In contrast to the literature that portrays nepotism as generally problematic, we develop a conceptual model to explain why some family firms benefit from nepotism while others do not. We distinguish two types of nepotism based on how nepots are chosen. We elaborate the differences between entitlement nepotism and reciprocal nepotism. We propose that reciprocal (vs. entitlement) nepotism is associated with three family conditions that indicate generalized (vs. restricted) social exchange relationships between family members. We also suggest that generalized social exchanges are valuable to firms because they facilitate tacit knowledge management that can lead to competitive advantage.
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