Family constitution and firm resilience

The family constitution (FC) (also called “family protocol,” “family agreement,” or “family charter”) is a written agreement that establishes a common understanding of key issues between the family and family firm (Suess, 2014; Villalonga et al., 2015) that codifies the family’s purpose, values, and aims while articulating a clear plan for the future of the firm’s governance (Montemerlo and Ward, 2011; Villalonga et al., 2015). The FC has been recalled as a key instrument that can mitigate problems among family members due to potential conflicts arising from the intermingling of individual, family, and firm goals (Suess, 2014; Wieszt et al., 2025), ultimately benefitting a firm’s economic performance (Arteaga and Menéndez-Requejo, 2017). In this study, we argue that, in addition to preventing conflicts among family members, FC prepares the family firm for potential disturbances arising from internal or external perturbations, making it more resilient (Annarelli and Nonino, 2016).

Despite the importance of the FC in family firm outcomes, literature on this topic is scarce (Matias and Franco, 2021; Rodriguez-Garcia and Menéndez-Requejo, 2023). Some authors (Suess, 2014) maintain that FC has been the least researched family governance tool. A few studies have connected FC and performance (Rodriguez-Garcia and Menéndez-Requejo, 2023); however, the relationship between FC and family firm resilience has never been examined. Therefore, we attempt to fill this gap in the literature. This is a key gap, considering that the organizational resilience framework is defined as a company’s capacity to adapt, recover, and thrive in the face of challenges, setbacks, and unexpected changes in its environment (Conz and Magnani, 2020; Czakon et al., 2023; Yilmaz et al., 2024). Furthermore, organizational resilience is especially critical for family firms because their owners usually intend to pass the family firm to the next generation of family members (Chrisman et al., 2011). A firm’s resilience is essential for surviving in a constantly changing environment (Starr et al., 2003; Tompkins and Ghoshal, 2007) and has become an emerging concept in explaining how to overcome environmental disturbances, such as the recent COVID-19 pandemic or subsequent economic crises linked to adaptation and overcoming adversity. The resilience of family firms depends, among other factors, on issues commonly encountered in FC, such as how they respond to the need to infuse managerial talent into the firm without losing control, balancing economic and family goals over varying timeframes, and using unique governance systems (Chrisman et al., 2011).

The FC is a key concept in family business literature related to family and family-to-firm relationships. Another relevant concept and theory related to family ties is the family social capital (FSC) theory, which refers to the actual and potential resources stemming from the relationships among family members (Arregle et al., 2007). The FSC theory is considered the most relevant form of capital among the three types that characterize family firms (social, human, and financial) (Sorenson and Bierman, 2009) and is assumed to define family firms. The FSCs are rare, valuable, and difficult to imitate; without substitutes, they represent a competitive advantage (Arregle et al., 2007) that can enhance firm resilience (Chrisman et al., 2011).

The FC and FSC are linked, as both emphasize the importance of maintaining good relationships between family members and between them and the family firm. The FC focuses on the norms regulating the relationships between family members and the firm, whereas the FSC highlights the firm’s resources stemming from the interpersonal relationships among family members, their trust and commitment to the firm, and their shared values and vision. Accordingly, FSC is considered a driver of firm resilience (Chrisman et al., 2011). Although FC and FSC are highly interrelated, there is a gap in the literature regarding their link. This study argues that both concepts can help family firms establish solid family ties, norms, and interactions, increasing their ability to develop firm resilience and face potential challenges. In particular, we address the following research questions: How does FC and its content influence family firm resilience, and to what extent does FSC moderate this relationship? To answer these questions, we provide theoretical arguments and empirical analysis of a set of firms to test (1) whether FC positively influences firm resilience, (2) the interactions between the FSC and FC in building family firm resilience, and (3) which specific content should be included in FC. Our empirical analysis involved several hierarchical regression analyses of a questionnaire sent to a set of Spanish family firms in secondary (manufacturing) and tertiary (service) sectors in 2022, extracted from the SABI (Iberian Balance-Sheet Analysis System) database. Our questionnaire requested information about variables such as whether the founder was still involved in the firm’s daily activities. Whether the firm had FC and its FSC level.

Our study’s first contribution is that it sheds light on the drivers of family firm resilience by linking the literature on FC, FSC, and resilience. This is highly relevant in the context of family firms because (1) most family firms have intergenerational succession intentions (Chrisman et al., 2011), and (2) our results show that FSC and FC are key drivers of firm resilience and that they interact. Therefore, to analyze the effect of having an FC, it is necessary to conduct a joint analysis with other variables, such as family relations and FSC.

Our second contribution to the literature comprises illustrating whether having an FC is beneficial and which content should be included to increase firm resilience. Depending on FC content, this can benefit family firms’ resilience.

The remainder of this paper is organized as follows: In the next section, we describe the theoretical approach and hypotheses related to the concepts of FC, FSC, and firm resilience, followed by an analysis of the interaction between these variables and the impact that the different elements of FC (norms that specify family members’ access to employment and management, succession plans, dividends, and voting rights, and regulations for the remuneration system of family members) have on firm resilience. The third section explains our analytical method and describes its empirical applications. Next, we debate key results, discussions, main conclusions, and limitations. Finally, we explain practical implications and directions for future research.

Resilience is a positive adjustment to adversity. In the business context, organizational resilience theory refers to an organization’s ability to respond positively to adversity and disturbances (Conz et al., 2020; Czakon et al., 2023; Hurtado and Herrero, 2024; Lengnick-Hall et al., 2005; Yilmaz et al., 2024) and has emerged as a crucial element in understanding how organizations can sustain effective operations in intricate and demanding settings (Yilmaz et al., 2024). Family resilience refers to family members’ ability to overcome difficulties. Family firms’ organizational resilience is fueled by the owning family’s resilience, which positively affects employee resilience and can be learned and passed down through generations (Czakon et al., 2023; Santoro et al., 2021).

Consequently, companies can modify their processes and structures to enhance their ability to face potential changes in an increasingly uncertain and dynamic environment (Lengnick-Hall et al., 2005; Mihotić et al., 2023). This proactive approach to resilience enables organizations to anticipate and respond to challenges more effectively, increasing their chances of survival and success in the long run.

