Effectiveness of Management Control Systems in Pakistani Family and Non-family Businesses: The Role of Family Social Capital

Abstract

Fertile social capital in the family firms (FFs) is predicted to give a competitive advantage to them over nonfamily firms (NFFs). In this study, we examined the role of social capital for the effectiveness of Simons levers of control in FFs and NFFs. Using data collected from an online survey in Pakistani SMEs, this study demonstrates that association among levers of controls and organizational performance differs between FFs and NFFs. The findings reveal that boundary and interactive controls are directly associated with organizational performance in NFFs. On the other hand, we cannot find a significant direct association between levers of control and organizational performance in FFs. Our findings lead us to support the view that fertile social capital does not provide a competitive advantage to FFs over NFFs for the effectiveness of management control systems. Therefore, we find a disconnect between the theory and empirical evidence.

Keywords: Management control systems, Family firms, Levers of Control, Family social Capital, SME, organizational performance