The role of family governance, identity and social capital in the transgenerational sustainability of family SMEs

Purpose While emphasizing firm performance, the existing family business literature downplays the significance of family components in shaping transgenerational sustainability. Drawing on socioemotional wealth, social identity and stewardship theories, this study aims to investigate the impact of family governance practices and owner-family identity on the transgenerational sustainability of family firms. In addition, it explored the dual mediating role of family social capital in family governance, owner-family identity and transgenerational sustainability. Design/methodology/approach In this quantitative study, data were collected through surveys of 393 executives working in 100 family-owned SMEs operating across Pakistan that have managed to survive beyond the first generation. The final data set was analyzed using SmartPLS4 software for hypotheses and model testing. Findings The results show that although family governance practices and owner-family identity positively influence the transgenerational sustainability of family firms, the route goes through family social capital, which mediates these relationships. Practical implications To achieve transgenerational sustainability, family firms need to incorporate the effective management of family governance practices, family identity and family social capital into their strategic goals. This requires reshaping family members’ behavior, communicating family values and fostering social connections to enhance governance practices, social identity and social capital. Originality/value This study provides evidence to support the connection between family governance, family identity, social capital and business sustainability. It contributes to the family business research and deepens the understanding of how these family elements impact a business’s sustainability across generations.