Born to rebel? The owner birth order and R&D investments in Chinese family firms

Abstract

AbstractFamily background has a significant impact on family firms’ strategies such as innovation investments. Going beyond prior studies that exclusively focus on how family governance and management factors determine research and development (R&D) investment decisions, this study investigates a family science factor: family firm owner's birth order, defined as the relative rank of the owner in terms of the age hierarchy among siblings in the family. Joining the family niche model of birth order and socioemotional wealth perspective, we propose that later‐born family firm owners tend to be risk‐takers and invest more in R&D projects compared with their earlier‐born counterparts. We further examine how the two other powerful decision‐makers within family firms (i.e., chairperson of the board and CEO) enable or constrain the owner's birth order–R&D investment relationship. We contend that the positive birth order impact on R&D investment is weaker when a family member is the chairperson of the board, while such a relationship is stronger in the presence of owner–CEO duality. We confirm our hypotheses using a sample of 605 firm‐year observations from Chinese‐listed family firms between 2006 and 2014. This study demonstrates the important impact of family science factors on innovation heterogeneities, which is understudied in the family firm innovation literature.