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Innovation and firm performance: influence of ownership and professionalization
Abstract
Empirical research has confirmed a mostly positive relationship between innovation and performance, but more work is needed to establish whether this relationship is homogeneous or whether it depends on other variables, such as ownership model (family/non-family) and who manages the company (owner/non-owner). This paper studies differences in the impact of innovation on productivity between family firms, owner-managed or professionalized, and non-family firms, also subdivided, for the first time in the academic literature, between owner-managed and non-owner-managed firms. A multistage model is used, controlling for endogeneity and selection bias issues. The results yielded by a large panel dataset of Spanish manufacturing firms suggest differences in the ability to benefit from innovation. These results confirm that, in non-professionalized firms, family ownership reduces the positive effect of innovation on productivity, while in professionalized firms, there are no significant differences between the family and non-family ownership model.
... Harmadikként, a professzionalizáció pozitív hatása a vállalati teljesítményre széles körben dokumentált a szakirodalomban. A kutatások alátámasztják, hogy a professzionalizáció javítja a pénzügyi átláthatóságot, a döntéshozatal minőségét és a vállalatok hosszú távú versenyképességét (Michiels et al.,2017;Ortiz & Gargallo-Castel, 2024). Kutatásunk ezt az irányt követve tovább finomítja a professzionalizáció és teljesítmény közötti összefüggéseket, különös tekintettel arra, hogy hogyan járulnak hozzá a különböző dimenziók -például a formális vezetés és az irányítás -a fenntartható növekedéshez és a vállalatok rezilienciájához. ...
... Ötödik elemként, a korábbi kutatások feltárták az innováció és a professzionalizáció közti kapcsolat létét (Ortiz & Gargallo-Castel, 2024;Songini et al., 2024). ...
A családi vállalati professzionalizáció fogalmának operacionalizálására nemzetközi és hazai cikkek egyaránt tettek kísérletet, azonban számos tanulmány adós maradt a professzionalizáció indikátorok szintjén történő azonosításával. Jelen tanulmány bemutatja a családi vállalkozások professzionalizálódásának aldimenziókra bontását főkomponens-elemzéssel, és felállít a professzionalizációs érettségi szintjükre vonatkozó elméletet. A kutatáshoz a szerzők a Corvinus Családi Vállalatok Központ adatbázisán végeztek elemzést, melyet 2024 márciusa és áprilisa között kérdőíves lekérdezés segítségével alkottak meg. A kutatás a professzionalizációt négy fő aldimenzió mentén azonosította és annak 21 elemét tárta fel. Az empirikus eredmények rámutatnak arra, hogy a hazai családi nagyvállalatok már egy relatív magas professzionalizációs szinttel rendelkeznek, míg a kis- és közepes méretű vállalatok a legnagyobb fejlődést a stratégai tervezés kapcsán, valamint a család és az üzlet kapcsolatának dimenziójában érhetik el.
... This study is not similar to Songini et al. (2024) who argue that the presence of professional managers and management mechanisms in family businesses contributes to business performance by reducing opportunistic behaviors. In addition, in contrast to this study, Ortiz and Gargallo-Castel (2024) claimed that professionalized businesses benefit more from the opportunities offered by innovation and thus increase their performance. The fact that there are many parameters, such as consistency, objectivity, and transparency regarding institutionalization that will affect the contribution of PROF to LP makes this result reasonable. ...
The performance of interdependent international companies is required to be consistently high, leading to an increase in sectoral competition. Furthermore, they are endeavoring to establish an institutional structure in order to enhance their professional and distinctive commercial procedures while also maintaining their competitive advantages. This study aims to investigate the influence of institutionalization, which holds significant organizational and operational importance, on logistics performance, a key factor in gaining a competitive edge. Specifically, it investigates the moderating role of autonomy and the mediating role of logistics agility in this relationship, providing empirical insights through a model grounded in the Dynamic Capabilities View. By addressing the gap in literature where institutionalization and logistics performance have not been studied together, this research highlights how autonomy and agility can transform the effects of institutionalization on performance outcomes. The data collected through the questionnaire were empirically tested using path analysis in structural equation modeling. Data were collected from 390 employees by visiting 108 companies in Western Mediterranean region of Türkiye. The study concludes that formalization and cultural strength positively affect logistics performance, logistics agility positively partially mediates these interactions, and autonomy has a moderating effect on the effect of cultural strength on logistics performance. The findings provide a nuanced understanding of how formalization and cultural strength can synergistically enhance logistics performance, thereby offering actionable insights for practitioners. This study also emphasizes the critical importance of fostering a supportive culture that empowers employees through autonomy, which is essential for optimizing logistics operations in dynamic environments. It is expected that the results of the research will serve as a guide for organizations seeking to improve their logistics performance through institutionalization and will contribute to future studies by filling the gap in the literature.
