Do Family Firms Promote or Hinder Innovation? Debate and Integration

Chen Jianlin, Feng Xinjun, Li Ruiqin

Foreign Economics & Management Vol. 40, Issue 04, pp. 140 - 152 (2018)  DOI:10.16538/j.cnki.fem.2018.04.011

Summary

Family firms play an important role in promoting economic growth, and innovation is the fundamental guarantee for enterprises to be invincible. Therefore, family firm innovation has become a hot issue in international academic research in recent years. At present, through reviewing and combing the literature of family firms in foreign countries, it is found that different scholars have concluded different conclusions, even in the opposite way. This has led to a debate in the family business innovation research: is family business conducive to innovation or against innovation? The family firm innovation research is embodied in two dimensions: innovation input and output. Firstly, this paper summarizes the literature of the impacts of family firms on innovation input and output respectively; secondly, this paper discusses the contingency factors that affect family firm innovation and analyzes the impacts of internal and external family factors on family firm innovation; internal family factors include long-term orientation, risk aversion, family control, intergenerational interaction and relationship orientation, and external environmental factors consist of system environment, the protection of intellectual property rights and government policy; finally, this paper puts forward the directions in integrating family firm innovation debate based on contingency theory, and the prospects for future research. Based on the above framework, we have carried out a systematic review of current foreign family firm innovation literature and argue that there are three reasons for the debate: firstly, most of the existing literature treats family involvement as a single variable, simply comparing differences in family and non-family firm innovation; secondly, the measure variables of family firm innovation are inconsistent; thirdly, the external environment and internal stages of family firms are very different. Accordingly, we draw the conclusions as follows: firstly, the related empirical results show that the studies on the impact of family firms on innovation have not reached a consistent conclusion; whether from a perspective of innovation input or output, it can find evidence to prove the promoting or hindering role of family firms in innovation; secondly, from the internal enterprise perspective, the existing literature shows that the family factors significantly influence family firm innovation, long-term family orientation can promote innovation, but risk aversion of the family firms and relationship orientation hinder firm innovation; family control and intergenerational interaction have dual effects on the innovation; thirdly, from the external enterprise perspective, the existing literature shows that environmental factors significantly influence family firm innovation and institutional environment, the protection of intellectual property rights and innovation policy are beneficial to the promotion of family firm innovation. As a result, the contribution of this paper lies in the discussion on the above problems based on contingency theory, helping us to understand the family firm innovation, especially in the economic transition period, and providing theoretical support for developing family firms through innovation in China.

Keywords

family firm; firm innovation; family factor; external environment