The Impact of Nepotism on Family Firm Performance: Evidence from Turkish Family Businesses

Abstract

Nepotism is widespread in family firms, especially in developing counties such as Turkey. A common feature of these countries is the adaption of tribal and peasant social morals into their organizations instead of norms and principles typical of industrial society, which fosters nepotism. Despite its prevalence, the impact of nepotism on firm performance has attracted little attention in such firms and has not been sufficiently examined in the literature. This study seeks to contribute to the underexplored research area by suggesting an explanation for nepotism by analyzing its effects on firm performance. The reasons for nepotism are examined based on institutionalization level, altruism, legislative basis, firm size, Turkish culture, and human resource practices of firms. Moreover, a case study approach is adopted, implementing qualitative semi-structured interviews to provide a depeer understanfing of why nepotism occurs. The study involves seven interviews with the founders and employees of family firms. The findings reveal that each dimension of nepotism as institutionalization, altruism to family, legislative basis, firm size, Turkish culture, and human resource practices has negative impact on firm performance.