Esta investigación tiene como objetivo estudiar el efecto de la propiedad familiar de la empresa y la separación entre propiedad y gestión, en el rendimiento empresarial medido en términos de creación de empleo. Para ello se comparan las diferencias entre empresas familiares y no familiares, así como entre aquellas empresas dirigidas por profesionales externos a la propiedad y aquellas en las que las tareas de dirección son asumidas por los propietarios. Aprovechando la estructura de panel de la muestra, el trabajo se completa con el estudio de la influencia del ciclo económico, en función de las distintas combinaciones de estructura de propiedad y gestión. Una de las principales conclusiones del estudio cuestiona que las empresas familiares superen de forma generalizada a las no familiares en términos de creación de empleo. Aunque esto se aplica a las empresas no profesionalizadas, que representan la mayoría de las empresas familiares, no se observa en las empresas profesionalizadas. Al diferenciar el efecto del ciclo económico en función de sus fases, se observa que, entre las empresas no profesionalizadas, no aparecen diferencias entre empresas familiares y no familiares tanto en la fase recesiva como en la de recuperación. Sin embargo, entre las empresas profesionalizadas, las familiares sufren más los efectos de la fase recesiva y muestran una mayor capacidad de recuperación del empleo en la fase de recuperación.
Esta investigación tiene como objetivo estudiar el efecto de la propiedad familiar de la empresa y la separación entre propiedad y gestión, en el rendimiento empresarial medido en términos de creación de empleo. Para ello se comparan las diferencias entre empresas familiares y no familiares, así como entre aquellas empresas dirigidas por profesionales externos a la propiedad y aquellas en las que las tareas de dirección son asumidas por los propietarios. Aprovechando la estructura de panel de la muestra, el trabajo se completa con el estudio de la influencia del ciclo económico, en función de las distintas combinaciones de estructura de propiedad y gestión. Una de las principales conclusiones del estudio cuestiona que las empresas familiares superen de forma generalizada a las no familiares en términos de creación de empleo. Aunque esto se aplica a las empresas no profesionalizadas, que representan la mayoría de las empresas familiares, no se observa en las empresas profesionalizadas. Al diferenciar el efecto del ciclo económico en función de sus fases, se observa que, entre las empresas no profesionalizadas, no aparecen diferencias entre empresas familiares y no familiares tanto en la fase recesiva como en la de recuperación. Sin embargo, entre las empresas profesionalizadas, las familiares sufren más los efectos de la fase recesiva y muestran una mayor capacidad de recuperación del empleo en la fase de recuperación.
By integrating literature on behavioral agency theory and fear as an emotional lens, we develop a theoretical framework explaining how family owners' fear of losing specific dimensions of socio-emotional endowments influence family firm innovativeness. Our analysis of data from a two-phased, multi-respondent, matched survey (n = 407) at two different time points from family SMEs (n = 207) in manufacturing industries in Chongqing, China, shows that socio-emotional preferences, and the fear attached to losing specific endowments, activate or constrain innovativeness. Family owners' fear of losing family control and influence increases firm innovativeness, as do family owners' fear of losing guanxi (social bonds). However, family owners' fear of losing identification with the business among family members decreases firm innovativeness, as do family owners' fear of being unable to renew family bonds. By deepening current understanding of fear and the perceived danger of losing socio-emotional wealth as determinants of firm innovativeness, our findings offer important implications for theory and practice, correcting for the inattention to sentiments and emotional preferences family owners may or may not have towards specific socio-emotional dimensions in their strategic choices.
While progress has been made in recent years to understand the differences among family firms, insights remain fragmented due, in part, to an incomplete understanding of heterogeneity and the scope of differences that exist among family firms. Given this, we offer a definition of and review the literature on family firm heterogeneity. A latent semantic analysis of 781 articles from 33 journals identified nine common themes of family firm heterogeneity. For each theme, we review scholarly progress made and highlight differences among family firms. Additionally, we offer directions for advancing the study of family firm heterogeneity.
