The Impact of Family Ownership,Management, and Governance on Innovation

Previous research suggests that the distinctive nature of family firms, including both specific advantages and disadvantages related to their particular agency situation, influences innovation activities. Most studies, however, view family firms as homogeneous entities and thus neglect the heterogeneity of family firms when comparing them with nonfamily firms. One important factor of this firm heterogeneity is family influence in terms of ownership, management, and governance. A data set of large German publicly traded firms between 2000 and 2009 is used to test how these three dimensions of family influence predict innovation input and output. The results show that family participation in management and governance has a negative impact on innovation input and a positive influence on innovation output. This suggests that family members are risk averse and reluctant to invest in innovation, but at the same time do so more effectively.     

Conceptualizing Work,Family and Community: A Socio‐Ecological Systems Model,Taking Account of Power,Time, Space and Life Stage

A large body of empirical research now exists about ‘work and family’, much of it in agreement on critical issues. However, it is under‐conceptualized, it over‐researches professional and managerial workers and it under‐attends the larger terrain of work, family and community. This contribution argues the case for a stronger analytical framework around work, family and community and the ways in which they intersect, drawing on concepts commonly used in the field of employment relations. The article utilizes a body of empirical research about work, family and community in Australia to develop Voydanoff's ecological systems model of work, home and community, arguing that it is vital to unpack the ‘black box’ of ‘work’ in a multi‐layered way, to give appropriate weight to various sources of power, and to avoid an individualistic approach to the reconciliation of work, home and community life by locating analysis in a larger social and political context. The contribution proposes a ‘socio‐ecological systems’ model of work, home and community that delineates the four issues of power, time, space and life stage.     

An Attention‐Based View of Family Firm Adaptation to Discontinuous Technological Change: Exploring the Role of Family CEOs' Noneconomic Goals

Recent studies show that managerial attention is a particularly important precursor of established firms' responses to discontinuous technological change. However, little is known about the factors that shape managerial attention‐response patterns. Our qualitative study investigates how the attention of family firm chief executive officers (CEOs) to discontinuous technological shifts, the interpretation and decision‐making processes associated with these changes, and ultimately organizations' responses are affected by CEOs' noneconomic goals. Based on seven longitudinal case studies in the German consumer goods industry, the paper induces a process model that extends the findings of the literature on the attention‐based view and helps to explain heterogeneity in family firms' adaptation to discontinuous technological change. This study shows that the family CEO's specific noneconomic goals—such as power and control, transgenerational value, the maintenance of family reputation, the continuance of personal ties, or personal affect associated with the family business—determine whether the CEO assesses an emerging technology as relevant enough to warrant a reaction from the firm. Moreover, the family CEO's noneconomic goals constrain the set of considered responses. The outcome of this sensemaking process determines the organization's response. For instance, in the specific context of this study, the goal of “family power and control” entailed an immediate interpretation of the focal trend as important for maintaining influence, and resulted in an unconstrained set of responses and, ultimately, high innovation in the new domain. Over time, family CEOs might reevaluate the emerging trend based on their goals and adapt organizational moves accordingly. The paper identifies and discusses how ambiguities and dilemmas may arise during this process. Our findings contribute to the literature on adaptation to discontinuous technological change and to family firm research.     

The Effect of Family Involvement on Innovation Outcomes: The Moderating Role of Board Social Capital

Innovation is an essential and yet puzzling part of family firms’ strategic focus. While family firms are generally characterized as conservative regarding their research and development (R&D) activities, researchers have recently argued that family firms can still achieve innovation-based competitive advantages. Seeking to understand the link between family influence and the outcomes of innovation, we suggest that it is necessary not only to observe the depth of family involvement, but also to differentiate between technological inventions and market innovations. We further posit that the board members’ social capital constitutes an important contingency for this link. We, therefore, investigate the relationship between family involvement and two different outcomes: the number of the firm’s inventions and the market relevance of innovations. Our analysis of S&P 500 firms comprises 1.85 million patents and manual evaluations of 1774 product announcements. The results of our estimations suggest that family involvement is negatively related to the number of inventions and positively related to the market relevance of innovations. They further show that internal and external board social capital moderate the relationship between family involvement and the number of inventions. This study adds to the discussion about family firm innovation by using socioemotional wealth to explain heterogeneity in innovation patterns and revealing that relational resources derived from board social capital are crucial boundary conditions for families’ influence on technological inventions. Taken together, it works toward a more holistic view of innovation in family-influenced firms.     

