.
    16. Patrick HERBST & Jens PRUFER, 2016. "Firms, Nonprofits, And Cooperatives: A Theory Of Organizational Choice," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 87(3), pages 315-343, December.
    17. Muhammad Ashfaq, 2016. "Impact Of Global Financial Crises On Global Financial Stability And Need For An Alternative Financial System," Poslovna izvrsnost/Business Excellence, Faculty of Economics and Business, University of Zagreb, vol. 10(2), pages 109-121.
    18. James Crotty, 2009. "Structural causes of the global financial crisis: a critical assessment of the 'new financial architecture'," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 563-580, July.
    19. James J. Chrisman & Jess H. Chua & Pramodita Sharma, 2005. "Trends and Directions in the Development of a Strategic Management Theory of the Family Firm," Entrepreneurship Theory and Practice, , vol. 29(5), pages 555-575, September.
    20. Pramodita Sharma & Jess Chua, 2013. "Asian family enterprises and family business research," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 641-656, September.
    21. Baxter, Roger, 2009. "Reflective and formative metrics of relationship value: A commentary essay," Journal of Business Research, Elsevier, vol. 62(12), pages 1370-1377, December.
    22. Alexander Guzmán & Belén Villalonga & María-Andrea Trujillo & Raphael Amit, 2015. "Governance of Family Firms," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 635-654, December.
    23. Hernández-Perlines, Felipe & Moreno-García, Juan & Yañez-Araque, Benito, 2016. "The mediating role of competitive strategy in international entrepreneurial orientation," Journal of Business Research, Elsevier, vol. 69(11), pages 5383-5389.
    24. Laura Hougaz, 2015. "Entrepreneurs in Family Business Dynasties," Management for Professionals, Springer, edition 127, number 978-3-319-13918-0, March.
    25. Simon, Alexandra & Marquès, Pilar & Bikfalvi, Andrea & Dolors Muñoz, M., 2012. "Exploring value differences across family firms: The influence of choosing and managing complexity," Journal of Family Business Strategy, Elsevier, vol. 3(3), pages 132-146.
    26. Sarstedt, Marko & Hair, Joseph F. & Ringle, Christian M. & Thiele, Kai O. & Gudergan, Siegfried P., 2016. "Estimation issues with PLS and CBSEM: Where the bias lies!," Journal of Business Research, Elsevier, vol. 69(10), pages 3998-4010.
    27. Caputo, Francesco & Magni, Domitilla & Papa, Armando & Corsi, Christian, 2021. "Knowledge hiding in socioeconomic settings: Matching organizational and environmental antecedents," Journal of Business Research, Elsevier, vol. 135(C), pages 19-27.
    28. Alberto Gimeno & Gemma Baulenas & Joan Coma-Cros, 2010. "Family business models," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28214-8, October.
    29. Nordqvist, Mattias & Melin, Leif, 2010. "The promise of the strategy as practice perspective for family business strategy research," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 15-25, March.
    30. Reinartz, Werner & Haenlein, Michael & Henseler, Jörg, 2009. "An empirical comparison of the efficacy of covariance-based and variance-based SEM," International Journal of Research in Marketing, Elsevier, vol. 26(4), pages 332-344.
    31. Basco, Rodrigo, 2013. "The family's effect on family firm performance: A model testing the demographic and essence approaches," Journal of Family Business Strategy, Elsevier, vol. 4(1), pages 42-66.
    32. Habbershon, Timothy G. & Williams, Mary & MacMillan, Ian C., 2003. "A unified systems perspective of family firm performance," Journal of Business Venturing, Elsevier, vol. 18(4), pages 451-465, July.
    33. Dana, Lucio E. & Smyrnios, Kosmas X., 2010. "Family business best practices: Where from and where to?," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 40-53, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barros, Ismael & Hernangómez, Juan & Martin-Cruz, Natalia, 2016. "A theoretical model of strategic management of family firms. A dynamic capabilities approach," Journal of Family Business Strategy, Elsevier, vol. 7(3), pages 149-159.
    2. Dawson, Alexandra & Mussolino, Donata, 2014. "Exploring what makes family firms different: Discrete or overlapping constructs in the literature?," Journal of Family Business Strategy, Elsevier, vol. 5(2), pages 169-183.
