SME familiness and the use of external accountants as advisors: performance implications

Abstract

Purpose

Past research is mixed on family small and medium-sized enterprises’ (SMEs) use of external advisors and the limited empirical evidence is confined to developed markets. Drawing on the knowledge-based view of the firm, this research focuses on the “familiness” characteristic of SMEs and their use of external accountants as advisors in an emerging marketplace. Using internal resources for basic tasks is proposed to strengthen this relationship from a managerial cognition lens. Focusing also on SME internalization, this research probes the performance ramifications of using external accountants as advisors.

Design/methodology/approach

Hierarchical regression is used to test the hypotheses. The mediation hypothesis is tested by bootstrapping the indirect effect. The interaction hypothesis is visualized with simple slope analysis.

Findings

The results indicate that the familiness of SMEs is positively associated with the use of external advisors, and thereby, with high performance. SMEs with higher international exposure also use these external advisors to a greater degree. Family SMEs that have a focused use of internal resources for basic tasks benefit more from the use of external accountants for advising tasks.

Originality/value

This research sheds light on how family involvement in management influences firm performance, showing the moderating role of the use of internal advisors for basic tasks and the mediating role of the use of external accountants for advising. We add to the knowledge-based view by describing how family SMEs can utilize internal and external knowledge resources simultaneously.