Abstract
Understanding product innovation in family firms is an important research endeavor given the economic predominance of those firms, their idiosyncrasies, and the importance of constant renewal for those firms to achieve transgenerational survival. Recently, family firm research has highlighted the role of next‐generation chief executive officers (CEOs; i.e., successors) who are often seen as drivers for innovating a family firm’s products. However, prior research has typically neglected that predecessors, who are often portrayed as less willing to introduce product innovation, frequently remain involved postsuccession through occupying board positions and thus still substantially influence the decision‐making processes and outcomes of family firms, such as product innovation. As a result, our understanding of the role of predecessors and their postsuccession involvement in family firms’ product innovation remains unclear. Building on stakeholder salience theory and on insights from the literature on innovation and succession in family firms, we develop hypotheses about how and under which conditions the predecessor’s board retention affects product innovation in family firms after succession. Building on more than 200 family firm CEO succession cases in small‐ and medium‐sized, privately owned family firms, our results reveal that the predecessor’s board retention negatively affects product innovation. This negative effect is strengthened with increasing involvement of the predecessor in the successor selection process, and it is offset in the case of family succession. Our findings contribute to the emerging stream of research on family firm succession and product innovation and provide important implications for practice.
Highlights
Product innovation, which refers to “new product[s] or services introduced to meet an external user or market need” (Damanpour, 1991, p. 561), is critical for the competitive advantage and survival of firms in general (e.g., Calantone, Harmancioglu, and Droge, 2010; Katila and Chen, 2008) and important for family firms, as it increases the likelihood of survival across generations
Given that prior research on family firm innovation (e.g., Chrisman et al, 2015; Kraiczy et al, 2015) and succession (e.g., Daspit, Holt, Chrisman, and Long, 2016; Kotlar, De Massis, Frattini, and Kammerlander, 2019) has shown that predecessors tend to preserve the status quo (Mitchell et al, 2009) and generally show less willingness to innovate compared to their successors (Cruz and Nordqvist, 2012; Hauck and Prügl, 2015; Salvato, 2004), we argue that predecessors who remain on the board of the firm have increased salience to negatively influence product innovation postsuccession in family firms
Prior research has demonstrated that product innovation is crucial for the survival and prosperity of family firms across generations (e.g., De Massis, Frattini, et al, 2016) and family firm research has often referred to the important role of next-generation chief executive officers (CEOs) to innovate the products of family firms (e.g., Kraiczy et al, 2015)
Summary
Ms Stephanie Querbach is a research associate at the Institute of Family Business and Mittelstand at WHU—Otto Beisheim School of Management, Germany. She holds a master’s degree in management with a focus on entrepreneurship and innovation from the Free University of Bozen-Bolzano, Italy, and obtained her PhD in management from the WHU—Otto Beisheim School of Management, Germany. Miriam Bird is an assistant professor at the Global Center for Entrepreneurship and Innovation at the University of St. Gallen. As of June 2020, she will be the associate professor of Entrepreneurship and Family Enterprise at the Technical University of Munich, TUM Campus Heilbronn, Germany, and will serve as the director of the Global Center for Family Enterprise. Her research has been published in leading journals such as Organization Science, Journal of Business Venturing, Entrepreneurship Theory and Practice, and Family Business Review
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