Innovation in Family Firms: The Relative Effects of Wealth Concentration Versus Family-Centered Goals

Abstract

Drawing on agency and behavioral perspectives, we disentangle two critical determinants of innovation strategies among family firms, namely, the family’s wealth concentration (WC) in its business and the family’s emphasis on family-centered goals (FCGs). Our results from a survey of Australian family firms show opposite and completely independent effects of WC and family-centered noneconomic goals on family firms’ innovation strategies. While higher WC is negatively associated with firm innovation, a greater emphasis placed on family-centered noneconomic goals has a positive impact, which seems to be the key determinant of innovation strategies in family firms.

The Psychological Foundations of Management in Family Firms: Values, Biases, and Heuristics

“…Of course, as we discuss in the next section, the family firm’s governance and resources are important contingencies that influence this relationship. First, family firm goals are both economic and noneconomic (Becerra et al, 2020; Chrisman et al, 2012; Chua et al, 2018; Kotlar & De Massis, 2013) and are informed by the heuristics and biases of the family firm decision-makers. Such goals are the starting point of the strategy formulation process (Hitt et al, 2019), which includes (1) establishing, launching, and communicating a healthy vision; (2) taking advantage of core capabilities and boosting them; (3) modeling and endowing human capital; (4) backing up the firm culture and ethical practices; and (5) exercising control of the firm (Hitt et al, 2010; Ireland & Hitt, 1999).…”

What to green: Family involvement and different types of eco‐innovation

“…However, previous research has also provided conflicting opinions on the role of family involvement in eco‐innovation. While some research suggests that non‐economic priorities encourage firms to engage in more eco‐innovation (Becerra et al, 2020; Wagner, 2010), others believe that the risk‐averse nature prohibits innovative engagements (Bendig et al, 2020; Chrisman et al, 2015; Tan et al, 2021). However, most previous studies regarded eco‐innovation as monolithic.…”

“…Previous research suggested that family involvement would jeopardise innovation because external partnerships in R&D processes (e.g. external expert appointments and money loans) would reduce family control authority and hence limit SEW (Becerra et al, 2020; Calabrò et al, 2019; Tan et al, 2021). For example, families could manage external engagements in reducing the emission of production waste.…”

“…Finally, external social capital also provides more information on pollution prevention eco-innovation, which further reduces concerns on family involvement. Innovation may be hindered by family involvement as the failure of projects may compromise SEW (Becerra et al, 2020;Bendig et al, 2020;Ceipek et al, 2021;Tan et al, 2021). with their partners' connections (Zona et al, 2018).…”

The Centrality of Family

“…We had 16 articles published in the four issues, along with five editorials. Topics ranged from new spins on traditional topics such as succession (Campopiano et al, 2020), innovation (Becerra et al, 2020), and socioemotional wealth (Swab et al, 2020) to more contemporary topics such as political activity (Combs et al, 2020) and metaphorical interpretations (Tognazzo & Neubaum, 2020).…”