Nonfinancial Considerations in Eco-Innovation Decisions: The Role of Family Ownership and Reputation Concerns

Societal pressures for greater sustainability can encourage firms to target part of their innovation activities at ecological initiatives (i.e., eco-innovation). Yet, depending on their value function, firms can respond differently to such pressures and exhibit variance in their eco-innovation activities. In this paper, we investigate the idea that a firm’s ownership structure may play a significant role in determining its engagement in eco-innovation. Specifically, we propose that ownership by family blockholders increases the value attached to the company’s reputation and that this, in turn, stimulates higher levels of eco-innovation. In other words, we model the company reputation motive as a key mediator in the relationship between family ownership and firm-level eco-innovation. To account for family firm heterogeneity, we also model the moderating role of owners’ intention to pass the business on to the next family generation (transgenerational intentions) and of the extent to which these owners reside in the firm’s local community (local embeddedness). As theoretical backdrop, our study builds on institutional theory and the mixed gamble logic. To test our hypotheses, we use a large sample of German firms and nonlinear moderated mediation regression analysis. Results reveal that family ownership is positively related to the introduction of eco-innovations by firms, in part because of the stronger emphasis being placed on the company’s reputation. We find that this effect is strongest when the owning-family has transgenerational intentions. As such, this study advances our understanding of firm-level drivers of eco-innovation. In view of the prevalence of family-owned firms and the mounting importance of ecological sustainability, it is valuable to extend knowledge on the contingent and indirect effect of family ownership on eco-innovation.     

The Growing Importance of Family: Evidence from Brothers’ Earnings

We examine between‐brother correlation of earnings, family income, and wages from two cohorts of the National Longitudinal Surveys. Young brothers who entered the labor market in the 1970s had lower correlations of economic outcomes than did those who entered in the 1980s and early 1990s. Neither the rising brother correlation in education nor the rising return to schooling accounts for much of the increase in the brother correlation in earnings. These results suggest that family and community influences other than years of education that are shared by brothers have become increasingly important in determining economic outcomes.     

Family Structure and Family Earnings: The Determinants of Earnings Differences among Family Types

Mean total family earnings differ greatly by family structure (the number, age, and gender of adults, and the presence or absence of children and dependent elders). This study classifies families into seven major types by structure, and analyzes inequality in mean earnings among these types. Differences in mean earnings among types depend primarily on the amount of labor supplied to the labor market. The quantity of labor supplied, in turn, while reflecting in part differences in the head's characteristics (such as human capital), is largely determined by family structure. Earnings changes by family type over time from 1973 to 1987 are also discussed.     

Family ownership and firm performance: Influence of family management,family control,and firm size

This study examines the relationship between family ownership and firm performance by considering the influence of family management, family control, and firm size. Using proxy data of 786 public family firms in Taiwan during 2002–2007, this study found that family ownership is positively associated with firm performance. The positive association is strong particularly when family members serve as CEOs, top managers, chairpersons, or directors of the firms; however, the association becomes weak when family members are not involved in firm management or control. The findings suggest that the potential family-ownership effects are more likely to be realized when family ownership is combined with active family management and control. In addition, the association between family ownership and firm performance is stronger in small- and medium-sized enterprises (SMEs) than in large companies.     

It Pays to Value Family: Work and Family Tradeoffs Reconsidered

We use longitudinal data to assess whether individuals who place greater importance on marriage and family pay a price for that priority in subsequent labor market success. Males placing a high priority on family before entering the labor market earn more, contrary to behavioral research but consistent with the economics literature. More important, females who place a high priority on family do not suffer in terms of subsequent earnings, contrary to most previous research.     