Several studies have analyzed firm resilience in the context of family firms. For example, Conz et al. (2020) proposed an integrative framework for family business resilience, highlighting four key ideas: the need to define family business resilience, the impact of long-term orientation and family values, the role of resources and capabilities, and the demonstration of resilience and learning processes. Eckey and Memmel (2023) found that family businesses are often more resilient than non-family businesses, suggesting how idiosyncratically they develop and enact resilience. Yilmaz et al. (2024), Danes et al. (2009), and Jaskiewicz et al. (2015) explored how family dynamics influence resilience, particularly in times of crisis. Their findings contribute to a deeper understanding of the unique resilience traits of family firms. However, there is still an avenue for research on which aspects of family firms determine organizational resilience.

Family firms are remarkably different from other firms, and succession proceedings and complicated internal family dynamic forces can lead to challenging family debates. To address this situation, firms have drawn on family governance mechanisms, including family meetings, councils, and FC. These structures establish the firms’ family dynamics, contributing to family unity and conflict resolution (Cabrera-Suárez and Martín-Santana, 2015; Rodriguez-Garcia and Menéndez-Requejo, 2023; Suess, 2014) through organization, communication, value transmission, and decision-making. This limits the scope of possible interference, reduces conflict among family members, promotes smoother transitions during succession, and ensures continuity of family firms (Jayantilal et al., 2024).

Among these mechanisms, FC has been the least researched family governance tool (Suess, 2014). The FC, a written statement of the family governance mechanism, guides the avoidance, resolution, and management of family conflicts. Additionally, the FC establishes paths and cultures that provide the family firm with the necessary resources for principles, fairness perception, and clarity about the norms that prepare the firm for future success (Rodriguez-Garcia and Menéndez-Requejo, 2023). The FC is a family roadmap for current and future generations, establishing broad principles concerning governance management and the use of family assets (Schickinger et al., 2023). This might include specific policies on issues such as investment norms or educational requirements for working in family businesses. This can greatly help the firm by establishing guidelines for current and future generations, avoiding the risk of disputes and misunderstandings between family members. Furthermore, FC can be useful in solving conflicts among shareholders by establishing and promoting governance mechanisms (Montemerlo and Ward, 2011).

Drafting an FC is related to the characteristics of the board of directors, such as having special agreements regarding the relationship with the management team to avoid interference. In many cases, this entails developing other family governance mechanisms, such as family meetings or councils. Additionally, it establishes areas of communication and discussion for decision-making and conflict resolution (Rodriguez-Garcia and Menéndez-Requejo, 2023). Incorporating requirements for family members wanting to participate in management teams limits owners’ favoritism in selecting managers, simultaneously promoting firm professionalization. Using the resource-based (RBV) theory, this professionalization provides the family firm with resources that aid them in preparing better for contingencies that may appear. Maintaining resource resilience during stability is essential for effectively coping with challenges during disturbances (Yilmaz et al., 2024). These agreements are necessary for firms with family succession intentions because parents’ altruistic behaviors can encourage nepotism and a lack of professionalization (Jaskiewicz et al., 2015). The FC indicates a firm’s orderly and structured continuity (Rodriguez-Garcia and Menéndez-Requejo, 2023). Furthermore, this mechanism favors professionalization by establishing the requirements for family members to join the firm. This is a key issue for some stakeholders considering FC to guarantee family firm-appropriated behavior.

Therefore, to increase resilience, family firms must establish clear norms and rules (Botero et al., 2015). Arteaga and Menéndez-Requejo (2017) maintain that firms that dedicate time and effort to formalizing the family’s relationships with the firm and developing an FC achieve greater growth in firm performance. By establishing clear norms, the FC avoids conflicts among family members and provides the family firm with valuable resources to cope with potential disturbances. According to the RBV, these resources allow family firms with an FC to be more resilient. Furthermore, the dynamics of control, management, and governance within family firms are particularly relevant in situations involving the family, non-family, and different generations (Villalonga et al., 2015). Thus, they would become more professionalized and similar to non-family firms, which would prepare them to face potential disturbances successfully and become more resilient. The FC should explicitly state the rules that the family will follow, helping family members understand what they can expect from their membership and potentially decreasing perceptions of inequality among family members (Botero et al., 2015). The FC helps firms appear legitimate and fosters stakeholder’s trust.

The RBV suggests that FC can enhance a firm’s capacity to adapt and thrive in changing environments by ensuring that family members understand the importance of resources and their roles in the business (Villalonga et al., 2015). The FC can reinforce commitment and perceptions of justice by clearly defining the roles, responsibilities, and expectations of family members involved in the business Villalonga et al., 2015). This transparency enhances resilience by ensuring that family members are committed to the sustainability and growth of the business and strengthen their capacity to face environmental disturbances.

Thus, we conclude that governance mechanisms play an important role in a firm’s success (Arteaga and Menéndez-Requejo, 2017; Calabrò and Mussolino, 2013). Overall, FC enhances a firm’s professionalization and limits nepotism, positively influencing the resolution of agency problems between managers and shareholders (Jaskiewicz et al., 2015; Rodriguez-Garcia and Menéndez-Requejo, 2023). Moreover, it can also increase the firm’s ability to cope with adverse situations or environmental changes by reducing potential conflicts between family members or between majority and minority shareholders (Botero et al., 2015; Brenes et al., 2011). These arguments lead to the following hypothesis:

Firm social capital, resources, and knowledge derived from firm relations with other actors, offer exceptional advantages to family firms, including competitive advantages (Nahapiet and Ghoshal, 1998). Assuming the RBV, family firms possess a unique type of social capital, the FSC, which stems from relationships among family members (Arregle et al., 2007). The evidence suggests that the characteristics of family and business subsystems, including the type of relationship between them can affect firm viability (Botero et al., 2015). Family members’ interactions are frequently informal over family meals or meetings or simply through daily activities, providing valuable resources (knowledge absorption, trust, etc.) to the family business that allows them to face disturbances more successfully.

Family firms are not homogeneous (Chua et al., 2012); therefore, the effect of FC on firm resilience may differ. This heterogeneity is particularly evident in FSC (Carr et al., 2011). Furthermore, some authors (Herrero, 2018) posit that family firms should be classified as more or less “family” firms depending on their level of FSC, as family relations and the resources stemming from them are what distinguish family firms. This finding suggests that family firms behave differently depending on their FSC level. Thus, we argue that this heterogeneity regarding FSC highly influences the effectiveness of having FC on firm resilience.

