Innovation in family firms – a generational perspective

Abstract

Purpose The purpose of this paper is to clarify the generation–innovation relationship in family firms. The study acknowledges that the degree of family influence on a firm varies over generations and tests if the generation–innovation relationship is affected by two defining characteristics of family influence (family management and intention to transfer family control). Based on recent research that deconstructed a family’s influence, this paper seeks to contribute to disentangling the ambivalent findings on family firm innovation. Design/methodology/approach The study draws on the Community Innovation Survey and analyzes a comprehensive data set of German family firms. The analysis builds on a structural equation model and tests if the two defining characteristics of family influence serve as mediators in the generation–innovation relationship. Findings The study suggests that family firms raise their innovation output over generations. Yet, a considerable fraction of the increase occurs via indirect paths – particularly via the intent to transfer family control to succeeding generations. The results indicate that increased family influence has positive and negative effects on innovation, reinforcing the need for careful application of the family firm definition. Research limitations/implications The sample is exclusively composed of German firms and the generalizability of the findings is limited. Future researchers may also overcome further limitations related to the survey data used. Practical implications The results urge family firm leaders to recognize the vital role of succession planning and non-family management involvement in an innovation context. Originality/value The study deconstructs the varying degree of family influence over generations and adds to the fields of family firm innovation, family firm definitions and typologies.