Interpersonal Family Dynamics and Corporate Governance in Saudi SMEs: Implications for Business and Family

Abstract

This research sheds light on the influence of family dynamics on businesses, exploring how both conflicted and harmonised relationships impact both the company and the family. Additionally, it delves into the role of corporate governance (CG) practices as potential solutions for family businesses to adeptly manage and sustain their firm's performance. This research addresses the gap in understanding how family dynamics within small and medium-sized enterprises (SMEs) influence business practices in Saudi Arabia. A qualitative semi-structured interview method was employed to collect research data, which was subsequently subjected to processing using thematic analysis through the lens of a social constructivist perspective and analysed using an interpretive approach. The findings reveal that conflicted relationships negatively impact business performance, particularly emerging during the transition from the first to the second generation and the retirement of the initial generation. This transformation from harmonised relationships to conflict is often attributed to excessive family involvement in the business. Additionally, certain findings point to the phenomenon of over-controlling behaviour by the first generation, which is influenced by societal norms. A newly emerging theme in this research pertains to the adverse effects of regulatory shifts stemming from implementing Saudi Vision 2030 plans on family businesses. This paper provides practical implications for family business owners, governmental bodies, and future research areas for academics and consultants, aiming to enhance our understanding of family dynamics within one of the prominent countries in the Middle East.