A Research on the Identity Difference of CEO Successors and Innovation Input in Family Firms: Based on the Perspective of Legitimacy

Abstract

The research on innovation in family firms has become more in-depth. However, the research conclusion of family firms’ innovation is not clear. Although existing studies have shown that inheritance is an important factor affecting innovation in family firms, the conclusions of incorporating inheritance into innovation research in family firms are still conflict. The contradiction of existing research has put forward higher requirements for exploring the innovation mechanism of family firms in the context of intergenerational inheritance. This paper focuses on the different sources of CEO successors in family firms. We hold the opinion that the identity difference of CEO successors in family firms is an important contingency factor influencing the firms’ innovation decision in the context of intergenerational inheritance. This paper tries to focus on the influence of CEO successors on the innovation input in family firms based on the perspective of the lack of legitimacy due to different sources of CEO successors in the succession period, and to explore the influence of the primary evaluator of legitimacy further, that is, to explore the difference in innovation input caused by the strategic difference between second-generation CEOs and professional manager CEOs seeking legitimacy in different types of family firms.Based on the empirical tests of 526 listed family firms from 2004 to 2015, the results show that: （1） Compared with the first-generation of founder CEOs, the second-generation of family CEOs and professional manager CEOs would reduce innovation input. （2） On the one hand, the lower innovation input caused by the lack of legitimacy of second-generation CEOs has been exacerbated in the family firms controlled by multiple founders; on the other hand, the lower innovation input caused by the lack of legitimacy of professional manager CEOs has been exacerbated in the family firms controlled by the single founder. In the further analysis of the succession context, for second-generation CEOs, when first-generation CEOs still stay on as the chairmen of the board, it intensifies their negative commitment to innovation input. For professional managers, when there is no second-generation CEO in family firms, it intensifies their negative commitment to innovation input. This study deepens the research on family firms’ innovation in the context of intergenerational inheritance, which has a certain theoretical significance. Firstly, the research conclusion finds that CEO successors’ need for identity legitimacy is closely related to their innovation input decision in family firms, and second-generation CEOs and professional manager CEOs would lead to the decrease of innovation input in family firms due to the pressure of identity legitimacy during the succession period. Secondly, this paper constructs the mechanism between the legitimacy of different CEO successors and their innovation input behavior, indicating that the legitimacy pressure of second-generation CEOs comes from the family system, and professional manager CEOs are more concerned with their career legitimacy. Finally, this paper makes up for the deficiency that previous research on family firms’ innovation is limited to family homogeneity. This study is also of some practical significance, which has a strong reference value for the managers in family firms to motivate the commitment of innovation input of different CEO successors.