Innovation In Family Firms Research Articles

Managing the tensions between tradition and innovation in family firms

PurposeThis study explores the relationship between innovation and tradition in family firms. By examining how these firms manage the potential tension between these two elements, the study aims to understand better how innovation and tradition coexist and support long-term survival across generations.Design/methodology/approachThis study has a constructivist standpoint and follows a qualitative methodology. By conducting a comparative case study, the data are collected from semi-structured interviews with 10 participants in 4 case companies located in Sweden. The data are analysed using thematic analysis.FindingsThis study found that managing the tension between innovation and tradition is carried out through four mechanisms: forward thinking through heritage, paradoxical thinking, operational control and governance. Moreover, the study further shows the great importance of the concept of intergenerational learning in family firms in managing tension.Originality/valueThe findings from this study contribute to the existing literature in family firms concerning managing tradition and innovation by providing a novel conceptualisation of the mechanisms embedded in this process. Moreover, the article proposes a grounded model, which could be used in research and practice when dealing with similar issues.

Long-Term-Oriented Values, Governance Model Preferences, and Dual Innovation in Family Firms

A total of 217 questionnaires were used to empirically test the mechanism and effect of long-term orientation and governance mode preference on dual innovation in family firms. The data analysis shows that family firms' long-term orientation values have a positive effect on both contractual and relational governance modes, long-term orientation values have a significant positive effect on dual innovation, family firms' contractual and relational governance have an inverted U-shaped effect on dual innovation, and slack resources have a positive moderating effect on the relationship between family firms' long-term orientation values and exploratory innovation.

Key drivers of green innovation in family firms: a machine learning approach

Key drivers of green innovation in family firms: a machine learning approach

Digital Product Innovation Within Family Firms: A Construal Level Perspective

Digital product innovation (DPI) is critical for the survival of firms, especially those operating in traditional industrial-age industries. While research has started to investigate digital innovation in family firms (FFs) considering them as a monolithic group, we still lack a more nuanced perspective that considers heterogeneity among FFs with respect to DPI and what drives such variance. Drawing on construal level theory to explain the risk behavior and goal time horizon of FF owner-managers, we propose and find that the presence of later family generations in control positively influences DPI in FFs, while the presence of a family CEO is detrimental to DPI. Furthermore, we propose that these relationships are moderated by the size of the top management team (TMT), finding that a larger TMT weakens the positive relationship between later generations in control and DPI. We base our analysis on a longitudinal sample of 103 FFs in the automotive, industrial engineering, and pharmaceutical sectors observed from 2013 to 2020. This first empirical study applying construal level theory to the family business literature has important implications for the FF digital innovation literature and for FF owner-managers interested in achieving DPI.

Digital Transformation and Innovation in Family Firms: Developed and Emerging Economies Perspectives

Digital Transformation and Innovation in Family Firms: Developed and Emerging Economies Perspectives

Founder CEOs’ Traditional Value Imprint and Green Innovation in Family Firms

Founder CEOs’ Traditional Value Imprint and Green Innovation in Family Firms

Fostering Sustainable Innovation and Hybrid Performance in Family Firms

Fostering Sustainable Innovation and Hybrid Performance in Family Firms

Beyond profit in family businesses: ESG-driven business model innovation and the critical role of digital capabilities

