What it costs: Family firms' supply chain efficiency losses

Abstract

We study whether family control shapes firms' supply chain efficiency. Using panel data on Chinese A-share listed firms from 2000 to 2023 and a staggered difference-in-differences design that exploits transitions into family control, we find that family-controlled firms operate with lower supply chain efficiency, reflected in inventory turnover cycles that are, on average, 17.77 days longer than comparable non-family firms (baseline DID estimate). Results are robust to multiple identification checks and alternative measures. We trace the effect to two mechanisms. First, family firms rely more on stable, relationship-based supplier ties, which dampens flexibility and competitive discipline. Second, family-centric talent practices constrain professional operations capabilities. The efficiency penalty is stronger when family involvement in management is deeper, during intergenerational succession, and when boards are less independent; it is weaker under tighter financing constraints and stronger market competition. Our study links ownership structure to operational outcomes, qualifying the presumed advantages of relational governance and identifying circumstances under which external discipline improves supply chain performance.