Motivation Gaps and Implementation Traps: The Paradoxical and Time-Varying Effects of Family Ownership on Firm Absorptive Capacity

We present a theoretical framework of family ownership as a driver of the heterogeneity (between-firm differences) and variability (within-firm differences over time) of absorptive capacity (AC). Building on our analysis of the multiple dimensions of family ownership influence on firm behavior and the mechanisms that can shape the firm willingness and ability to acquire, assimilate, transform, and exploit external knowledge, we introduce the concepts of motivation gap and implementation gap to explain why, paradoxically, family ownership can cause both upward and downward divergences in AC. Our contingency framework identifies conditions under which the positive and negative effects of family ownership on AC are likely to prevail and adds a temporal perspective suggesting that AC varies depending on the duration of family ownership and ownership succession.     

What Makes a Family Firm Innovative? CEO Risk‐Taking Propensity and the Organizational Context of Family Firms

Investigating the new product portfolio innovativeness of family firms connects two important topics that have recently received considerable attention in innovation and family firm research. First, new product portfolio innovativeness has been identified as a critical determinant of firm performance. Second, research on family firms has focused on the questions of if and why family firms are more or less innovative than other organizational forms. Research investigating the innovativeness of family firms has often applied a risk‐oriented perspective by identifying socioemotional wealth (SEW) as the main reference that determines firm behavior. Thus, prior research has mainly focused on the organizational context to predict innovation‐related family firm behavior and neglected the impact of preferences and the behavior of the chief executive officer (CEO), which have both been shown to affect firm outcomes. Hence, this study aims to extend the previous research by introducing the CEO's disposition to organizational context variables to explain the new product portfolio innovativeness of small and medium‐sized family firms. Specifically, this study explores how the organizational context (i.e., ownership by top management team [TMT] family members and generation in charge of the family firm) of family firms interacts with CEO risk‐taking propensity to affect new product portfolio innovativeness. Using a sample of 114 German CEOs of small and medium‐sized family firms operating in manufacturing industries, the results show that CEO risk‐taking propensity has a positive effect on new product portfolio innovativeness. Moreover, the analyses show that the organizational context of family firms impacts the relationship between CEO risk‐taking propensity and new product portfolio innovativeness. Specifically, the relationship between CEO risk‐taking propensity and new product portfolio innovativeness is weaker if levels of ownership by TMT family members are high (high SEW). Additionally, the effect of CEO risk‐taking propensity on new product portfolio innovativeness is stronger in family firms at earlier generational stages (high SEW). This result suggests that if SEW is a strong reference, family firm‐specific characteristics can affect individual dispositions and, in turn, the behaviors of executives. Therefore, this study helps extend the knowledge on the determinants of new product portfolio innovativeness of family firms by considering an individual CEO preference and the organizational context variables of family firms simultaneously.     

When the Former CEO Stays on Board: The Role of the Predecessor’s Board Retention for Product Innovation in Family Firms

Understanding product innovation in family firms is an important research endeavor given the economic predominance of those firms, their idiosyncrasies, and the importance of constant renewal for those firms to achieve transgenerational survival. Recently, family firm research has highlighted the role of next-generation chief executive officers (CEOs; i.e., successors) who are often seen as drivers for innovating a family firm’s products. However, prior research has typically neglected that predecessors, who are often portrayed as less willing to introduce product innovation, frequently remain involved postsuccession through occupying board positions and thus still substantially influence the decision-making processes and outcomes of family firms, such as product innovation. As a result, our understanding of the role of predecessors and their postsuccession involvement in family firms’ product innovation remains unclear. Building on stakeholder salience theory and on insights from the literature on innovation and succession in family firms, we develop hypotheses about how and under which conditions the predecessor’s board retention affects product innovation in family firms after succession. Building on more than 200 family firm CEO succession cases in small- and medium-sized, privately owned family firms, our results reveal that the predecessor’s board retention negatively affects product innovation. This negative effect is strengthened with increasing involvement of the predecessor in the successor selection process, and it is offset in the case of family succession. Our findings contribute to the emerging stream of research on family firm succession and product innovation and provide important implications for practice.     