Prior studies find that nonfamily managers enhance family firm performance, yet other studies note that family firms have difficulty attracting high-quality nonfamily managers, often settling for average-quality nonfamily managers. Given these findings, how is it possible that average-quality nonfamily managers enhance family firm performance? We address this paradox by theorizing that lower-performing, rather than higher-performing, family firms are more likely to benefit from employing nonfamily managers. Using a sample of 324 small family firms, we find that family firms with below-average performance significantly benefit from employing nonfamily managers, whereas family firms with above-average performance do not experience the same benefit. We attribute the difference to the presence of family-management capacity constraints in lower-performing family firms. For family firms with such constraints, the employment of nonfamily managers is more beneficial than it is for higher-performing family firms, which are not bound by these constraints.
Research on family firm innovation (FFI) has grown exponentially in recent years, as evidenced by the growing number of authors devoted to its study. However, to date, numerous questions remain unsolved about how family firms are coping with different innovation issues. In this context, this study aims to explore the scientific literature on FFI through performance indicators of scientific production, social networks of collaborations between authors and the intellectual and conceptual structures of the field. To accomplish this goal, bibliometric techniques are conducted, namely co-author, co-citation and co-word analyses. This study is carried out through a review of 975 published documents on FFI retrieved from the Web of Science and Scopus databases during the period 1987–2019. The findings reveal the richness of the FFI field and allows this large body of work to be organized into four theoretical roots and five thematic clusters. Additionally, this study proposes an integrative framework aimed at advancing new knowledge on the available research paths on FFI and identifying new research avenues to further develop the field. Hence, our research enriches the lively debate on FFI by offering a better understanding of the heterogeneous innovation behaviour of family firms.
Determining what factors influence firm performance constitutes an essential issue in both the management and the family firm research fields. This article, building on the resource-based view perspective, develops a mediation model that involves a unique intervening mechanism, namely, technological innovation efficiency (TI efficiency), with the potential to explain the inconsistencies found in prior work on the ways through which family involvement in management affects performance outcomes. Regression analyses utilizing a longitudinal sample of 1,118 Spanish private firms largely support the hypothesized mediating relationship, revealing that TI efficiency leads to richer firm performance in family firms with active family involvement in management. Overall, our findings help elucidate the black box of performance outcomes within family firms and make several contributions to theory and practice.
JEL CLASSIFICATION L25; M12; O32
We review the theoretical underpinnings and the empirical findings of the literature that investigates the effects of innovation on firm survival and firm productivity, which constitute the two main channels through which innovation drives growth. We aim to contribute to the ongoing debate along three paths. First, we discuss the extent to which the theoretical perspectives that inform the empirical models allow for heterogeneity in the effects of R&D/innovation on firm survival and productivity. Secondly, we draw attention to recent modeling and estimation effort that reveals novel sources of heterogeneity, non-linearity and volatility in the gains from R&D/innovation, particularly in terms of its effects on firm survival and productivity. Our third contribution is to link our findings with those from prior reviews to demonstrate how the state of the art is evolving and with what implications for future research.
Research background: Total factor productivity (TFP) determines how efficiently and intensely the available inputs are used and combined in production process. Improvement of TFP performance requires identification of its determinants, thus enabling policy actions to focus on them. Since the ability to create and absorb innovation is considered as a crucial factor of economic development, the investigation of the impact of the level of regional innovative performance on TFP distribution across EU regions is an important research problem.
Purpose of the article: The aim of the paper is twofold. Firstly, we attempt to develop a theoretical framework for the analysis of the impact of innovation on TFP. Secondly, we assess TFP levels for regions in the EU and investigate whether innovations account for the observed regional disparities in TFP.
Methods: The research sample consists of 202 European Union (EU) regions at NUTS 1 and NUTS 2 level from 22 countries. The regional data on GDP, employment and gross fixed capital formation come from the Eurostat. The source of data on the level of innovativeness of European regions is the Regional Innovation Scoreboard. To calculate TFP, we use the multiplicatively-complete Färe-Primont index. In turn, to examine the impact of innovation on TFP, we employ the spatially-lagged X model.
Findings & Value added: Our findings show a high degree of dispersion in TFP across EU regions. We find a positive impact of regional innovation performance on TFP. Although theoretical papers on economic development and regional economics suggest that improvements in TFP are key to regional economic performance, and that innovations are crucial to gain such productivity effects, there is a dearth of empirical studies on the link between innovation and TFP at the regional level. Therefore, our paper attempts to fill this gap by providing the evidence of positive effect of innovation externalities on TFP in European regions.
