Abstract
There has been much debate concerning innovation in family-owned companies. Prior inconsistent findings may be a consequence of approaches to family ownership that do not fully capture its heterogeneity. The priorities and risk preferences of family owners differ depending on important contingencies. Our study in the German machine tool industry reveals that increases in the degree of family ownership and the generation of the family reduce innovation. Dedicated family business institutions foster innovation. It is not family ownership per se that drives or impedes innovation, but how it is characterized and how family owners exercise their influence on the firm.
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