Combining Internal and External R&D: The Effects on Innovation Performance in Family and Nonfamily Firms

Abstract

We examine the effect of combining internal and external R&D loci on innovation performance in family firms (FF) and nonfamily firms (non-FFs). Our longitudinal analysis of 27,438 firm-year observations of Spanish manufacturing firms from 1990 to 2016 shows that FFs can better exploit the benefits of simultaneously engaging in internal and external R&D activities, leading to a positive effect on innovation performance. Moreover, the relationship between combined internal and external R&D and innovation performance in FFs is contingent upon firm economic performance. By pointing to the importance of taking into account the combination of internal and external R&D loci to foster innovation in FFs, we challenge current family business innovation research.

Family Firm Heterogeneity: A Definition, Common Themes, Scholarly Progress, and Directions Forward

“…However, Duran et al (2016) found that when the CEO is the founder, innovation input increases and innovation output decreases, yielding a less efficient input-to-output conversion ratio. Additionally, concerning innovation differences, family firms are effective at simultaneously exploiting internal and external R&D, yet innovation performance variation depends, in part, on the firm's economic performance (Muñoz-Bullón et al, 2020). These, and an array of other effects, such as long-term orientation, create notable variation in innovation outcomes (Werner et al, 2018).…”

Three decades of research on corporate governance and R&D investments: a systematic review and research agenda

“…In addition, as far as a decision to pursue an external R&D investment is determined by the antecedent decision to invest in R&D internally (Piga and Vivarelli, 2004), we also need to understand which type of CG mechanisms are conducive or detrimental to internal R&D investments. We also encourage future research to investigate how CG might affect the combination of internal and external R&D (Muñoz‐Bullon et al, 2019). Therefore, future CG‐R&D investment research could highly benefit from examination of the effects of firm‐ and country‐level CG on different types of R&D investments and their combination.…”

Collaborative innovation in the family SME: conceptualization, goals, and success factors

“…Social capital is defined by Bourdieu (1986: 248) as "the sum of real or potential resources linked to the possession of a lasting network of relations of knowledge and mutual recognition." It is considered a key element for strategic collaborations, increasing the probability of successful collaborations due to the trust and willingness to share resources among the partners (Hitt, Ireland, Camp, and Sexton, 2001;Nahapiet and Ghoshal, 1998;Siebert, Kraimer, and Liden, 2001). In this sense, Galán and Castro (2004: 108) pointed out that "confidence can lead to joint efforts and, for this reason, it is considered as an antecedent and an extraordinary lubricant of collaboration."…”

“…Innovation is fundamentally a collaborative effort between people who share ideas, perspectives, and values (Adler and Kwon, 2002). That is why social capital, understood as the set of values, norms, and attitudes that foster collaborative dynamics is a resource that favors the exchange of knowledge and information (Nahapiet and Ghoshal, 1998), as well as innovation processes (Sánchez-Famoso, Iturralde, and Maseda, 2015). The family business, given its peculiar characteristics linked to the family with solid business values and strong social ties (Hall, Melin, and Nordqvist, 2001), are companies with essential reserves of social capital in which interand intra-organizational relations have a strong influence on their behavior and dynamics (Sánchez-Famoso, Maseda, and Iturralde, 2017).…”

“…Collaborative innovation is defined as voluntary agreements among independent firms, who exchange and share capital, information, knowledge, and technology to achieve a common innovation goal (Feranita, Kotlar, and De Massis, 2017;Un, Cuervo-Cazurra, and Asakawa, 2010). It is a particularly interesting strategic option for small and medium-sized enterprises (SMEs) since it enables the development of new resources and capabilities to maintain and improve their competitiveness in the market (Muñoz-Bullón, Sanchez-Bueno, and De Massis, 2019). Besides, it allows to have resources that could not be obtained otherwise, or that would imply an excessive cost, and all this without having to give up the desire to be creative and innovative (Miles, Miles, and Snow, 2005).…”