The innovation of family firms in China: New evidence from the China employer-employee survey

Drawing on China Employer-Employee Survey data collected in 2018, this study examines the effects of family ownership on firm innovation in China. Baseline regressions suggest that Chinese family firms have significantly lower R&D investment and number of patents than non-family firms, and the results are not sensitive to response quality, unobserved characteristics, and non-random assignment of family ownership. Furthermore, this gap can be effectively explained by the lower management quality of family firms. Heterogeneous analyses indicate that the low innovation of family firms appears only in more competitive environments. To improve innovation, we suggest that Chinese family firms should make increased efforts to upgrade their management.