The FSC represents informal relational resources, and the FC represents formal governance mechanisms. They provide the family firm with valuable resources; the FSC provides flexibility in decision-making, whereas the FC offers a structure. Both elements may contribute differently to resilience, making their joint examination valuable and providing a more comprehensive view of how family firms manage relationships and governance due to interaction effects. The FSC level may influence an FC’s effectiveness and vice versa. For example, a strong FSC may facilitate implementation and adherence to FC.

The FSC, a resource stemming from family relationships, is generated when relationships among individuals are intense and characterized by commitment, trust, a shared vision, and goals (Arregle et al., 2007). The FSC-rich firms develop norms and unique identities (Nahapiet and Ghoshal, 1998; Pearson et al., 2008), possessing ethical norms that invite social support and stewardship behavior (Sorenson and Bierman, 2009). Altruism, commitment, and reciprocity embedded in the FSC diminish the necessity for written norms such as FC adoption. This does not imply that FSC can replace FC. The FC is necessary for long-term success, as it is the key to ensuring a clear structure and clarity of norms that prevent future conflicts. However, high levels of FSC can make family firms less vulnerable to economic recessions (Pearson et al., 2008) and make family protocols less relevant for achieving firm resilience in the short term.

The FSC facilitates understanding among family members and shareholders. This implies a commitment to relationships among firm members, which promotes information sharing, identification, and a common vision and goals, all representing unique resources that favor resilience. Frequent and trusting relationships among family members facilitate exchange of information, which can benefit the firm’s functioning (Pearson et al., 2008). When combined, commitment values, firm identity, and a common vision and goals generate feelings of unity, improving firm resilience (Lengnick-Hall et al., 2011).

Conversely, if FSC is low and family conflict plagues a firm, having FC with clear norms and obligations is key to firm functioning (Rodriguez-Garcia and Menéndez-Requejo, 2023). In these cases, FC provides the firm with a clear way to conduct business and prevent family conflict, which can help the firm deal with environmental perturbations (Polat, 2021). Moreover, FC enhances communication, allowing family and non-family members to interact more frequently, rendering these relations structurally unique and stronger than those among non-family members (Polat, 2021). Consequently, it is necessary to draw an FC before a conflict occurs.

Our study investigates the relationship between FC, FSC, and firm resilience in family businesses. Both formal structures (e.g. FC) and informal resources (e.g. FSC) contribute to a firm’s ability to adapt and thrive in the face of challenges.

Overall, the FC establishes a set of norms that promotes cooperation and conflict resolution while preserving family bonds, encouraging inclusion and empowerment, and strengthening multigenerational bonds and collaboration among family members. The FC can strengthen family ties and social capital by providing a structured framework for family interactions and decision-making, leading to a more resilient and cohesive family unit.

Thus, considering the factors above, we establish the following hypothesis:

The FC content is closely tied to the sources of heterogeneity identified in family firm research (Chua et al., 2012). The norms and rules outlined in these documents vary widely across family firms, reflecting categorical and variational differences in succession planning, governance structures, employment policies, and financial management practices. This variability in FCs manifests the broader heterogeneity observed among family firms, and we analyze how this heterogeneity influences and makes some family firms more resilient than others.

Family firms are unique entities that blend family dynamics with business operations. One critical aspect of their governance is the FC, which serves as a framework for establishing norms and rules regarding family members’ access to employment and management roles (Arteaga and Escribá-Esteve, 2020). Norms regarding the roles, responsibilities, and expectations of family members in a business can enhance family business performance and continuity (Hauck et al., 2016). Miller and Le Breton-Miller (2014) highlighted the significance of family values in shaping employment practices. They suggested that certain norms articulate these values and establish guidelines for family members’ access to management roles. This approach fosters a sense of fairness, helps prevent nepotism, and ensures that family members qualify for their positions.

Additionally, the governance structure of a family business, such as the FC, influences how family members interact within the firm. Conz et al. (2020) emphasized that governance mechanisms, such as FC, should define roles and responsibilities for family members. The FC can help maintain harmony and effectiveness in family businesses by including norms regarding employment and management access.

Klein et al. (2005) discussed how clearly defined norms regarding family employment are critical for aligning family and business goals. They argue that incorporating these norms into the FC can enhance governance and overall performance as it sets clear expectations for family members regarding their roles within the business.

Family businesses must avoid favoritism and ensure that all family members understand that their employment decisions are based on their qualifications and merits. By explicitly stating these principles in the FC, family firms can foster a culture of accountability and fairness that is vital for maintaining morale among family and non-family employees. Miller and Le Breton-Miller (2014) emphasize that family members often expect special privileges, which can lead to resentment among non-family employees. To counteract this, the FC should outline clear policies regarding the recruitment, promotion, and performance evaluation of family members, ensuring that they are treated equally by non-family employees. This approach promotes fairness and reinforces the legitimacy of family businesses’ governance practices.

Another critical aspect of including norms in FC is establishing conflict-resolution and change-management mechanisms. De Massis et al. (2016) suggest that FCs provide guidelines to address disputes arising from family employment issues. By outlining procedures for conflict resolution, family firms can ensure that disagreements are handled constructively, preserving family relationships and business continuity.

Additionally, FCs should include provisions for change management, allowing family members to propose and assess new ideas while respecting established norms. This flexibility is essential to adapt to changing business environments and ensure that family businesses remain competitive. In many cases, a firm’s future entails a deeper discussion of the family’s future; accordingly, questions and discussions regarding who will lead the business are difficult to answer (Daspit et al., 2018). Different family members may want to take business in different directions, preferring to hire professional management or want a strong internal family candidate to take over the company’s leadership. In such cases, an FC can help avoid conflicts by establishing the appointment and promotion of family members within the firm, including norms related to the competency, age, qualification, merit, and professionalization of said family members (Suess, 2014). The FC establishes guidelines for equal access and merit-based hiring, ensuring that family employees possess the necessary skills, training, education, and knowledge to contribute effectively to the business by promoting professionalization, limiting owner nepotism, and reducing conflicts between shareholders and managers (Daspit et al., 2018). This improves family firms’ overall performance and resilience.