Using firm-level data, we estimate the returns to R&D investments for a sample of European manufacturing firms over the period 2007–2009. Results confirm that R&D efforts are positively related to productivity regardless of firm type (family or nonfamily firms). Additionally, we find that family firms invested more in R&D than nonfamily firms, but the returns to their R&D investments are low, emphasizing that they have a lower capacity to translate R&D investments into economic gains.
https://www.tandfonline.com/doi/full/10.1080/10438599.2019.1629533?scroll=top&needAccess=true#
Long-established family firms are endowed with a bundle of beliefs and practices that constitute their tradition. However, to remain competitive, they need to renew and update their products and production processes. Such forces pulling toward the past and the future, antithetically calling for continuity and change, seem paradoxical. In an abductive analysis of eight long-established family firms in Turkey, we identify four equifinal strategies to manage this paradox. Adopting a family imprinting perspective, we theorize how the long-lasting legacy of previous family generations shapes different approaches to innovation and tradition depending on the content imprinted on the current family generation. Contributing to family business, imprinting, and innovation research, we identify temporal symbiosis as a firm's simultaneous adoption of retrospective and prospective approaches to using its resources to concurrently perpetuate tradition and achieve innovation, highlighting its crucial role as a shield of the past and engine for the future.
Understanding how family small and medium-sized enterprises (SMEs) seize
opportunities for innovation and thus achieve superior performance is of substantial
interest to family firm managers and academia. This paper develops a conceptual
framework of antecedents that include resources internal and external to the firm in the
two major dimensions of technological innovation (TI) and management innovation (MI)
and their effects on financial performance. The framework is empirically tested with
survey data from 152 manufacturing family SMEs in the D-A-CH countries, which
comprise Germany (D), Austria (A) and Switzerland (CH). Drawing on the knowledgebased
view, the results highlight the central role of firm-external knowledge for family
firm innovation, which is inherent in an industry’s technological opportunities and
interorganizational collaboration. Furthermore, results show that it is only through
technological innovation that family firms can capitalize on innovation. Finally,
management innovation is still observed to constitute a vital complement for
technological innovation in that it is an enabler for innovation in products and processes.
Recommendations for practice include the need for technological innovation, openness
toward collaborations with external partners and receptiveness to knowledge from
external sources.
The relationships between corporate entrepreneurship, innovation and performance have been previously addressed by the literature. However, they have yielded mixed and often inconclusive results. The purpose of this paper is hence to empirically test a model that links entrepreneurial culture, innovation outcomes and business performance. In this model, the family nature of firms is subsequently included as a moderator variable. The empirical investigation is based on a sample of 145 family firms from the automotive components manufacturing sector in Spain. This study uses Partial Least Squares (PLS) path-modeling to test our research model and hypotheses. Our results reveal the increasing importance of fostering an entrepreneurial culture within family firms in order to yield innovation processes and performance.
This paper accounts for the development of the academic endeavour to determine the firm-level relationship between investments in R&D and productivity. The impact of 28 highly cited publications within this line of study is investigated using a combination of bibliometric techniques and citation function analysis. We show how the attention paid to this line of research broadens and deepens in parallel to the diffusion of innovation as a research theme during 2000s. Our findings also suggest that the attraction of scholarly attention is driven by combination of broadening interest in the central research question under study and boundary-pushing methodological contributions made in the key contributions.
This paper reviews the existing evidence regarding the effects of technological and non-technological innovations on the productivity of firms and the existence of possible complementarities between these different forms of innovation.
This paper challenges the prevalent notion that family-owned firms are more risk averse than publicly owned firms. Using behavioral theory, we argue that for family firms, the primary reference point is the loss of their socioemotional wealth, and to avoid those losses, family firms are willing to accept a significant risk to their performance; yet at the same time, they avoid risky business decisions that might aggravate that risk. Thus, we propose that the predictions of behavioral theory differ depending on family ownership. We confirm our hypotheses using a population of 1,237 family-owned olive oil mills in Southern Spain who faced the choice during a 54-year period of becoming a member of a cooperative, a decision associated with loss of family control but lower business risk, or remaining independent, which preserves the family's socioemotional wealth but greatly increases its performance hazard. As shown in this study, family firms may be risk willing and risk averse at the same time.
