This study examines the impact of family management on digital transformation with specific regard to the firm's development of Internet of Things (IoT) innovations. Drawing on the distinctive characteristics of firms with family managers, such as the focus on family-centered noneconomic goals, long tenure, emotional ties to existing assets, and rigid mental models, it hypothesizes that increasing family involvement in the top management team is negatively related to the development of IoT innovations that are distant from a firm's existing technology base (i.e., exploratory IoT innovations) compared to exploitative IoT innovations. Further, the study proposes that the firm's degree of technological diversification, especially in unrelated forms, reinforces this relationship. The longitudinal analysis between 2002 and 2013 on a sample of publicly traded German firms allows us to test our hypotheses from the beginning of the emergence of the IoT concept. Our findings show that due to the particular characteristics of their managers, family-managed firms do not welcome the risks related to exploratory IoT innovations, and the benefit of risk diversification from technological diversification is lower than the cost of abandoning family-centered goals. As our results imply that the involvement of family managers constrains the development of exploratory IoT innovation, the top management team composition in firms that intend to be at the forefront of the digital transformation should be accurately designed by avoiding a high proportion of family members. • The transition toward digital transformation is not straightforward, and technologically diversified family-managed firms face difficulties in this respect, especially when such transition involves the development of digital innovations distant from their current innovation trajectories.

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Technological diversification has been linked to a wide range of phenomena, including financial performance, innovation, product diversification and inter‐organizational relationships. This is the first systematic review of this literature and provides an overview of its historical development and conceptual foundations. It finds that the role of contingency factors impacting the positive relationship between technological diversification and financial performance needs further exploration. Also, it finds that the research on the links between technological diversification and inter‐organizational relationships requires consolidation. This paper suggests three avenues for further research. First, it sets out an agenda for identifying the antecedents of technological diversification. Second, it identifies contextual factors that could shape the relationship between technological diversification and performance. Third, it argues that technological diversification research must engage with contemporary technological and organizational developments such as digital organizations, open boundaries and networks.

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