Abstract
Abstract This paper studies the influence of purchasing financial products (FPs) on the innovation strategy of family businesses (FBs) under the background of Chinese system. Applying a difference in difference methodology we are able to compare FBs who have purchased FPs with FBs who have not yet purchased FPs, and compare FBs that have purchased FPs before and after the purchase. We distinguish between different patent types (invention, utility, and design), and find that purchasing FPs significantly increase the design patents of FBs. That means buying FPs will shift innovation direction to safer and more economical path. Moreover, the effect of purchasing FPs on innovation outputs is governed by institutional ownership, government subsidy, and R&D personnel ratio. This paper contributes to our understanding of the important role of risk aversion in technological innovation strategy of FBs.
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