PurposeThis study aims to analyze the interaction between environmental, social and governance (ESG) practices and digital capabilities in promoting business model innovation (BMI) in family firms. Specifically, it researches how ESG practices influence BMI in family firms, breaking down this influence into its ESG components.Design/methodology/approachWe used microdata from the Flash Eurobarometer 486 survey, conducted by the European Commission in 2020, which provides detailed data on the challenges and obstacles faced by European businesses. The survey included telephone interviews with key managers from 2,483 family-owned businesses across 27 EU countries.FindingsThe analysis found that the environmental, social and governance dimensions of ESG significantly enhance business model innovation in family firms. Additionally, the interaction between environmental practices and digital capabilities significantly enhances business model innovation in family firms, while the interactions between social or governance practices and digital capabilities do not show significant effects.Research limitations/implicationsThe study supports the theoretical framework that integrates ESG practices into business model innovation, providing empirical evidence for the concept of sustainable business models. It emphasizes the importance of environmental sustainability, social engagement and robust governance in driving innovation.Practical implicationsFamily business managers can use the findings to guide their innovation strategies by integrating ESG practices with digital capabilities. Policymakers can also benefit from understanding the importance of supporting ESG practices and digitalization in family businesses, fostering a regulatory environment that encourages sustainable innovation.Originality/valueThis research expands the theoretical understanding of how ESG practices and digital capabilities interact to foster BMI, particularly in family firms. By breaking down ESG practices into environmental, social and governance components, the study offers a detailed view of their interaction with digital capabilities.

FAMILY FIRM NARCISSISM: CONCEPTUALISATION, MEASUREMENT, AND RELATIONSHIP TO INNOVATION

Family firm behaviour can be a potential root of innovation in family firms. Building on the theoretical perspectives of socioemotional wealth and narcissistic organisational identification, we introduce a novel concept and new measure for family firm narcissism (FFN). We suggest that FFN influences family firms’ innovation orientation (i.e., strategic innovativeness) and realised innovation outcome (i.e., digital inventiveness). Additionally, we assume that industry IT intensity, as an indicator of environmental pressure regarding digital transformation, moderates these relationships. To test the hypotheses, we investigated a longitudinal cross-industry sample, comprising 1,302 firm-year observations of S&P 500 family firms and analysed it with regression models. The results indicate that FFN is positively related to strategic innovativeness and negatively related to digital inventiveness. We further find that industry IT spending intensity amplifies both linkages. Our study contributes to the discussion on the family innovation agenda by (1) introducing the new concept and measure for FFN and (2) underlining its controversial impact and effectiveness on two central manifestations of innovation under the boundary conditions of digital transformation.

Adversity breeds ingenuity: exploring the enduring effect of historical Yellow River flooding on family firm innovation

ABSTRACT Historical natural disasters could leave deep imprint on family firms’ innovation trajectory. Drawing upon the well-established link between geographic characteristics, institutions and innovation dynamics, this study investigates the effect of historical natural disasters on family firm innovation, focusing specifically on the impact of the historical Yellow River flooding. By leveraging the both sides of the Yellow River floodplain areas (YRFA) and employing the regression discontinuity design (RDD), we find compelling evidence that the historical Yellow River flooding significantly promotes family firm innovation in the affected areas. Meanwhile, the mechanism shows that the Yellow River flooding increases family firms’ risk-taking propensity and fosters the concentration of ownership, thereby leading to a higher engagement in innovative activities. Furthermore, we demonstrate that the positive impact of the YRFA on family firm innovation is mainly attributed to the cumulative effects of the historical flood, rather than individual flood events. Overall, this study underscores the enduring historical legacy that shape the dynamics of family firm innovation.

Growth and Performance: Business Model Innovation in Family Firms

A business model, defined as the underlying logic of a company, is not permanent over time. Instead, companies need to introduce innovations in the business model to be competitive in the market. This is even more critical for family firms which are continuously looking for a way to obtain sustainable growth, together with satisfactory performance. The objective of this research is to analyze the impact that business model innovation activities have in the short/long-term growth and performance of family firms. This study was obtained from panel data made up of 112 valid responses from family firms involved in business model innovation. A composite model approach has been used for data analysis. The significant components of BMI that lead to greater growth and performance are identified, the distinction between long-term and short-term effects of BMI on those outcomes is made, and BMI is proven as an authoritative source of competitive advantage and growth in family firms. Those aspects are valuable insights for researchers and managers with regards to which innovation propositions help sustain growth and performance over time.

