Employee Layoffs in Times of Crisis: Do Family Firms Differ?

Abstract

In this study, we seek to understand firm behavior during times of crisis, with a particular focus on family firms in different contexts. We theorize that family control mitigates (i.e., negatively moderates) the relationship between economic crisis and the layoff of employees, resulting in a higher propensity of family firms to retain their employees during a crisis compared to their nonfamily counterparts. Furthermore, taking a closer look at family firms, based on their location, we argue that family firms in rural regions are more likely to adopt measures leading to involuntary job turnover than family firms in urban areas due to a higher sensitivity to the loss of socioemotional wealth following a business closure. Relying on a panel dataset of Swedish private firms active in the period 2004–2012, our study contributes to a better understanding of family firms as employers in different contexts.