Born to rebel? The owner birth order and R&D investments in Chinese family firms

Abstract

Family background has a significant impact on family firms’ strategies such as innovation investments. Going beyond prior studies that exclusively focus on how family governance and management factors determine research and development (R&D) investment decisions, this study investigates a family science factor: family firm owner's birth order, defined as the relative rank of the owner in terms of the age hierarchy among siblings in the family. Joining the family niche model of birth order and socioemotional wealth perspective, we propose that later‐born family firm owners tend to be risk‐takers and invest more in R&D projects compared with their earlier‐born counterparts. We further examine how the two other powerful decision‐makers within family firms (i.e., chairperson of the board and CEO) enable or constrain the owner's birth order–R&D investment relationship. We contend that the positive birth order impact on R&D investment is weaker when a family member is the chairperson of the board, while such a relationship is stronger in the presence of owner–CEO duality. We confirm our hypotheses using a sample of 605 firm‐year observations from Chinese‐listed family firms between 2006 and 2014. This study demonstrates the important impact of family science factors on innovation heterogeneities, which is understudied in the family firm innovation literature.

Understanding the Impact of Mandatory CSR Disclosure on Green Innovation: Evidence from Chinese Listed Firms

“…Following previous studies, we screened the sample as follows: (1) we excluded financial firms and firms with overseas listed shares (i.e. B-share firms), since these two types of firms are subject to different market trading regulations (Chen et al, 2018); (2) we eliminated observations with special treatment (ST/*ST), since these observations are at risk of delisting due to losses in two or three consecutive fiscal years (Zhang et al, 2020); (3) we excluded observations with missing information for all variables used in the regressions; (4) we excluded voluntary CSR reporting firms ( 16333 Our sample starts in 2006 because this was the first year for listed firms to disclose detailed R&D expenditure in their annual reports, in accordance with new accounting standards (Li et al, 2021); R&D expenditure is an important control variable in our study. Our sample ends in 2015 because the Chinese legislative institution approved the Environmental Protection Tax Law in 2016, a very ambitious environmental policy, which greatly increased the cost of corporate environmental violations (Wu and Tal, 2018).…”

Does the famine experience of board chair hamper innovation?

“…Given the lack of compulsory rules for disclosing detailed personal information for executives of firms in China, we encountered challenges in collecting personal information for all chairmen (W. H. Li et al, 2021). Moreover, sample selection bias may exist due to the missing value of birth place information of the board chair.…”

“…Our first‐stage probit model predicted the presence of birth place information of the board chair. We selected one instrument (industry likelihood of having birthplace information) within the two‐digit industry, which was calculated by the proportion of firms in a focal industry that have disclosed board chair birthplace information (W. H. Li et al, 2021). This instrument was assumed to be significantly related to Presence of birthplace information but not to innovation performance.…”

A tale of two distractions: How institutional forces influence R&D‐based problemistic search in transition economies

“…Board chairs are typically the most powerful leaders of Chinese listed firms (X.‐H. Li & Liang, 2015; J. Zhang et al, 2016). Hence, their political backgrounds relative to their counterparts in comparable peer firms can properly represent firm decision makers' tendencies for politically‐oriented problem attribution.…”

“…The dependent variable of our study is R&D search, one of the most widely investigated forms of search in the BTOF literature (e.g., W. R. Chen, 2008;Greve, 2003;Rudy & Johnson, 2016;Xu et al, 2019). Consistent with previous research, we measured R&D search by firms' R&D intensity, calculated as the ratio of R&D expenses to total sales (e.g., W. Li et al, 2021;Lim & McCann, 2014;O'Brien & David, 2014).…”