How Relational Conflict Harms Family Firm Performance: The Mediating Role of Family Social Capital and the Moderating Role of Family Ownership

While many researchers suggest that relational conflict has adverse performance effects in family firms, the exact mechanisms through which conflict harms performance are rarely empirically investigated. This paper explores the role of family social capital in the relationship between relational conflict and family firm performance. We hypothesize that the negative relationship between relational conflict and family firm performance is partially mediated by family social capital, while family ownership moderates the relationship between relational conflict and family social capital. In a sample of 175 U.S.-based small and medium-sized family firms recruited through Prolific Academic, we find that relational conflict harms firm performance indirectly through the erosion of family social capital. However, no evidence of a direct negative effect of relational conflict on performance is found. Our results also indicate that the negative relationship between relational conflict and family social capital is intensified by family ownership. We discuss the implications and contributions and present relevant directions for future research.