According to family business theory and practice, family firms often face a paradoxical tension between their anchorage to the past and the need to renew and innovate to remain competitive, which often hampers innovation. Given that innovation is inherently a social process that depends on the knowledge and creativity of an organization’s people, employee incentives may be key to managing the tradition–innovation paradox and unlocking a family firm's innovation potential. However, current research has not addressed how family firms can effectively configure incentives to promote innovation. Drawing on a configurational approach and the unique properties of the qualitative comparative analysis method, our study reveals that the set of incentives that family firms use to motivate their employees toward innovation differs in relation to whether they are more or less attached to tradition. As such, in line with the principle of equifinality, family firms with high attachment to tradition can be as innovative as those with low attachment to tradition by implementing the right configuration of incentives. Thus, we offer a human resource management perspective on innovation that advances knowledge on how family firms can unlock their innovation potential.
This study explores whether the probability to patent differs between family and non-family firms, and whether any potential difference between firm-type is moderated by size. The analysis is based on a large archive of patenting activities (Orbis–PATSTAT dataset) carried out by around 3700 Italian manufacturing firms over the 2010–2017 period. The results from a random effect probit model show that family firms patent less than non-family firms (the estimated average marginal effect of family ownership ranges from −0.055 to −0.032 according to model specification). Furthermore, the size effect is positive in every model, suggesting that the probability of patenting increases with size. While it is demonstrated that family firms remain less likely to patent than non-family firms, we also show that their disadvantages increase as they grow in size: in large firms, the probability of patenting is 0.22 for family firms and 0.39 for non-family firms. Importantly, the results hold when considering patent counts, citations and a number of additional sensitivity tests.
This study explores whether the probability to patent differs between family and non-family firms, and whether any potential difference between firm-type is moderated by size. The analysis is based on a large archive of patenting activities (Orbis–PATSTAT dataset) carried out by around 3700 Italian manufacturing firms over the 2010–2017 period. The results from a random effect probit model show that family firms patent less than non-family firms (the estimated average marginal effect of family ownership ranges from −0.055 to −0.032 according to model specification). Furthermore, the size effect is positive in every model, suggesting that the probability of patenting increases with size. While it is demonstrated that family firms remain less likely to patent than non-family firms, we also show that their disadvantages increase as they grow in size: in large firms, the probability of patenting is 0.22 for family firms and 0.39 for non-family firms. Importantly, the results hold when considering patent counts, citations and a number of additional sensitivity tests.
Advancing the multidimensional approach to family business professionalization
Abstract
Purpose – Although it has been implicitly or explicitly assumed that family business professionalization is indeed a multidimensional construct, there has been a tendency to confine it to the employment of nonfamily managers and delegating authority in academic research. Dekker et al. (2013) have made an impressive work in untangling the multidimensional structure of family business professionalization. This paper aims to introduce a more comprehensive multidimensional approach and a framework to understand and study family business
professionalization by identifying additional dimensions.
Design/methodology/approach – The conceptual framework relies on insights derived from the literature on family business professionalization, occupational professionalism and organizational professionalism to reveal the broader multidimensionality of family business professionalization.
Findings – The proposed framework extends the definition of family business professionalization and offers additional dimensions which were grouped under five overarching headings: professionalization of
management, professionalization of organizational structure, processes and operations, professionalization of family’s relationship with business, professionalization of employees and professionalization of work
environment and culture. Originality/value – This paper contributes to the literature by providing a wider approach for the
understanding of family business professionalization. It presents a new way of thinking about family business professionalization, underlining the importance of employees and organizational culture for the
professionalization process in family firms.
Keywords Family business, Family business professionalization, Dimensions of family business professionalization, Occupational professionalism, Organizational professionalism
Paper type Conceptual paper
Measured TFP fell in Spain during the boom years of 1995 to 2007. Using administrative data from the quasi‐universe of firms we show that there was an increase in misallocation, which was more severe in sectors where connections with public officials are more important for business success. We write and estimate a simple model of cronyism in which heterogeneous firms invest in political connections. Our quantitative exercise concludes that the institutional decline over this period costed 1.9 percent growth in TFP per year and a 0.8 percent annual increase in the resources spent by firms in establishing political connections. This article is protected by copyright. All rights reserved
With firm data from the Spanish Community Innovation Survey (CIS) for the period 2003–2014, we find a positive and significant effect of innovation in the demand for labor when firms introduce product and process innovations in the same time period. The effect of innovation on the demand for labor is countercyclical, higher in the recession, after 2008, than in the expansion, before 2008, but the probability that firms innovate in product and process is counter-cyclical, i.e. lower in the recession. Altogether, the elasticity of the demand for labor to the probability that firms introduce product and process innovations remains stable throughout the sample period, at around 0.035. Innovation contributes to stabilize average employment during the cycle, more so when the innovation is in product, alone or together with process, than when it is only in process. These results are broadly consistent with product and process innovations shifting firms’ demand and production functions upwards, but differentially in expansions (less product market competition) than in contractions (more competition).