Marking Single–Family Property Values to Market

This paper is the text of the 2001 Presidential Address for the American Real Estate and Urban Economics Association. House price prediction accuracy is a function of: (1) the procedure used to identify within–metropolitan–area housing submarket boundaries, (2) the econometric technique used to estimate the parameters of the house price model and (3) the characteristics of the local housing market. This paper empirically examines several procedures for delineating within–metropolitan–area housing submarket boundaries. In addition, the paper examines the increase in prediction accuracy that can be achieved by employing spatial econometric techniques to spatially adjust ordinary least squares house price predictions. Finally, the paper examines the influence that local housing market characteristics have on house price prediction accuracy. Housing market characteristics examined here are: (1) structural characteristics of neighborhood properties, (2) heterogeneity of the neighborhood housing stock and (3) housing market liquidity. Prediction accuracy is examined using hedonic house price equations with over 40,000 single–family transactions for Dallas, Texas.     

Introducing Interface Management in New Product Family Development

Creating product platforms from which many products can easily be leveraged is an issue of increasing concern for many companies. This article introduces and explores the concept of interface management (IM) in new product platform development. IM is the distinct process of developing and defining the physical platform interfaces. The concept of IM is empirically explored in two product family development projects in the Swedish manufacturing industry that have been longitudinally studied for more than 3 years. It is proposed that firms which have a product family development approach that is associated with an extensive IM process enjoy a high degree of freedom in deciding how to balance its time to market for individual products with the beneficial utilization of design familiarities across all products. Moreover, if product managers understand and explicitly focus on the IM process, the often challenging shift from a single product development approach to a product family development approach is likely to be facilitated. © 1999 Elsevier Science Inc.     

Family Ownership and R&D Intensity in Small‐ and Medium‐Sized Firms

Research was largely consistent in predicting a negative relationship between family ownership and research and development (R&D) intensity until Chrisman and Patel, using a behavioral agency model (BAM), called this general assumption into question. They argued that publicly owned family firms typically invest less in R&D than nonfamily‐owned firms. This behavior may however be reversed if economic performance levels are below family aspirations or if family long‐term goals, such as pursuing strong transgenerational family control, are highly valued. While most researchers, like Chrisman and Patel, primarily focused on large listed firms, more research on the relationship between family ownership and R&D intensity in privately held small‐ and medium‐sized enterprises (SMEs) is required. This is because firm size can play an important role in understanding the innovation management behavior of firms. Building on the BAM perspective, in the present paper it is argued that Chrisman and Patel's results can be extended to the context of SMEs, albeit with one important specification: the relationship between family ownership and R&D intensity is likely to be contingent on the way the family has invested its wealth. Specifically, it is contended that in the context of SMEs, where goals are more fluid and mixed, when there is a high overlap between family wealth and firm equity (i.e., most of the family's wealth is invested in the firm) the relationship between family ownership and R&D intensity is negative because of the family owners' greater desire to protect their socioemotional wealth (SEW). However, if the overlap between the family's total wealth and single firm equity is low (i.e., firm equity is just a small part of the total family wealth), the relationship between family ownership and R&D intensity is positive as the low overlap between family wealth and firm equity reduces the family's loss aversion propensity. In such a situation, family ownership is likely to foster R&D intensity because of the long‐term orientation of family owners that increases the family firm's propensity to bear the risk of investing in R&D activities. The hypothesis is tested and confirmed in a study of 240 small‐ and medium‐sized firms based in Italy. The paper contributes to the literature in several ways. First, adding to the literature on innovation management and R&D intensity, it increases the understanding of what drives or inhibits R&D investments in SMEs when a family is involved in the ownership of the firm. This is particularly important because research on innovation management, as well as research on R&D intensity in family firms, is primarily focused on large firms and much less on SMEs. Second, the study complements arguments from prior research on the correlates of R&D intensity in large listed firms, showing that the BAM and SEW perspective offer a theoretical framework that is also able to illustrate the complex nature of innovation management in the context of SMEs. Third, the study contributes to research on the effects of family ownership on the general functioning of a firm. In particular, it provides new insights into how family ownership may affect R&D intensity.     