In other situations, parents’ altruistic behavior makes it difficult for owners to sanction inappropriate family practices (Chrisman et al., 2021) and even discourages the efforts of family managers. On the one hand, parental altruism and self-control in some family businesses can negatively influence stakeholder relationships, leading to conflicts and potential mismanagement (Schulze and Kellermanns, 2015). This is because some family owners and managers prioritize personal benefits and privileges over the firm’s interests, undermining the business and disadvantaging other shareholders (Schulze et al., 2002). On the other hand, altruism can also serve as a protective mechanism, shielding family managers from the repercussions of incompetent management by fostering a supportive environment (Schulze et al., 2002). To mitigate these risks and balance the benefits, establishing clear norms within family firms is crucial. The FC can formalize these norms by specifying the criteria for family members' access to employment and management positions. This structured approach ensures that decisions are made based on merit and the firm’s long-term goals rather than on personal relationships or short-term gains, enhancing the overall governance and resilience of the family business.

Regarding incorporating relatives into the firm, the smooth transition of leadership and knowledge from generation to generation allows for the preservation of the family’s values and institutional knowledge (Motylska-Kuzma et al., 2022). Family members aspiring to assume managerial roles are more likely to invest time, energy, and resources in their businesses’ growth and resilience (Chrisman et al., 2011). This alignment of interests fosters a sense of shared purpose and dedication, strengthening the family firm’s ability to navigate challenges and adapt to market changes. They also share business and industry knowledge because those who grow up with close connections to the family firm often possess a deeper understanding of the context (Miller and Le Breton-Miller, 2014). The relationship between shareholders and family outsiders can interfere with family business decisions (Le Breton-Miller et al., 2015; Villalonga et al., 2015). The objectives of family outsiders, who are significant stakeholders in the family firm and often exert powerful influence, are not always aligned with those of other family members (controlling shareholders, board members, and/or managers). The authors refer to this conflict as Agency Problem IV (Villalonga et al., 2015). Relatives’ participation may only be allowed when they meet certain training and experience requirements, such as particular jobs and functions, including appropriate education and training; meanwhile, outside directors could perform monitoring. Families with an entrepreneurial legacy are aware of the vital roles of relatives and integrate them sooner (Jaskiewicz et al., 2015).

Nevertheless, relying exclusively on family members for managerial positions may limit the inclusion of external talent with market knowledge, fresh perspectives, and innovative ideas (Lorenzo et al., 2022), limiting the diversity of perspectives and expertise required for a firm’s long-term success.

The FC clarifies the career plans of family and non-family members. By recruiting non-family professionals with specialized expertise, businesses can benefit from fresh perspectives, diverse skill sets, and industry knowledge (Lévesque and Subramanian, 2022). Infusing external talent enhances a firm’s ability to innovate, respond to market changes, and navigate challenges. This strengthens family firms’ resilience by avoiding insularity and encouraging a dynamic forward-thinking approach.

Accordingly, we propose the following hypotheses:

The succession plan is one of the primary triggers for the development of an FC, as getting the process wrong can damage businesses. This process can be difficult for founders who may find it difficult to control the daily management of family businesses (Motylska-Kuzma et al., 2022). For many families, succession is often a topic that drops to the bottom of the list, and many families do not feel a sense of urgency. This requires considering when the business must change hands and implies a gradual transition from one generation to the next. However, many families are aware that discussions about succession can be difficult and conflicting (Jasir et al., 2023). Therefore, they avoid difficult discussions instead of directly confronting and resolving issues.

Succession planning should also align with the firm and family values (Lévesque and Subramanian, 2022). The next generation will take these values forward, enabling the firm’s success, improving its reputation, establishing strategic goals with specific roles, and conferring responsibility to family members.

Discussing when the current generation should start introducing younger family members is necessary because the next generation should thoroughly understand the family business (Canovi et al., 2022).

Founders can sometimes hold back on introducing younger generations to the business, fearing that they are not ready (Raitis et al., 2021); however, the sooner this process starts, the more confidence and respect stakeholders will have for the next generation. This should help mitigate the two potential risks of the succession process.

However, if the succession process is not well-managed, it can threaten firm survival. We find the following failures in firm succession: lack of clarity (Villalonga et al., 2015); family members not having the right skills to effectively run the business (Pérez-González, 2006), poor relationships between family members (Villalonga et al., 2015); stakeholders’ faith in the future of the business (Cucculelli and Micucci, 2008); and employees not respecting the skills and capabilities of the next generation. Conflict among family members (Schulze et al., 2002) limits talent recruitment, discourages competition between agents, reduces managers’ professionalization (Van den Berghe and Carchon, 2003), and may favor overpaying family managers for their efforts (Chrisman et al., 2011). Thus, when succeeding generations weaken familial bonds and decrease family members’ identification with the firm, other governance mechanisms become necessary (Suess, 2014).

Family businesses often exhibit higher resilience than non-family firms, largely owing to their long-term orientation and integration of family values into business practices. These characteristics are crucial during succession because they help maintain stability and continuity during the leadership transition. By embedding succession planning into the FC, family firms can ensure that future leaders are aligned with the family’s values and vision, which are vital for sustaining resilience. A well-structured FC with a succession plan can mitigate the risks associated with leadership transition. Clarity in norms and succession processes can prevent conflicts and misunderstandings among family members, which are often exacerbated by leadership changes (Chrisman et al., 2011).

Filser et al. (2018) supported the notion by highlighting that family firms with well-defined governance structures are better equipped to manage internal conflict. Voting rights plans are essential governance tools that delineate how family members participate in the decision-making processes within a family business. Family firms can establish transparent voting processes to ensure their voices are heard, particularly during leadership transitions or a crisis. A well-structured voting rights plan can significantly contribute to family firm resilience by ensuring that decision-making is both an inclusive and long-term strategic goal. This inclusivity helps mitigate conflicts among family members and fosters a collaborative environment, which is crucial during times of crisis.

A voting rights plan can also enhance socioemotional wealth by promoting harmony, fairness, and transparency in decision-making processes. As Boers et al. (2024) highlighted, when family members feel that their opinions are valued and considered in governance matters, they strengthen their emotional attachment to the business. This emotional investment is crucial for resilience, as it encourages family members to work collaboratively toward common goals, even during challenging times.

Clear guidelines on how profits are distributed among family members and shareholders help avoid conflict and confusion in determining dividend payouts, ensuring a fair and transparent process (Gunawan and Koentjoro, 2023). Dividends can align family members’ interests with the business’s long-term success and sustainable growth (Seth and Mahenthiran, 2022). This alignment of interests encourages family members to support and contribute to a firm’s resilience.

