International Business & Economics Research Journal – November/December 2014 Volume 13, Number 6 Copyright by author(s); CC-BY 1447 The Clute Institute Analysis Of Differences Between Financial Management In Family And Non-Family SMEs Of The Yucatecán Textile Industry Martha Isabel Bojórquez Zapata, Universidad Autónoma de Yucatán, Mexico Antonio Emmanuel Pérez Brito, Universidad Autónoma de Yucatán, Mexico Jorge Humberto Basulto Triay, Universidad Autónoma de Yucatán, Mexico ABSTRACT This paper’s objective is to analyze the main differences between financial management in family and non-family small and medium enterprises (SMEs) in the textile industry. It considers variables such as sales growth and implementation of management control systems (MCS) as strategic and sustainable factors of business competitiveness. In this regard, the paper uses agency theory (Fama, 1980), which identifies that family enterprises have fewer agency costs because ownership and management are held by family members, and contingency theory, which is based on the study of MCS and their related performance (Otley, 1980; Tiessen and Waterhouse, 1983; Chenhall, 2003). The results show that family SMEs have lower sales growth than non-family SMEs and that there is no direct relationship between the implementation of MCS and performance. Keywords: Growth; SMEs; Textile Industry; MCS INTRODUCTION amily businesses in most countries of the world represent the main driver of economies (Klein, 2000; Astrachan and Shanker, 2003; Morck and Nakamura, 2003; Amat, 2004; Lee, 2004). In emerging economies like Mexico, family-owned small and medium enterprises (SMEs) form the majority of businesses and therefore play an important role, although they face a number of structural problems that impede development such as staff retention and business competitiveness. However, family SMEs have certain competitive advantages. For example, they are more consumer-oriented, more focused on quality, and more active within communities than their non-family equivalents (Ibrahim et al., 2008). Consequently, in recent years there has been growing interest in studying them. Aldrich and Cliff (2003) argue that, to some degree, every business is like a family and every family is like a business. The characteristics that distinguish family businesses lie in the peculiarities related to ownership, control, and management (Maseda et al., 2009) and the stability and longevity that enable them to face economic adversities. Naldi et al. (2007) comment that in family businesses, owners and managers are the same individuals or represent the same family owners. Lopez and Sanchez (2007) state that an owner and a manager tend to be the same person, thereby reducing costs because the agency relationship is removed. This situation creates a number of advantages that non-family businesses do not have. According to Esparza et al. (2010), when more than 50% of business capital is owned by a family or household, managerial or director positions are occupied by at least one representative of the family who aims to spend his or her working life in the business. It is also believed that 30-35 years after the founding of a family business, a generational shift occurs, with 30% of such businesses surviving alongside the second generation and only 13% alongside the third (Ward, 2001). According to Ruelas (2008), cited in Esparza et al. (2010), over 95% of companies in Latin America are SMEs. Belausteguigoitia (2010) supports this by saying that nine out of ten SMEs are family-owned and adds that these businesses usually have shorter lives than non-family SMEs. Nonetheless, as Macias (2003) states, SMEs are the main generator of jobs and the best distributor of income between people and between regions. F brought to you by CORE View metadata, citation and similar papers at core.ac.uk provided by Clute Institute: Journals