Does family ownership reduce exploratory innovation in family firms? The moderating role of the generational stage

Does family ownership reduce exploratory innovation in family firms? The moderating role of the generational stage

Facilitating corporate sustainability integration: innovation in family firms

PurposeThe purpose of the study is to understand the relationship between family-driven innovation and the incorporation of corporate sustainability in German family firms.Design/methodology/approachThe study conducted 26 interviews with 22 German family firms. Thematic analysis was undertaken on the collected data resulting in five major themes.FindingsThe study identified five main themes of corporate sustainability-oriented innovation in family firms, which include measuring corporate sustainability performances, building corporate sustainability-oriented infrastructure, stabilizing/optimizing operations, enhancing operational flexibility/independence and knowledge management and development. The study also provides an activity-based guide for family firms to use innovation to achieve corporate sustainability goals and present the findings’ implications for policymakers.Originality/valueThe present study is the first study to empirically investigate the relationship between family-driven innovation and the incorporation of corporate sustainability at each of the corporate sustainability maturity levels.

Excess control of family board seats and corporate innovation

AbstractWe examine the impact of board‐level control on corporate innovation in family firms. We find that excess control of family board seats (ECFBS) is negatively correlated with innovation investment, innovation output and innovation efficiency. Our findings suggest that ECFBS exacerbates type II agency problems. Mechanistic analyses show that ECFBS reduces firms’ risk‐taking level, increases their financing constraints and damages channels for acquiring innovative professional knowledge. We also observe that effect of ECFBS on innovation is associated with family origin, familiarization time and family management characteristics. Our findings should be of interest to family firm manager investors and lenders who are interested in family governance mechanisms.

Institutional investor ESG activism and exploratory green innovation: Unpacking the heterogeneous responses of family firms across intergenerational contexts

This paper investigates the heterogeneous responses to institutional investor ESG activism by expanding reference point theory among non-family firms and family firms with different intergenerational contexts. Using a Chinese family firm database comprising 14,425 observations from 2012 to 2020, this study finds that institutional investor ESG activism is more likely to stimulate exploratory green innovation in family firms than in non-family firms. Such linkage between institutional investor ESG activism and exploratory green innovation is stronger in second-generation family firms than in first-generation firms. Furthermore, this study explores the moderating roles of family involvement and financial slack in first- and second-generation family firms as they respond to institutional investor ESG activism. Specifically, both family involvement and financial slack can enhance the positive impact of institutional investor ESG activism on exploratory green innovation in the context of second-generation family firms. The moderating effect of family involvement is not significant, whereas the moderating effect of financial slack turns into be negative in the context of first-generation family firms. Our study highlights the heterogeneous responses to institutional investor ESG activism of family firms with different intergenerational contexts.

Digitalization of small and medium-sized family enterprises: The key role of succession

Family small and medium-sized enterprises (SMEs) represent a peculiar context for investigating digitalization since the vital link between the family and the business turns into distinctive approaches to innovation relative to nonfamily firms. Although extant literature acknowledges that all firms are increasingly required to respond to the challenges of the digital economy, the current knowledge about how family SMEs pursue digital innovation and how it impacts the organization is still limited. Similarly, understanding if and how succession plays a role in innovation and digital change development in family firms is a topic that needs further investigation. A qualitative study of six Italian family SMEs currently undergoing their digitalization journeys detected three types of digitalization (molt, turmoil, and clear-cut) that are deeply connected with different succession experiences, different levels of business family support, and various levels of strategic planning. The findings highlight the central role of succession and intergenerational dialogue in fostering digitalization in family firms. The paper contributes to the general literature about digital innovation in family SMEs and mainly speaks to that literature focused on the relationship between technological innovation and succession, offering new and deeper insights into the relationship between the family, the person who is in charge of managing digitalization in these firms and the whole digitalization process. Contributions to practice are also outlined: the three types of digitalization represent a valuable tool to sustain consultants and family firms’ owners in digitalizing these organizations.

