The present research shows through computer simulations the dynamic positive interconnections among Knowledge, Capabilities, Dynamic Capabilities, Entrepreneurial Performance and Trans-generational Value in family business. In addition, interesting results and new insights will come out introducing Family Inertia in the model (as a function of Paternalism) which negatively influences the creation of capabilities and dynamic capabilities, with some exceptions. Keywords: Knowledge, Absorptive Capacity, Capabilities, Dynamic Capabilities, Trans-generational Value, Paternalism, Family Inertia, Family business