This studyinvestigatesthemoderatinginfluenceofR&Dintensityontherelationships
between familymanagementandfirmperformanceinprivatefirms.Theresultsconfirmthat
R&D intensityreinforcesthenegativeeffectoffamilymanagementonfirmperformance.More
specifically,weobtainthatR&Dintensityisastatisticallysignificantmoderatorforthosefirms
having largelevelsofR&Dinvestmentrelativetoone’sindustrypeers.Likewise,wefindthat
only whentakingintoaccountthetotaleffectofR&D,includinginternalandexternalR&D,
does itsinteractionwithfamilymanagementhasadetrimentaleffectonfirmperformance.
© 2018ACEDE.PublishedbyElsevierEspa˜na, S.L.U.ThisisanopenaccessarticleundertheCC
BY-NC-NDlicense(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Purpose – The purpose of this study is to offer new insights regarding an issue that has attracted the interest of multitude academics and practitioners in business management and family firm literature: technological innovation (TI). Specifically, this study brings new knowledge regarding both the impact of TI efficiency on firm growth and the moderating role of family involvement in management on such relationship.
Design/methodology/approach – The authors use a matched-pairs design and an ordinary least squares regression analysis to examine a sample of 152 Spanish manufacturing firms.
Findings – First, the authors show that firms obtaining higher TI efficiency are also those that achieve superior growth. Second, the authors reveal that as family involvement in management increases, the positive effect that TI efficiency exerts on firm growth is strengthened.
Practical implications – This study suggests that family managers should essentially consider various aspects such as tacit knowledge, social capital and long-standing collaborations with stakeholders to reinforce the relationship between TI efficiency and firm growth.
Originality/value – To the best of our knowledge, this is the first study that analyses the effect of TI efficiency on firm growth, as well as, when and to what extent family involvement in management influences the TI efficiency-growth relationship. Thus, this
paper provides a deeper understanding of the importance that family managers could have on firm growth deriving from TI efficiency.
This paper systematically explores the effects of firms’ innovation activities on their productivity changes for Turkish manufacturing firms, differentiating between different typologies of innovation. We employ endogenous switching methodology, controlling for endogeneity and selection bias issues, as well as analysing counterfactual scenarios. The main finding of the study points to firm heterogeneity in terms of propensity both to innovate and to benefit from innovation activities. Our results indicate that all types of innovation activity have positive effects on the productivity of firms when compared with non-innovating firms. We find robust evidence for the differential impact of innovation on firm productivity across different innovation types. Further, this relationship alters across different phases of the economy with respect to the 2008 financial crisis.
We combine behavioral agency and family business literature to analyze the role of dominant firm principals in constraining the managerial agent’s (CEO’s) response to equity-based pay. Behavioral agency research has made progress in understanding CEO risk behavior in response to equity-based incentives and family firm risk behavior driven by concentrated socioemotional and financial firm-specific risk bearing. However, both literatures have evolved independently, which has limited our understanding of how the risk bearing of agent and principal influences the predictions of the behavioral agency model (BAM). We combine these literatures in order to enhance BAM’s predictive validity with regard to firm risk-taking as a function of both agent and principal risk preferences. Our findings suggest that family principals are more likely than nonfamily principals to constrain CEO risk behavior that is perceived as immoderate (excessively risk averse or excessively risk seeking). We also offer evidence that CEO ties to the family influence the CEO’s response to equity-based incentives. In doing so, we offer refinements to BAM’s formulation and advance our understanding of the unique nature of agency problems within family firms.
An analysis of the effect of family governance on the relationships among risk aversion, innovation and performance is the purpose of this study. Beyond the level of risk and innovation, we are interested in analysing the relationship between them and their influence on performance in family firms. Traditionally, risk-seeking has been associated with innovation and performance. Our results confirm both components to be independent and, furthermore, show relationships with opposite signs as expected in the literature. In a sample of 500 firms, the results confirm an idiosyncratic behaviour in family firms; innovation contributes to performance to a higher extent in family firms, and at the same time, risk aversion is positively associated with performance only in non-family firms.
