I do think it isn't an unreasonable assumption that it results in slightly less competent people get jobs. But then again who will know you better than your relatives?

We use "maps" that are simplifications of the actual territory. And so using a map which is not so complex as the real world, an oversimplified standard of competence for a particular job which is characterized by an overly simplified job description will often yield candidates who score higher on the oversimplified metrics than do the actually optimum candidates. And what could be more oversimplified that applying the same term of nepotism to a dictator forcing all businesses in his country to do business with his son-in-law when buying cement as we apply to the process of a brilliant CEO championing one of his four sons as the best possible candidate as his successor, while continuously offering the board the choice of keeping the original brilliant CEO in place until they agree with him about his son.