Does Religious Affiliation of Owning Family Matter to Firm Performance? Study of Indian Family Firms

Whether the religious antecedence of owning family has any influence on the performance of a family firm in a religiously diverse institutional context is an interesting yet unexplored area of research. Invoking the resource-based view and social capital theory we theorize why family owners’ religious affiliation may impact firm performance and the moderating role of factors such as promoter shareholding, age, and size of the firm. Use a proprietary dataset of family firms in India, we find that firms with family owners affiliated to minority religions perform better and we also find support for the moderating hypotheses. India provides a natural setting for this study as several religions are practiced by its population and the business landscape is dominated by family firms. Our results run counter to the popular belief of dominance of majority religion in such institutional context. We conclude that micro level resources that accrue over a period due to religion based social network and religious practices are perhaps more dominant in comparison to macro level-institutional resources in impacting family firm performance. We find significant heterogeneity in performance amongst firms owned by different minority religions relative to the dominant religion adding further credence to our core thesis.