Navigating the politics of innovation in family firms: The role of political capital

AbstractIn family firms, innovation poses distinct challenges due to the social complexity resulting from the intertwining of the family and business systems. While prior research has focused primarily on the powerful role of the dominant family coalition in leadership positions, much less attention has been paid to middle managers who must navigate the social complexity in family firms to implement management innovations. Through a multicase study of two highly innovative family firms, we theorize and demonstrate how middle managers engage in coalition building to address the social complexity in family firms when pursuing management innovation by creating a new organizational unit dedicated to managing innovation at the corporate level. Our study shows that middle managers change the social evaluation of the transfer of political capital from the dominant family coalition through enforcement and detachment. Subsequently, they convert, invest, and then mobilize different sources of political capital to gain power through pragmatic persuasion and altruistic evangelizing. Finally, we find that the dominant family coalition employs two distinct modes of political stewardship with respect to family and nonfamily middle managers.

The Impact of Family-Based Human Capital on Corporate Innovation: Evidence from Sibling-Chairpersons in China

We examine the impact of family-based human capital stemming from a chairperson’s having siblings vis-à-vis not having siblings on corporate innovation in Chinese family firms. Using hand-collected data, we document that when a firm has a sibling-chairperson, it holds more patents, receives more total citations to its patents, and has greater innovation efficiency and innovation quality than an otherwise equivalent firm with a chairperson having no siblings. The results are economically significant and robust to a battery of robustness checks. Specifically, the findings remain intact after using China’s one-child policy as an exogenous shock to apply a regression discontinuity research design to mitigate endogeneity. Additional analyses suggest that the mechanisms behind the impact of siblings on innovation are consistent with family-based human capital embedded in the sibling relationships such as competition, knowledge spillover, and family firm succession effect among siblings. Furthermore, we show that sibling comanagement and sibling gender diversity matter in corporate innovation. In addition, sibling effect enhances corporate investment efficiency, stock returns, and merger and acquisition performance. Overall, family-based human capital from siblings positively contributes to corporate innovation. This paper was accepted by Victoria Ivashina, finance. Funding: The authors acknowledge financial support from the National Natural Science Foundation of China [Grants 72225005 and 72202249] and the China Postdoctoral Science Foundation [Grant 2022M713658]. Supplemental Material: Data are available at https://doi.org/10.1287/mnsc.2023.4965 .

Family Ownership After Going Public: Exploring Nonlinear Effect on Innovation Inputs and the Role of Institutional Investors

Understanding the drivers of innovation in family firms is essential for their survival. While previous studies have mainly investigated innovation behaviours in private or public family firms, we focus on their R&D investment in the year following an IPO. Observing family firms in this context is crucial because it allows to analyse their propensity to innovate when financing constraints are relaxed. This work aims to investigate whether a relationship exists between R&D expenditures and family ownership in the setting of Initial Public Offerings (IPOs). Using a sample of IPOs in the period 2013–2018 by 132 French and Italian family and non-family firms, results reveal the existence of a U-shaped relationship in this regard. In addition, the curvilinear relationship is positively influenced by institutional investors. This study contributes to the debate around family firms’ innovation propensity, as well as to the literature on the heterogeneity among family firms.

Digital innovation in family firms: The roles of non-family managers and transgenerational control intentions

AbstractDigital innovation, i.e. the creation of products and services, processes, or business models on the basis of digital technology, represents a new innovation phenomenon that offers important opportunities, but also entails high risks. Family firm research argues that family firms generally possess a greater ability to innovate, but differ in their willingness to do so. We propose that with regard to digital innovation family firms rather face an “ability and willingness challenge”, i.e. they differ in their willingness and their ability to engage in digital innovation. We analyze two factors—non-family managers and transgenerational control intentions—that might help family firms overcome the ability and willingness challenge and that allows to explain heterogeneity among family firms in the adoption of digital innovation. An empirical, survey-based investigation of 104 German family firms supports our hypotheses. We contribute to the literature on digital innovation in family firms as well as on family firm professionalization.