Between Legacy and Leadership: How Family Involvement Shapes Ability-Enhancing Human Resource Management Practices in Family Firms

Family-owned firms dominate the corporate landscape in Germany, representing 90% of all companies and employing over half of the workforce. Despite their prevalence, their human resource management (HRM) practices, especially their ability-enhancing HRM (AE-HRM) practices—such as employee selection and development—remain under-researched compared to those of nonfamily businesses. This study investigated the impact of family involvement in top management on the AE-HRM practices of family firms. Using the Linked Personnel Panel (LPP) dataset combined with the German Federal Employment Agency’s Institute for Employment Research (IAB) Establishment Panel dataset, we analyzed a comprehensive range of AE-HRM practices through the lens of the Ability, Motivation, and Opportunity framework. Our findings revealed that family involvement in top management positively influences the AE-HRM practices of family firms, such as employee training and development (T&D), but has no impact on other AE-HRM practices, like employee selection, running of assessment centers, and conduct of skill tests. These results provide new insights into the unique HRM dynamics in family firms as the backbone of the German economy and highlight the complex relationship between family management and AE-HRM practices as well as the importance of AE-HRM practices in family firms.