Moreover, including voting rights helps establish a fair and transparent mechanism for important decision-making. Voting rights ensure that decision-making power is distributed based on ownership stakes in the family firm and that decisions are collectively made in the best interests of the entire family business (García-Meca and Santana Martín, 2023). By granting voting rights, the FC ensures that a single individual or small group does not influence decisions. This diversity of inputs can lead to more well-rounded decision-making, strengthening the family firm’s resilience.

Voting rights also create a system of accountability and governance within the family firm (Rodriguez-Garcia and Menéndez-Requejo, 2023). This ensures that critical strategic choices such as major investments, business expansions, and significant policy changes are collectively made by considering the inputs of all relevant stakeholders. Involving family members in decision-making promotes unity, a sense of ownership, and shared responsibility, which can contribute to the family firm’s resilience. Additionally, it provides a structured framework for resolving conflicts and reaching consensus among family members. Voting rights impart a fair and democratic way to make decisions when different opinions or interests arise. Therefore, it can help prevent prolonged conflicts by disrupting businesses and hindering their ability to navigate challenges effectively.

Voting rights encourage family members to consider their businesses’ long-term interests. The FC promotes a broader perspective that transcends short-term interests by involving multiple generations and ensuring their representation in decision-making. Long-term orientation can help a family firm withstand economic fluctuations and adapt to changing market conditions, enhancing its resilience and sustainability. Voting rights within the FC play a crucial role in succession planning by ensuring a smooth transfer of decision-making power from one generation to the next.

The FC regulates shareholder remuneration and voting rights. Shareholders not involved in a firm’s daily activities are important. The FC regulates dividend policies; dividend distribution can be the annual source of discrepancy with minority shareholders and liquidity and transmission within the firm (Villalonga et al., 2015). This serves as a framework for addressing dividends and voting rights to ensure firm resilience (Montemerlo and Ward, 2011). Other types of agreements include the continuity of the family in terms of sale conditions of shares and payment methods to retain ownership control and avoid decapitalization (Rodriguez-Garcia and Menéndez-Requejo, 2023). Moreover, the FC can also include clauses related to matrimonial property regimes. Although relatives are free to sell their shares, the FC establishes agreements to retain the property linked to the family.

The regulation of dividend rights is crucial to firm survival and growth. Paying dividends can significantly reduce a company’s ability to finance investments and ultimately affect its long-term resilience. Family firms often adopt more restrictive dividend payout policies during economic downturns than non-family firms, allowing them to maintain greater financial flexibility (Jarchow et al., 2023). By prioritizing reinvestment over immediate shareholder returns, family businesses can preserve capital for essential investments, ensuring they have the necessary resources to adapt and thrive in changing market conditions (Ossorio, 2024). This strategic focus on retaining earnings, rather than distributing them as dividends, is crucial for sustaining long-term growth and resilience because it enables firms to navigate crises without compromising their financial stability.

Chrisman et al. (2011) argue that clear governance mechanisms, such as a remuneration system, are essential for effective decision-making, conflict resolution, and mitigation because establishing a remuneration system helps provide the right incentives to managers based on performance and responsibility rather than on their ties to the family in family firms where personal and professional relationships are closely intertwined (Suess, 2014).

Thus, a well-defined remuneration system is essential for managing expectations and maintaining harmony within family businesses, as it ensures that family members are fairly and equitably compensated based on their roles, responsibilities, and contributions to the business, which is particularly important during leadership transitions or crises (De Massis et al. (2016).

These regulations regarding the remuneration system of family members in the FC can positively affect the family firm’s resilience (Calabrò et al., 2021). When family members perceive the remuneration system as fair, they are more likely to be motivated, committed, and aligned with long-term business goals, thereby enhancing the firm’s resilience. Thus, a carefully regulated remuneration system can contribute to the firm’s financial health and sustainable growth (Chrisman et al., 2011). By establishing guidelines and limits on family members’ compensation, the FC ensures that businesses maintain a reasonable balance between profit reinvestment and earnings distribution. This helps strengthen a firm’s financial position, maintain liquidity, and effectively allocate resources essential for resilience in the face of economic challenges and market fluctuations. The remuneration system outlined in the FC can also play a role in succession planning and continuity (Calabrò et al., 2021). By specifying how compensation will be determined for future generations and the criteria for family members' involvement in the business, the FC helps establish a smooth transition of leadership and management. This contributes to the family firm’s resilience by ensuring that capable and motivated family members are incentivized to continue the legacy and drive the business forward.

Additionally, family firms’ resilience is often linked to their ability to adapt to changes and challenges (Yilmaz et al., 2024). Family firms with well-defined remuneration systems are better equipped to manage crises. The FC’s embedded remuneration system provides a framework for proactively addressing financial issues, enhancing a firm’s capacity to respond to external shocks. By clarifying family members’ roles and responsibilities regarding compensation, these systems can reduce ambiguity and conflict during difficult times, ultimately contributing to a firm’s resilience. Having a clear compensation protocol allows family businesses to respond more effectively to unexpected events, minimize disruptions to their operations, and ensure long-term sustainability. By promoting effective governance, supporting long-term orientation, enhancing socio-emotional wealth, and fostering adaptability, a well-defined remuneration system can significantly contribute to the resilience of family businesses.

Our empirical analysis involved a set of Spanish family firms in secondary (manufacturing) and tertiary (service) sectors. We collected data for the year 2022. The primary data were extracted from the SABI (Iberian Balance Sheet Analysis System) database. This well-known database from Bureau van Dijk (2015) has been widely used in management studies because it includes contact and financial data for most firms in Spain and Portugal. This database is analogous to Aida in Italy, Dafne in Germany, and FAME in the UK and Ireland. We filtered firms to exclude those with fewer than five employees, ensuring they had a minimal structure and that the possibility of having an FC was meaningful. Additionally, we filtered the samples to ensure that family businesses were active during data collection.

We designed a questionnaire to collect key firm variables such as the number of employees and whether the firm could be considered a family firm. Considering that we had no prior information on whether the firm was a family firm, we asked interviewees whether they considered it a family firm. This type of self-assessment indicates whether an interviewee feels emotionally linked to the family firm and frequently relates to the firm’s identity, which could be a good indicator (Carr et al., 2011). Next, we double-checked whether firms that considered themselves family firms verified that the same family owned most of the shares and was involved in managing and controlling the firm. Only one firm was removed from the dataset because most of its ownership was neither in the family’s hands nor was the family involved in management.

