The Role of the Family Institution in Economic Activity: Evidence from Indian Slum Households

Firms in impoverished settings exist largely outside of formal institutional boundaries; however, they are not void of institutional influence. We shed light on one of the most fundamental institutions, which we suggest governs much of economic activity in impoverished contexts: the family. We integrate institutional and resource-based theories to explicate the role of the family in impoverished business activity. We develop theory to explain how the family constrains entrepreneurial behavior through pressure to conform to accepted norms, yet enhances business performance through the provision of critical resources. We test our hypotheses using a unique sample of households and firms in Indian slums. Our paper contributes by developing theory on the role of informal institutions (the family) in business activity and providing a preliminary investigation into factors that may influence firm success in impoverished settings.