    3. Remedios Hernández-Linares & Soumodip Sarkar & Manuel J. Cobo, 2018. "Inspecting the Achilles heel: a quantitative analysis of 50 years of family business definitions," Scientometrics, Springer;Akadémiai Kiadó, vol. 115(2), pages 929-951, May.
    4. Irava, Wayne J. & Moores, Ken, 2010. "Clarifying the strategic advantage of familiness: Unbundling its dimensions and highlighting its paradoxes," Journal of Family Business Strategy, Elsevier, vol. 1(3), pages 131-144, September.
    5. Unai Arzubiaga & Amaia Maseda & Txomin Iturralde, 2019. "Exploratory and exploitative innovation in family businesses: the moderating role of the family firm image and family involvement in top management," Review of Managerial Science, Springer, vol. 13(1), pages 1-31, February.
    6. Basco, Rodrigo, 2013. "The family's effect on family firm performance: A model testing the demographic and essence approaches," Journal of Family Business Strategy, Elsevier, vol. 4(1), pages 42-66.
    7. Hernández-Perlines, Felipe & Covin, Jeffrey G. & Ribeiro-Soriano, Domingo E., 2021. "Entrepreneurial orientation, concern for socioemotional wealth preservation, and family firm performance," Journal of Business Research, Elsevier, vol. 126(C), pages 197-208.
    8. Arrondo-García, Rubén & Fernández-Méndez, Carlos & Menéndez-Requejo, Susana, 2016. "The growth and performance of family businesses during the global financial crisis: The role of the generation in control," Journal of Family Business Strategy, Elsevier, vol. 7(4), pages 227-237.
    9. Rajan, Bharath & Salunkhe, Uday & Kumar, V., 2023. "Understanding customer engagement in family firms: A conceptual framework," Journal of Business Research, Elsevier, vol. 154(C).
    10. Ismael Barros-Contreras & Héctor Pérez-Fernández & Natalia Martín-Cruz & Juan Hernangómez B., 2023. "Can we make family social capital flourish? The moderating role of generational involvement," Journal of Family and Economic Issues, Springer, vol. 44(3), pages 655-673, September.
    11. Karlsson, Johan, 2018. "Does regional context matter for family firm employment growth?," Journal of Family Business Strategy, Elsevier, vol. 9(4), pages 293-310.
    12. Veider, Viktoria & Matzler, Kurt, 2016. "The ability and willingness of family-controlled firms to arrive at organizational ambidexterity," Journal of Family Business Strategy, Elsevier, vol. 7(2), pages 105-116.
    13. Zellweger, Thomas & Sieger, Philipp & Halter, Frank, 2011. "Should I stay or should I go? Career choice intentions of students with family business background," Journal of Business Venturing, Elsevier, vol. 26(5), pages 521-536, September.
    14. Angela Dettori & Michela Floris, 2023. "Improving continuity by simplifying the structure of family firms: a replication study," Management Review Quarterly, Springer, vol. 73(2), pages 635-660, June.
    15. Nicolas Classen & Martin Carree & Anita Gils & Bettina Peters, 2014. "Innovation in family and non-family SMEs: an exploratory analysis," Small Business Economics, Springer, vol. 42(3), pages 595-609, March.
    16. Mikel Alayo & Txomin Iturralde & Amaia Maseda & Gloria Aparicio, 2021. "Mapping family firm internationalization research: bibliometric and literature review," Review of Managerial Science, Springer, vol. 15(6), pages 1517-1560, August.
    17. Peterson, Preston & Distelberg, Brian J., 2011. "Differentiating value orientations and unity in values as predictors of varying family business system processes," Journal of Family Business Strategy, Elsevier, vol. 2(4), pages 207-219.
    18. Wouter Broekaert & Petra Andries & Koenraad Debackere, 2016. "Innovation processes in family firms: the relevance of organizational flexibility," Small Business Economics, Springer, vol. 47(3), pages 771-785, October.
    19. Melanie Richards, 2023. "When do Non-financial Goals Benefit Stakeholders? Theorizing on Care and Power in Family Firms," Journal of Business Ethics, Springer, vol. 184(2), pages 333-351, May.
    20. David G. Sirmon & Jean–Luc Arregle & Michael A. Hitt & Justin W. Webb, 2008. "The Role of Family Influence in Firms’ Strategic Responses to Threat of Imitation," Entrepreneurship Theory and Practice, , vol. 32(6), pages 979-998, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:14:y:2022:i:11:p:6773-:d:829751. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.