Our questionnaire ( Annex) also requested information about other variables, such as whether the founder was still involved in the firm’s daily activities (family founder), the percentage of ownership in the family hands (family ownership), and whether the firm had an FC or its level of FSC. To measure FSC, we used a well-known scale widely used in the literature (Carr et al., 2011). We pretested our questionnaire with three managers, including their comments. We have made only minor changes to a few questions.

We addressed our questionnaires to family managers because some authors have indicated a high agreement between family firm managers’ responses and those of other family members and non-family employees. Therefore, the responses provide a broad picture of the entire organization (Carr et al., 2011; Gómez-Mejía and Herrero, 2022; Klein et al., 2005), confirming that their responses are appropriate for our study. Data were collected through telephone interviews with family managers to ensure high response rates. This method was chosen for several reasons: the lack of existing databases analyzing the studied variables, its accessibility and ability to yield a more representative sample, and its cost-effectiveness. Additionally, telephone surveys facilitate real-time interactions, allowing interviewers to clarify questions, probe deeper responses, and ensure respondents fully understand the survey items. To mitigate potential biases, we tested for nonresponse bias by comparing the values of some variables in our sample with those of the initial population (Clottey and Benton, 2013; Diamantopoulos and Souchon, 1999) and found no major differences. Additionally, we used neutral and non-leading questions to minimize response bias. The interviewers were trained to maintain consistency and avoid influencing responses.

We randomly selected firms from the initial population. We then called them and insisted on second and third phone calls when necessary. A response rate of approximately 10% was achieved with the final sample comprising 240 firms, which can be considered reasonable when dealing with difficult-to-reach populations in business research (Mellahi and Harris, 2016).

We eliminated firms that could not be considered family firms or those with missing data, thus reducing our sample size to 231 family firms. The average firm had approximately 166 employees. As shown in Table 1, our sample includes firms of various sizes. Data diversity ensures the reliability of the results (Blair, 2006). In 30% of cases, the founder was still involved in the firm, and 90% of the firms had a family CEO. Only 23.4% of the firms in our sample had an FC (Table 1). The average FSC level (1–5) was approximately 4.4. This is consistent with previous studies that measured FSC in family firms (Carr et al., 2011; Herrero and Hughes, 2019).

For some variables, we compared the values of early respondents with those of later respondents and found no sizeable differences. This finding suggests that nonresponse bias was not a problem in our sample.

Resilience: We used the scale developed by Akgün and Keskin (2014). It comprises the following four items: (1) we take actions and make investments before required to ensure that we benefit from situations emerging in our organization; (2) we deliberately unlearn obsolete information or dysfunctional heuristics in our organization; (3) we quickly discard behaviors constraining us from developing new competencies in our organization; and (4) we can identify opportunities that other firms without our competencies might miss.

FSC: We used the well-known scale by Carr et al. (2011), which was validated by other authors. It comprises three dimensions: structural, relational, and cognitive. The first scale measures the intensity and frequency of family ties. The second focuses on relational trust and commitment to the family firm, and the third refers to common values and visions. Some studies have adapted Tsai and Ghoshal's (1998) scale to the family context, but Carr et al.’s (2011) scale is the only one found in the literature specifically focused on FSC. Consequently, we chose the latter because it has been validated in the literature (Herrero and Hughes, 2019).

FC: This was measured using a dummy variable equal to 1 if the firm had FC and 0 otherwise.

FC Content: We measured six additional variables related to the FC content. We considered whether the FC included norms on the following aspects: (a) family access to firm employment, (b) access to management positions, (c) succession planning, (d) dividend rights, (e) voting rights, and (f) the remuneration system of family members. Given the large potential variations within these variables and the broad qualitative differences that could occur, we preferred to consider them as dummy variables so that each of these variables was equal to 1 if the FC included norms about that issue (e.g. norms regarding management positions) and 0 if there were no norms in the FC.

We also considered several control variables for family firm heterogeneity, such as the firm size, measured using the number of employees. Smaller firms are more flexible and adaptive to external changes, which influences their resilience (Akgün and Keskin, 2014). In addition, we included founder involvement because founders perform differently from subsequent generations, and their influence is crucial in decision-making, consequently affecting firm resilience. Founder involvement was measured using a dummy variable equal to 1 if the founder was involved in the family business and 0 otherwise. Additionally, the family CEO variable was included to account for the involvement of a family member at the top of the management team. It was measured as a dummy variable equal to one if the CEO was a family member and 0 otherwise. Finally, we include the percentage of family ownership to control for heterogeneity in family influences (Cruz et al., 2019).

We performed several hierarchical regression analyses. We previously standardized all variables. We used the natural logarithm for the number of employees to avoid heteroscedasticity problems. Surprisingly, the results showed that FC does not affect family firms’ resilience, contradicting our first hypothesis (Tables 2 and 3). As shown in Table 2, neither the direct effect (Model 1: beta coefficient = 0.069, p-value = 0.288) nor the moderating effect of FSC on the relationship between FCs and resilience (Model 2b: beta coefficient = 0.077, p-value = 0.264) was significant. Therefore, our second hypothesis is not supported because FSC does not moderate the relationship between FC and firm resilience (Table 2). Firm resilience is driven by the FSC level, as indicated by the positive and highly significant coefficients (see Models 2a and 2b in Table 2; p < 0.005). Regarding the control variables, the results show that the larger the firm, the higher its resilience. Interestingly, the founder’s involvement in the family firm enhanced its resilience (Table 2). Conversely, the coefficient for family CEOs is negative and highly significant.

When we focus on FC content, the results show that constitutional content is more relevant than having FC. Our results do not support the hypothesis regarding the inclusion of norms related to family employment access (H3a). This suggested that including norms in the FC regarding family access to family employment was unrelated to firm resilience (β = 0.226; p-value = 0.118). Interestingly, the opposite occurs when family access to management-level positions is included in the family firm’s constitution (H3b), significantly enhancing firm resilience (β = 0.327; p-value = 0.016). The empirical results supported the H3c hypothesis because the coefficient associated with succession planning (H3c) was highly significant (β = 0.323; p-value = 0.025). Similarly, establishing clear dividend rights (β = 0.356; p-value = 0.008) and voting rights (β = 0.294; p-value = 0.037) promotes resilience, which support H3d and H3e, respectively. Finally, family remuneration is found to positively affect firm resilience (β = 0.396; p-value = 0.004), so that hypothesis H3f is supported.

