Corporate Governance of Innovation in Singapore Chinese Family Business

Abstract

Corporate governance of innovation (CGOI) can be defined as a systematic approach to align goals, allocate resources, and assign decision-making authority for innovation, across the organization and with external parties. Despite the large number of research publications on innovation management matters, the mechanisms that effectively govern innovation at firm level are still unclear. Given the socioeconomic importance of family firms in Asia and beyond (where the founder or the founder’s relatives are owners and/or perform key leadership roles), we argue that there is an urgent need to examine those family factors that influence the effectiveness of corporate governance of innovation in Asian enterprise. Against this background, this paper contributes to the innovation literature by (i) developing a model of corporate innovation governance for Singapore Chinese family firms (CGOI) featuring four building blocks: innovation leadership, innovation strategy, innovation capabilities, and innovation outcome; (ii) defining the roles and responsibilities of the board of directors in these family businesses with regard to governing innovation; and (iii) creating a checklist to support both board members and CEOs of family firms to better govern and manage organizational innovation efforts at corporate levels. Methodologically, we adopted a grounded theory-driven case study approach to explore the dynamics of corporate governance of innovation in four Singapore Chinese family firms based on the following criteria: (i) ownership majority by members belonging to the founder’s family; (ii) involvement of the owner or at least one of the owner’s family members as a key management executive in the day-to-day business operations; and (iii) recognition of the family firm as an innovative business organisation (e.g., as evidenced by industry awards). We also conducted 10 interviews with experts in the areas of innovation and governance to shed light on the roles that boards should play when it comes to governing innovation and to unpack what makes proactive boards with a superior innovation performance tick. The resulting checklist features four CGOI building blocks: innovation leadership, innovation strategy, innovation capabilities, and innovation outcome. By expanding these blocks into 11 elements and incorporating several indicators for self-assessment in form of a dashboard, the study provides practitioners with valuable tools in order to increase their CGOI execution finesse. The research findings underscore the importance of family influence as antecedents of establishing CGOI in Singapore Chinese family firms such as commitment to ensure the continuity of the family business, cohesiveness among family owners, and clear control of the family firm. They also suggest that there is an urgent need for boards of Asian family-based enterprises to learn how to govern innovation effectively. One skill gap refers to the process of formulating a winning innovation strategy. An increased emphasis on CGOI during board meetings will not only increase the effectiveness of innovation investment portfolio management and innovation processes but also minimize the risk of becoming a victim of disruptive innovation.