Family firms account for a significant portion of businesses worldwide, contributing over half of global GDP. These firms are not just economic powerhouses; they are distinct in how they approach business decisions, often prioritizing legacy, community, and long-term impact. One area where these values shine is Corporate Social Responsibility (CSR), where family businesses are believed to excel by leveraging their unique characteristics. But is this perception accurate?
Recent research explored this question by analyzing a comprehensive 20-year dataset of S&P 500 firms, examining how family ownership influences the effectiveness of CSR strategies. Specifically, the study focused on two types of CSR: symbolic and substantive. Symbolic CSR includes actions designed to project an image of responsibility without addressing deeper concerns, while substantive CSR involves long-term, meaningful investments aimed at solving societal and environmental issues.
The findings revealed that family firms consistently outperform nonfamily firms in their CSR efforts. Short-term financial gains from symbolic CSR are higher for family businesses, as these firms leverage their stakeholder trust to deflect criticism and build goodwill. Long-term performance advantages from substantive CSR are equally compelling, with family firms seeing a 17% greater improvement in financial outcomes over a three-year horizon.
The researchers attribute this success to the socioemotional wealth (SEW) that family firms cultivate. SEW encompasses both the dimensions that drive family firm behavior and the resources these dimensions generate. The key dimensions include the family’s identification with the firm, meaningful stakeholder relationships, and a desire for transgenerational control. These dimensions result in SEW resources such as favorable reputations, deep stakeholder relationships, and long-term orientations. Together, these resources and dimensions not only enhance the effectiveness of CSR but also align naturally with the values and priorities of family businesses.
For family business leaders, the implications are clear. By doubling down on their inherent strengths—such as fostering deep community ties and maintaining a long-term perspective—they can achieve outsized rewards from their CSR efforts. For nonfamily firms, there’s a powerful lesson in emulating these traits to unlock the full potential of CSR.
The findings demonstrate that CSR isn’t just a moral obligation; for family firms, it’s a strategic tool that transforms their values into tangible value.
João Cotter Salvado
Professor and Academic Director
CATÓLICA-LISBON Entrepreneurship Center