Doing More with Less: Innovation Input and Output in Family Firms

Abstract

Family firms are often portrayed as an important yet conservative form of organization that is reluctant to invest in innovation; however, simultaneously, evidence has shown that family firms are flourishing and in fact constitute many of the world's most innovative firms. Our study contributes to disentangling this puzzling effect. We argue that family firms-owing to the family's high level of control over the firm, wealth concentration, and importance of nonfinancial goals-invest less in innovation but have an increased conversion rate of innovation input into output and, ultimately, a higher innovation output than nonfamily firms. Empirical evidence from a meta-analysis based on 108 primary studies from 42 countries supports our hypotheses. We further argue and empirically show that the observed effects are even stronger when the CEO of the family firm is a later-generation family member. However, when the CEO of the family firm is the firm's founder, innovation input is higher and, contrary to our initial expectations, innovation output is lower than that in other firms. We further show that the family firm-innovation input-output relationships depend on country-level factors; namely, the level of minority shareholder protection and the education level of the workforce in the country.We are grateful for the helpful comments of Linus Dahlander and the anonymous reviewers. Further, we acknowledge the valuable comments of

Are Family Firms Good Employers?

“…Nyberg (2010) and others (Trevor, Gerhart, & Boudreau, 1997;Vroom, 1964) argue employees are more likely to leave when there is an unclear line of sight between performance and rewards and perceptions of unfairness. Also, a family's aversion to losses that might threaten their ability to sustain family control (Gómez-Mejía et al, 2007) may reduce investments, such as in research, new product development, and other initiatives (Chrisman & Patel, 2012;Duran, Kammerlander, Van Essen, & Zellweger, 2016), which makes the workplace less attractive to highly skilled employees. Together, these agency predictions suggest that the workplace environment in family firms should be characterized by higher levels of voluntary turnover among nonfamily employees.…”

How to Publish in Academic Journals: Writing a Strong and Organized Introduction Section

“…Nor did they say that little research has been done on family business and innovation in Taiwan, which would have been completely wrong. Much research has been done on family business and innovation including a major meta-analysis recently (Duran, Kammerlander, Van Essen, and Zellweger, 2016). That is another major mistake commonly committed by authors: writing that "not much research has been done on a topic" when it fact much work has been done.…”

“…ii Liu et al (2017) could have produced a 2X2 table to depict the previous literature on innovation and family business but chose not to as the research was fairly easy to describe and other previous work had already provided a very detailed summary of that research (Duran et al, 2016). iii The topic of "contributions" in a research paper is a very rich one and will be dealt with in subsequent work on this topic.…”

“…The position in the literature they found that had been less studied was the "macrointernal" area, that is, "macro" topics such as corporate governance and ownership, and internal, strategic decision-making. They stayed away from discussing goals, cognitive factors, culture and other decision and behavioral influences that had been well-studied on family business and innovation (Duran et al, 2016;Wang, Ahlstrom, Nair, and Hang, 2008). Poorly organized papers would try to cover many of those topics instead of answering the research question and staying within the boundaries specified by the question and the positioning of www.ieeca.org/journalthe paper.…”

Family Governance at Work

“…It is based on the idea that family firms can be highly innovative while still maintaining a strong family character (Chrisman & Patel, 2012) and that lower innovation inputs do not necessarily translate into lower innovation outputs (Duran, Kammerlander, & van Essen, 2015). Based on these premises, this study attempts to extend current theory on innovation in family firms in three major respects.…”