Purpose – One of the central requirements of research is that the knowledge acquired should not only be
academically rigorous, but also socially useful. If an article fails to address practical relevance, the audience
will question its value and respond with “so what?”. Due to recent criticism regarding the practical relevance
of innovation research, the purpose of this paper is to examine whether a similar “ivory divide” prevails in
research on innovation in family businesses. More specifically, this paper investigates to what extent and at
what depth researchers generate practical implications for innovation in family businesses. Furthermore,
different strategies to bridge the “ivory divide” are discussed.
Design/methodology/approach – This literature review systematically analyses the findings of 50 journal
articles focusing on innovation in family businesses published between 2004 and 2015. Based on this, the
articles are classified according to their degree of practical relevance.
Findings – Although the findings unanimously show the relevance of innovation for strengthening
business’s performance, only a minority of articles offer in-depth implications for practitioners in terms of
practical guidance for action and application-oriented recommendations. A number of reasons for the
development of this “ivory divide” are discussed and suggestions for how the connection between research
and practice could be strengthened are provided.
Originality/value – This paper attempts to provide an impulse toward more practically oriented family
business research in order to increase its interestingness to academics and its value to practitioners.
Family and nonfamily firms both must align owner and employee interests. However, family firms may experience lower labor productivity because of adverse selection problems from labor market sorting and attenuation. Incentive compensation reduces alignment of interest problems in family and nonfamily firms. Importantly, incentive compensation signals to potential employees that performance will be rewarded, which should improve the relative labor productivity in family firms by reducing adverse selection. Analysis of matched data on 216,768 firms supports our hypotheses, implying that incentive compensation has a broader impact on firm performance than commonly recognized in the family firm or human resource literatures.
This paper studies the sensitivity of patent filings to the business cycle using patent filings at the European Patent Office (EPO). Using a dynamic model of patenting and the Hodrick-Prescott (HP) filter method to separate the cyclical component of real Gross Domestic Product (GDP) from its trend component, we find that patent filings are strongly pro-cyclical. This supports the view that short term resource constraints affect patenting decisions, even if there are longer term factors that determine innovation. The study also has significance for forecasting patenting behavior, which is important for policy decision-making, institutional operations, and strategic business planning. Forecasts that rely only on trends prove to be less accurate amidst economic booms and recessionary shocks, such as the recent global financial crisis.
We examine the effect of professional management on inno-
vation in family-owned firms. Since professionalism is a crit-
ical but controversial issue that can influence the innovative
capacity of family businesses, we aim to determine if profes-
sional management improves innovation outcomes from a
comprehensive perspective. Using a sample of 583 Spanish
family firms, we demonstrate that professionalism in man-
agement exerts a positive influence on innovation from both
technological (product and process innovation) and man-
agement perspectives. We also find that firms managed by
external professionals are willing to develop higher innova-
tive activity and that professionalism contributes positively
to persistent innovation. Copyright © 2016 ASAC. Pub-
lished by John Wiley & Sons, Ltd.
The scale of family company activity in the United Kingdom was measured with regard to several family firm definitions. This study confirms that family companies are a numerically important group of businesses. Policy makers and practitioners must, however, be aware that the scale of family firm activity in any developed economy is highly sensitive to the family firm definition selected. Within a bivariate as well as multivariate statistical framework, marked demographic differences were identified between family and non-family companies with regard to several family firm definitions. We suggest that bivariate studies comparing the management practices and performance of family and non-family firms may have identified ‘demographic sample’ differences rather than ‘real’ differences. Implications for future research exploring the management and performance of family and non-family firms are discussed.
The aim of this research is to study the moderating role of family management in the relationships between the intensity of research and development and the occurrence of continuous technological innovation and between the existence of technological innovation outcomes and long-term firm performance. The results show that family management reduces efficiency in the conversion of research and development expenses into technological innovation outcomes over time. Our findings also suggest that the influence of family management significantly contributes to improving the effect of the achievement of technological innovation on long-term performance.