All coefficients related to the norms that could be incorporated into FC were positive and highly significant, except for employment access to family.

Our empirical analysis provides valuable insights into the relationship between the FC, FSC, and firm resilience in family businesses. We hypothesized that FC positively affects resilience (H1) that interacts with FSC regarding firm resilience (H2). Initially, we assumed that these two elements might partly substitute for each other in the short term while potentially having certain enhancing effects. However, our findings challenge these hypotheses. Our analysis reveals that FC does not significantly affect firm resilience. Similarly, the moderating effect of the FSC on the relationship between FC and firm resilience is not statistically significant (Table 4). Consequently, we rejected Hypotheses 1 and 2. These results contradict some of the existing literature on FC’s positive effects. In contrast, our results consistently support that the FSC positively affects firm resilience (Hurtado and Herrero, 2024). We propose several explanations for these unexpected results. One possibility is that, in many cases, the family protocol (FC) may play a symbolic role rather than effectively impacting firms. Our initial argument suggests that when FSC is high, the presence or absence of FC may be less relevant. Conversely, when FSC is low, the existence of FC as a written statement on the family governance mechanism is necessary to avoid and resolve potential conflicts. However, our results only partially support this idea, indicating a more complex relationship between these variables than initially anticipated. Considering the interactions between FC and FSC, the success of implementing FC depends primarily on the attitudes and interests of the most influential family members. This is closely related to the FSC levels within the family. Theoretically, FC should help mitigate conflicts between family shareholders and managers by promoting information flow and communication among family members, relatives, and passive owners, acknowledging their concerns, and channeling their demands. However, our results do not fully support this hypothesis. One possible explanation is that the altruism, commitment, and reciprocity embedded in FSC may diminish the perceived necessity for FC adoption. Consequently, high levels of FSC may make family firms less proactive in adopting FC, making FC less relevant in achieving firm resilience. The FSC develops through individual intense relationships characterized by commitment, shared trust, vision, and goals (Arregle et al., 2007). Therefore, firms rich in FSC frequently present unique identities and norms that can be clearly or tacitly expressed (Nahapiet and Ghoshal, 1998; Pearson et al., 2008). They often possess ethical norms that invite social support and stewardship behaviors (Sorenson and Bierman, 2009). These strong familial bonds and shared values may reduce the perceived need for formal governance structures such as FC or written norms regulating family-to-firm relations. In contrast, before family conflict appears, possessing FC should facilitate firm functioning and problem resolution (Rodriguez-Garcia and Menéndez-Requejo, 2023). When FSC is low, its advantages are absent, and the family may not share values such as trust or a common vision (Tsai and Ghoshal, 1998). Therefore, we expect that establishing clear norms and obligations regarding the relationship between the family and firm through FC would be of utmost importance in these situations. In FSC-poor firms, conflict can appear more frequently because of a lack of trust and a non-shared vision. In this situation, FC can provide a clear way to prevent family conflict and assist firms in dealing with environmental perturbations (Polat, 2021). Consequently, having FC is necessary before conflict arises.

Theoretically, FC should improve communication, allowing family and non-family members to interact more frequently and rendering these relations structurally unique and stronger than those among non-family members (Polat, 2021).

However, our results do not support this interaction effect, and FC’s direct effect on firm resilience is not significant. The lack of a significant moderation may only be meaningful when we combine these results with the fact that including certain norms in FC has a positive effect. In a low FSC context, family conflicts can provoke disagreements about what should be included in FC, resulting in a symbolic FC that misses the key norms necessary for resilience. This potential for conflict in high-FSC environments might explain why the overall effect of FC on resilience is not significant despite certain norms having a positive impact. When we analyzed the specific norms contributing to family firm resilience, all our hypotheses were supported, except for H3a, which refers to the inclusion of norms regarding family members’ access to employment.

Norms specifying family members’ access to managerial positions are the key to enhancing firm resilience (H3b). These results may be explained by top-down recruitment. Studies on top-down and/or bottom-up recruitment effects have focused on two levels: the board and executives (top management team) and top and middle management, also known as the board of directors and managers. Considering this theory, the main aspects of FC are not the norms related to access to any level of employment in firms but are specifically related to the recruitment of managers. Therefore, regulating the entrance of family members into a family firm matters primarily in managerial positions and not in lower-level positions. Our results support Hypothesis 3c on succession planning. Effective succession planning provides the next generation with a thorough understanding of the particularities of the family business (Canovi et al., 2022). It also establishes strategic goals for specific roles and responsibilities ascribed to family members, positively affecting the family firm’s resilience. This finding is consistent with the previous hypothesis that successors should occupy managerial positions. Furthermore, our analysis supports that including norms on dividends (H3d) and voting rights (H3e) in FC improves firm resilience. These norms help establish fair and transparent mechanisms for important collective decision-making processes such as major investments, business expansions, and significant policy changes. This ensures that decisions reflect the best interests of the entire family business (García-Meca and Santana Martín, 2023).

Finally, our results indicate that regulating the remuneration system (H3f) through FC positively affects resilience. A well-defined remuneration system ensures that family members are compensated fairly and equitably based on their roles, responsibilities, and contributions to the business. This promotes a sense of fairness and reduces the potential for conflict and resentment among family members. This permits increased motivation, commitment, and alignment with the long-term goals of the business, enhancing the firm’s overall resilience. In conclusion, although our initial hypotheses regarding the overall impact of FC on firm resilience are not supported, our study reveals important insights into the specific norms within FC that contribute to family firm resilience. These findings highlight the complex nature of family firm governance and the need for nuanced approaches to enhance resilience in these unique business environments.

We include a set of control variables in our analyses. One relates to the family firm’s generational state and the founder’s involvement in the family firm. Successful implementation of FC depends mainly on the attitudes and interests of the most influential family members. Implementing FC helps mitigate conflicts among family shareholders and managers by promoting information and communication among family members and relatives or passive owners, understanding their concerns, and channeling their demands. It is also useful for mitigating other agency problems in family firms (Calabrò et al., 2021). Conflicts may arise among majority shareholders, intensifying tensions between family branches. Consequently, the risk of conflict increases as families age and members of new generations with different interests and fewer social interactions are incorporated (Schulze and Kellermanns, 2015).