Family ownership and acquisition behavior in publicly‐traded companies

Much of the literature on corporate acquisitions has focused on managerial incentives for making acquisitions but has underemphasized the role played by the social context of major shareholders. This study of Fortune 1000 firms argues that the priorities and risk preferences of family owners can have important implications not only for the volume but also for the diversifying nature of their acquisitions. Agency and family business perspectives are used to derive expectations concerning the acquisitions behavior of family owners. Consistent with both perspectives, and owners' desire to reduce business risk, we find that family ownership is inversely related to the number and dollar volume of acquisitions. However, whereas agency theorists differ about how ownership concentration influences whether acquisitions are diversified, the family firm literature is more definitive. The latter suggests that given family owners' desire to retain control of their firms for offspring, their wealth must remain concentrated. Hence they can most easily reduce the risk of their wealth portfolio by diversifying the business—that is, through diversifying acquisitions. Consistent with this logic, we found the propensity to make diversifying acquisitions to increase with the level of family ownership. Copyright © 2009 John Wiley & Sons, Ltd.     

The Ability and Willingness Paradox in Family Firm Innovation

We present a framework of how family involvement influences innovation management based on ability (discretion to act) and willingness (disposition to act), two drivers that distinguish family firms from nonfamily firms and lead to heterogeneity among family firms. Paradoxically, family firms have superior ability yet lower willingness to engage in technological innovation. Resolving this paradox should yield new insights about innovation management in general. We summarize and position the papers in this special issue according to these drivers and set out an agenda for further research that will contribute to a better understanding of family firms' heterogeneous and paradoxical behaviors.     

Intergenerational Mobility and Interracial Inequality: The Return to Family Values

This paper investigates two questions. First, what is the relative importance of the components of childhood family environment—parental values versus parental class status—for young adult economic outcomes? Second, are interracial differences in labor market outcomes fully explained by differences in family environment? We find that both family values and family class status affect intergenerational mobility and inter‐racial inequality. Consideration of racial differences in parental values and class status alters but does not eliminate the impact of race on the labor market outcomes of young adults.     

Family business groups in Thailand: coping with management critical points

Using insights drawn from business history and business group literature, we develop a model to analyze how family business groups in late industrializing countries cope with management resource limitations that plague them in their pursuit of growth and diversification. A field study was conducted analyzing 215 family business groups in Thailand. Results suggest that family business groups will survive, and even prosper, if they are able to adapt their strategies and modernize their management styles to overcome three management resource limitations (or “management critical points”)—fund raising, production technology, and human resources. There is a detailed discussion of the different strategies that help to extend these upper limits or management critical points. We then divide family business groups into four types, which are based on their diversification and management strategies. We argue that their performances vary and that the modernized single business type and the modernized conglomerate type will be the future forms of family business groups, which will ensure that they remain competitive in the new global economy. Using our model, we conclude that family business groups in Thailand are still disinclined to make the transition to managerial enterprises, according to the conventional Anglo-Saxon model.     

Balancing Work and Family: The Role of High-Commitment Environments

Recently, researchers have begun to recognize that the nature of jobs, the workplace environment, and more generally, the culture of the workplace can have a significant impact on the ability of workers to balance their work and family lives. This article examines the effect of high-performance work practices, job characteristics, and the work environment on workers' views about whether the company helps them balance work and family. Using data from a survey of workers across three manufacturing industries, we show that a high-commitment environment—characterized by high-performance work practices, intrinsically rewarding jobs, and understanding supervisors—positively influences employees' perceptions that the company is helping them achieve this balance. This article reinforces the view that helping workers balance work and family responsibilities is not just a matter of benefits and formal family-friendly policies. Rather, it also depends on the characteristics of jobs within the business enterprise.