Family firm innovativeness: an investigation of family governance, commitment, and generation involvement

Abstract

ABSTRACT This study empirically investigates the relationship between family governance and innovativeness in family firms, along with the moderating effects of a family’s commitment to the firm and whether members of the founding generation are still involved in firm activities. Recent work has highlighted the lack of research into the different effects of generation involvement (i.e. that of founding or succeeding generations) on family firm outcomes. Drawing from agency theory, our focus on how governance influences firm innovativeness in relation to family commitment and generation involvement aims to fill this research gap related to family firm heterogeneity. Employing a sample of 332 family firms across multiple countries and industries, we use moderated regression analysis to find that family commitment and founding family generation involvement strengthen the relationship between family governance and firm innovativeness. Additionally, when family members from the founding generation are no longer involved, firms with a strong family commitment enhance the relationship between family governance and firm innovativeness more than firms with weaker family commitment. Our findings contribute to agency theory by providing boundary conditions within a family firm context, including the extent of family commitment and if the founding generation is still involved in the family business with these moderators influencing the family governance to firm innovativeness relationship.