The literature on FCs and family member norms underscores the importance of establishing clear guidelines that promote fairness, transparency, and effective governance. By articulating these norms within the FC, family firms can mitigate conflict, enhance resilience, and ensure family members qualify for their roles. Interestingly, our results do not support the first hypothesis regarding the relationship between FC and family firm resilience. We did not explicitly consider the case in which a firm may lack FC but still has agreements on specific issues. However, these agreements are made in the context of good family relations, that is, in the case of high FSC. This is another reason the FSC could act as a substitute for FC sometimes, as it could cover tacit or explicit but not written norms regarding family-to-firm relations. During conversations with managers, we suggested that nonwritten norms are ineffective without good family relations. Future research should reinforce this assessment through formal studies. If tacit agreements were in force in many cases, even if not written, this would explain why Hypothesis 1 was not supported.

The literature emphasizes the critical role of voting rights plans in the FC. By promoting effective governance, mitigating conflict, supporting long-term orientation, and enhancing socioemotional wealth, voting rights plans can significantly contribute to the resilience of family businesses. As family firms navigate complex challenges, embedding clear voting rights mechanisms into their governance structures is essential. Future research should explore the interplay between voting rights plans and family firm resilience to provide additional insights into best practices for sustaining family businesses across generations.

Moreover, family firms can enhance their resilience and long-term sustainability by clearly defining succession processes and integrating family values. This study highlights that a well-articulated succession plan mitigates leadership transition risks and fosters a culture of preparedness and adaptability. As family businesses navigate complex environments, embedding succession planning into governance is necessary.

Our study contributes to the literature by clarifying the role of FC in family firm resilience. As Daspit et al. (2018) note, that social relationships within a family firm represent an informal governance mechanism that may effectively substitute for formal governance mechanisms introduced through FC. However, the insignificant results of the moderating effect of FC on the relationship between FSC and resilience can be partially explained by the fact that when FSC is low, FC is significant in compensating for weak family ties, and conflict among family members may lead to a lack of agreement regarding the norms to be included in the FC. This could often lead to an “empty” FC. This could also explain why FC appears irrelevant to achieving firm resilience, even though including certain norms in FC, such as access to managerial positions or succession planning, is critical for enhancing firm resilience.

Like any quantitative analysis, the statistical model used in this study has certain inherent limitations. One key concern is the potential omission of relevant variables that, due to data limitations or measurement difficulties, could not be included in the specification. If such variables are correlated with the included regressors, this may lead to biased estimates. Additionally, potential endogeneity cannot be fully ruled out—particularly regarding variables such as family involvement, which may both influence and be influenced by the observed outcomes. While efforts have been made to mitigate these issues —such as including relevant controls— we acknowledge that future research could explore these aspects more rigorously.

The study results have practical implications for family firms, suggesting ways to achieve higher levels of resilience through FC implementation. The literature maintains that resilience is not an inherent quality of certain entities but can be learned, developed, or transmitted (Lengnick-Hall et al., 2005). Accordingly, companies can adapt their governance mechanisms (e.g. those related to FC) to improve their capacity to prepare for change (Lengnick-Hall et al., 2005). This benefits practitioners because they can take action to improve their firm’s resilience. Another practical implication of this study is that the question is not whether to have FC but how to select the appropriate norms to be included in it. Therefore, managers should be aware of the need to regulate family members’ access to managerial positions, succession planning, voting and dividend rights, and remuneration through FC. These factors appear to be the key to enhancing a firm’s resilience.

Moreover, consultants assisting family firms in FC development should emphasize the importance of balancing tradition with adaptability. A rigid FC may stifle necessary evolution, whereas an excessively flexible one may fail to provide the structure needed for long-term stability. Therefore, advisors should encourage firms to integrate clear governance principles while leaving room for future modifications based on evolving business needs, industry changes, or generational shifts.

Finally, successful FC implementation requires an active engagement of family members, executives, and advisors. Ensuring commitment and understanding through workshops, transparent communication, and periodic reviews can make the FC a living document rather than a static set of rules. By aligning key stakeholders, firms can maximize the resilience-building potential of their FC and secure sustainable growth.

Resilient family firms play a vital role in economic stability, employment continuity, and public welfare, especially during crises. Family firms are known for their long-term strategic orientation, which prioritizes sustainable growth over short-term profits. This stability helps them survive economic downturns and financial instability better than many non-family firms, enabling the retention of employees. This benefits not only employees but also the broader community, reducing economic stress during turbulent times. Family firms often invest in philanthropic initiatives, supporting education, healthcare, and disaster relief efforts. Their intrinsic motivation to prioritize stakeholders’ welfare beyond financial gain—helps communities deal with crises efficiently. Ultimately, resilient family firms are indispensable in crisis management. Their inherent values, long-term perspectives, and commitment to employees and society make them key contributors to economic stability and social well-being.

The appropriateness of an FC also depends on the context and, more precisely, on the country’s commitment level to family firms. Regarding FC attributes, no universal or optimal model exists. Thus, the selection and degree of adopting these attributes influence resilience. Therefore, similar studies should be conducted in other countries and contexts. For example, global, Anglo-American, Communitarian, and studies on emerging countries could test the consistency of the results obtained in this study.

Funding: This study is funded by Universidad Pablo de Olavide/CBUA.

1. FSC: Structural dimension. Please indicate to what extent …

   • Family members who work in this firm engage in honest communication with one another.

   • Family members who work in this firm have no hidden agendas.

   • Family members who work in this firm willingly share information with one another.

   • Family members who work in this firm take advantage of their family relationships to share information

2. FSC: Relational dimension. Please indicate to what extent …

   • Family members who work in this firm have confidence in one another.

   • Family members who work in this firm show a great deal of integrity with each other.

   • Overall, family members who work in this firm trust each other.

   • Family members who work in this firm are usually considerate of each other’s feelings.

3. FSC: Cognitive dimension. Please indicate to what extent …

   • Family members who work in this firm are committed to the goals of this firm.

   • There is a common purpose shared among family members who work in this firm.

   • Family members who work in this firm view themselves as partners in charting the firm’s direction.

   • Family members who work in this firm share the same vision for the future of this firm.

4. Is there a formally established family protocol?

5. What aspects are included in your company’s family protocol?

   •  Employment of family members within the company

   • Remuneration of family members within the company

   • Access of family members to executive and/or management positions

   • Succession planning in the company

   • Rights to dividends

   • Voting rights in decision-making processes