Family Governance at Work

Abstract

A growing body of research is concerned with how family governance influences innovation.Yet, the organizational issues that family governance engenders for innovation processes have been largely overlooked. In a study of six family SMEs, we investigate the design decisions that fit family and business logics to create high-performing new product development programs. Our results reveal three design principles concerning teams, leadership, and incentives that diverge from customary approaches of organizing for new product development, adding important dimensions to the determinants of successful new product development in family SMEs. INTRODUCTIONProduct innovation drives organizational change and growth (Agarwal & Helfat, 2009;Dougherty & Hardy, 1996) and is therefore considered an important component of corporate entrepreneurship (Branzei & Vertinsky, 2006;Covin & Slevin, 1991) and a major determinant of firms' competitive advantage and performance (Brown & Eisenhardt, 1995; Ernst, 2001).Recently, researchers have paid great attention to product innovation in family firms (De Massis, Di Minin, & Frattini, 2015; De Massis, Frattini, & Lichtentaler, 2013). This body of research suggests that the distinctive attributes of family governance, including centralized authority structures, incentives for parsimonious use of resources, and asymmetrical accountability norms (Carney, 2005;Gedajlovic et al., 2004Gedajlovic et al., , 2012, can be major impediments of family firms' innovativeness . For example, family firms are reported to engage less in R&D investments (Block, 2012;Chrisman & Patel, 2012;Gómez-Mejía, Campbell, Martin et al., 2014;, technology acquisitions (Kammerlander & Ganter, 2015;König, Kammerlander, & Enders, 2013; and open innovation (Classen, Van Gils, Bammens, & Carree, 2012;Nieto, Santamaria, & Fernandez, 2013) than non-family firms.3 Accordingly, many scholars concur that "old, moneyed families block creative destruction among their own firms" (Morck & Yeung, 2003, p. 377) and that "for some family firms, maintaining family control may be a higher priority than innovating" (Gómez-Mejía et al., 2007, p. 134). However, if family firms innovate less then we should see them diminish as an organizational form over time. Patel and Chrisman's (2014) research suggests that the reason they continue to flourish is that they follow different innovation strategies than non-family firms and, when necessary, are able to change strategies more rapidly owing to their concentrated control. If family firms follow different strategies then it is also likely that they use different organizational designs to implement their innovation programs. But the nature of these differences, if any is unknown.Existing research has made substantial strides on the macro-level focusing on the different innovation strategies adopted by family firms and the impact of family involvement on innovation inputs and outputs. However, by adopting a strategic perspective primarily focused on examining differences in innovation across type...

Innovation processes in family firms: the relevance of organizational flexibility

“…This leads to similar product innovation performance as observed in non-family owned firms. Novel and recent research on new product development (NPD) projects in family firms leads to similar insights (De Massis et al 2016). Among other things, the authors find that family firms' specific organizational characteristics allow employees to flexibly switch between the innovation project and their ''normal'' tasks and to achieve better NPD results than full-time crossfunctional innovation teams.…”

How governance mechanisms in family firms impact open innovation choices: A fuzzy logic approach

“…We concentrated on privately owned Italian manufacturing firms operating in high and medium-to-high technology industries. The focus on manufacturing was considered appropriate in the OI context because, on the one hand, the product lines of manufacturing firms need to be frequently improved and expanded, making the capacity to develop new products crucial for business survival (De Massis, Kotlar, Frattini, Chrisman, & Nordqvist, 2016) and, on the other, in such industries products typically embrace elements/subsystems developed by other players (Almirall & Casadesus-Masanell, 2010). In addition, the high technological intensity and rapid technological change which characterize high and medium-to-high technology industries may force firms to collaborate when their abilities are insufficient to satisfy their needs for knowledge (Gassmann & Enkel, 2004).…”

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“…Innovation activities: innovation activities are hand led differently in family versus non-family firms. The reason behind could be the interaction of the two systems, namely the family and the enterprise, which affect the innovation behaviour of family firms (De Massis et al, 2016). Also, family firms organize their innovation processes differently and generally use a functional organisation with high levels of decisional autonomy given to project leaders.…”