Family firms are often portrayed as an important yet conservative form of organization that is reluctant to invest in innovation; however, simultaneously, evidence has shown that family firms are flourishing and in fact constitute many of the world's most innovative firms. Our study contributes to disentangling this puzzling effect. We argue that family firms-owing to the family's high level of control over the firm, wealth concentration, and importance of nonfinancial goals-invest less in innovation but have an increased conversion rate of innovation input into output and, ultimately, a higher innovation output than nonfamily firms. Empirical evidence from a meta-analysis based on 108 primary studies from 42 countries supports our hypotheses. We further argue and empirically show that the observed effects are even stronger when the CEO of the family firm is a later-generation family member. However, when the CEO of the family firm is the firm's founder, innovation input is higher and, contrary to our initial expectations, innovation output is lower than that in other firms. We further show that the family firm-innovation input-output relationships depend on country-level factors; namely, the level of minority shareholder protection and the education level of the workforce in the country.We are grateful for the helpful comments of Linus Dahlander and the anonymous reviewers. Further, we acknowledge the valuable comments of
We integrate research on family business and discontinuous change to better explain why incumbents vary in when and how they adopt discontinuous technologies. Family influence induces companies to strive for continuity, command, community, and connections and, thus, alters the mix of constraints under which firms operate. Consequently, family influence weakens several of the inertial forces described in the discontinuous change literature, particularly the level of formalization, dependence on external capital providers, and political resistance. However, it also aggravates critical sources of organizational paralysis, specifically emotional ties to existing assets and the rigidity of mental models. We aggregate these seemingly contradictory effects to show that, overall, discontinuous change conflicts with essential goals and values of the family system, and, therefore, family influence entails fundamentally different dilemmas than those described in extant research. In turn, although highly family-influenced companies recognize discontinuous technologies later than their less family-influenced counterparts, they implement adoption decisions more quickly and with more stamina. Moreover, family influence reduces adoption aggressiveness and flexibility. We discuss important implications of our research for conversations on discontinuous change as well as for the debate on the advantages and disadvantages of family influence in firms. We gratefully acknowledge helpful comments from Margaret Cording,
German Mittelstand firms are globally recognized for their innovation, especially regarding product, process, and service innovation. So what can scholars and managers across the globe learn from the success story of German Mittelstand innovation? Drawing on information collected on innovative Mittelstand firms and extant knowledge on innovation, the resource-based view, and family firm research, the authors investigate how these highly innovative firms flourish and achieve high innovation performance despite the severe financial and human capital resource constraints they face as compared with larger corporations. The authors then present a model identifying and integrating six salient traits of such firms that allow them to efficiently orchestrate their resources to innovate and outcompete their competitors in the global market, enabling those firms to overcome their resource-related weaknesses and turn them into strengths. Specifically, these traits are: niche focus and customer collaboration, globalization strategy, preference for self-financing, long-run mindset, superior employee relations, and community embeddedness. The power of this Mittelstand approach takes full effect only when all six traits operate in an integrated fashion, and the proposed resource-based model serves as a starting point for a more holistic and comprehensive understanding of firm ability to innovate and successfully compete within a specific context. The article outlines the implications of the model of German Mittelstand innovation for research conducted in different fields including innovation, entrepreneurship, strategy, dynamic capabilities, ecosystems, and family business. Finally, the article proposes a future research agenda aimed at improving current understanding of the German Mittelstand "innovation strategy" and its transferability to other contexts, and outlines practical implications for owners and managers worldwide wanting to emulate the German Mittelstand innovation model.
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