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

Nepotism is widespread in family firms especially in developing counties such as Turkey. The common feature of these kind of countries is adapting tribal and peasant social morals into their organizations instead of norms and principles typical of industrial society that causes a nepotism. In spite of the prevalence of nepotism, its impact 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 underdeveloped research topic 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 which facilitate understanfing of why nepotism occurs. The study involves seven interviews with the founders and employees of firms.

The findings reveal that each proposition of nepotism as institutionalization, altruism to family, legislative basis, firm size, Turkish culture, and human resource practices has negative impact on firm performance.