Family Influence and R&D Spending in Dutch Manufacturing SMEs: The Role of Identity and Socioemotional Decision Considerations

Abstract

Prior research has revealed a negative association between family influence and R&D spending. The dominant explanation for this association centers on the role of socioemotional considerations in decision‐making. These socioemotional decision considerations are argued to play a more prominent role among family firms and to lower their R&D spending intensity. However, to date, this negative explanatory mechanism has not been empirically verified. Moreover, a deeper analysis of the literature suggests that some family‐induced socioemotional considerations may actually stimulate R&D investments. In this study, four socioemotional decision considerations are delineated—namely, concern for current control, for extended preservation, for organizational reputation, and for organizational values and traditions—of which the first two are anchored in a family's nurturer role identity and the latter two in a family's organizational identification. It is hypothesized that those socioemotional considerations derived from a family's nurturer role identity constrain R&D spending, while those derived from the family's organizational identification boost R&D spending. The empirical study concentrates on the setting of privately held manufacturing SMEs, and using survey data on 365 such companies in the Netherlands, a structural equation model is estimated. The analyses reveal several interesting results: (1) the overall association between family firm status and R&D spending indeed turns out to be negative, and this negative effect is fully explained by family firms' preoccupation with extended preservation; (2) concerns for organizational reputation and for organizational values and traditions partly compensate the negative effect of the extended preservation mechanism. Key academic and practical implications of these findings are discussed.