The present paper studies the relationship between R&D investment and firm productivity growth by explicitly modelling non-linearities in the R&D–productivity relationship. We employ a two step estimation approach, and match two firm-level data sets for OECD countries, which allows us to relax the linearity assumption of the canonical Griliches (1979) knowledge capital model. Our results suggest that: (i) R&D investment increases firm productivity with an average elasticity of 0.15; (ii) the impact of R&D investment on firm productivity is different at different levels of R&D intensity—the productivity elasticity ranges from −0.02 for low levels of R&D intensity to 0.33 for high levels of R&D intensity implying that the relationship between R&D expenditures and productivity growth is highly non-linear, and only after a certain critical mass of knowledge is accumulated, is productivity growth significantly positive; (iii) there are important inter-sectoral differences with respect to R&D investment and firm productivity—firms in high-tech sectors not only invest more in R&D, but also achieve more in terms of productivity gains related to research activities.
Innovation in family firms is often driven by family assets, valuable resources that are particularly prevalent in family firms. For example, they have particularly strong networks that can be deployed in an innovation context. These family assets can over time atrophy and stifle rather than stimulate innovation performance. However, family firms can fight this process by institutionalizing innovation within the family and the firm by means of family and corporate governance and through incentivizing key individuals in the innovation process.
This study analyzes how family involvement leads to high performance in SME-family businesses (SME-FB). This research considers family involvement in management and firm governance, development of family governance, firm size, generations in FB, and ownership concentration. Results show three combinations that lead to high performance: 1) a large-enough SME-FB with a family CEO and a board with significant presence of non-family directors; 2) a large-enough SME-FB in its first generation, without family government structures, and that a non-familial top managerial team runs; 3) a large-enough SME-FB with low ownership concentration and family governance structures.
This paper aims to further our understanding of how the degrees of innovation novelty and innovation failure are connected. It argues that a better understanding of the specific predictors of innovation novelty and failure would improve our understanding of the innovation process and inform R&D managerial interventions to reduce the occurrences of failure and enhance radical innovation. This investigation draws on data on 5387 Spanish manufacturing firms from the 2009 Spanish Community Innovation Survey (CIS). Unlike prior studies which examine product innovation, degree of innovation novelty, and innovation failures in separate models, this study relies on a multivariate model to account for the extent to which these outcomes are interdependent. Overall, the results indicate that innovation effort and innovation failure are closely linked, especially if the innovation involves a significant level of novelty. These interdependencies are problematic since firms aspire to higher propensity for innovation and novelty; however, this higher propensity is accompanied by a higher probability of failure. Our empirical results identify a number of factors that contribute to enhancing innovation novelty while also attenuating the probability of innovation failure. These factors are: (i) R&D employees, (ii) research and institutional sources of information, (iii) contracting external R&D, and (iv) corporate social responsibility practices.
It is generally accepted that a family's involvement in the business makes the family business unique; but the literature continues to have difficulty defining the family business. We argue for a distinction between theoretical and operational definitions. A theoretical definition must identify the esence that distinguishes the family business from other businesses. It is the standard against which operational definitions must be measured. We propose a theoretical definition based on behavior as the essence of a family business. Our conceptual analysis shows that most of the operational definitions based on the components of family involvement overlap with our theoretical definition. Our empirical results suggest, however, that the components of family involvement typically used in operational definitions are weak predictors of intentions and, therefore, are not always reliable for distinguishing family businesses from non-family ones.
In this paper we draw on recent progress in the theory of (1) property rights, (2) agency, and (3) finance to develop a theory of ownership structure for the firm.1 In addition to tying together elements of the theory of each of these three areas, our analysis casts new light on and has implications for a variety of issues in the professional and popular literature, such as the definition of the firm, the “separation of ownership and control,” the “social responsibility” of business, the definition of a “corporate objective function,” the determination of an optimal capital structure, the specification of the content of credit agreements, the theory of organizations, and the supply side of the completeness-of-markets problem.
Recent thinking about top management has been influenced by alternative models of man.1 Economic approaches to governance such as agency theory tend to assume some form of homo-economicus, which depict subordinates as individualistic, opportunistic, and self-serving. Alternatively, sociological and psychological approaches to governance such as stewardship theory depict subordinates as collectivists, pro-organizational, and trustworthy. Through this research, we attempt to reconcile the differences between these assumptions by proposing a model based upon the subordinate's psychological attributes and the organization's situational characteristics.
This study analyzes how Spanish manufacturing firms' technological collaboration with suppliers affects these firms' product innovation. This research also considers innovation novelty (radical versus incremental). Using the 2007-2010 data from the ESEE (Business Strategies Survey), logistic regression analysis shows that technological collaboration with suppliers is an important factor in the innovation process. Novelty degree is also an important factor because collaboration's effect varies over time: early supplier involvement is not always essential.