Family Influence and R&D Spending in Dutch Manufacturing SMEs: The Role of Identity and Socioemotional Decision Considerations

Abstract

Prior research has revealed a negative association between family influence and R&D spending. The dominant explanation for this association centers on the role of socioemotional considerations in decision-making. These socioemotional decision considerations are argued to play a more prominent role among family firms and to lower their R&D spending intensity. However, to date, this negative explanatory mechanism has not been empirically verified. Moreover, a deeper analysis of the literature suggests that some family-induced socioemotional considerations may actually stimulate R&D investments. In this study, four socioemotional decision considerations are delineated-namely, concern for current control, for extended preservation, for organizational reputation, and for organizational values and traditions-of which the first two are anchored in a family's nurturer role identity and the latter two in a family's organizational identification. It is hypothesized that those socioemotional considerations derived from a family's nurturer role identity constrain R&D spending, while those derived from the family's organizational identification boost R&D spending. The empirical study concentrates on the setting of privately held manufacturing SMEs, and using survey data on 365 such companies in the Netherlands, a structural equation model is estimated. The analyses reveal several interesting results: (1) the overall association between family firm status and R&D spending indeed turns out to be negative, and this negative effect is fully explained by family firms' preoccupation with extended preservation; (2) concerns for organizational reputation and for organizational values and traditions partly compensate the negative effect of the extended preservation mechanism. Key academic and practical implications of these findings are discussed. Practitioner PointsFamily-owned SMEs on average invest less in R&D than nonfamily SMEs.The greater concern of owning-families for the extended preservation of their firm largely explains these lower investments in R&D. On the other hand, family owners' greater concern for organizational reputation, as well as for organizational values and traditions provides some incentive towards an increase of R&D spending.Firm decision-makers and advisors, as well as policy makers, should thus be aware that family-induced socioemotional considerations represent a doubleedged sword in relation to R&D spending decisions.Rather than trying to suppress such socioemotional considerations without discrimination, from an R&D perspective some of these considerations should be carefully monitored whilst others can be nurtured and stimulated.

Innovation in Family Firms: A Systematic Literature Review and Guidance for Future Research

“…Among the 78 quantitative articles, a large majority use regression analyses, while a few rely on factor analyses (Craig and Moores ), principal component analyses (Llach and Nordquist ), econometric models (Wagner ) and structural equation modelling (Brinkerink and Bammens ; Filser et al . ; Kraus et al .…”

“…Two studies pursue the debate on SEW preservation considering it a mechanism mediating the relationship between family‐related dimensions and innovation. On the one hand, based on identity and social identity theory, SEW concerns and reputational issues mediate the relationship between family status and R&D spending (Brinkerink and Bammens ). On the other hand, the findings show that family functionality – referring to the functional integrity and stability of relationships among family members – is positively related to family identification, binding social ties, emotional attachment and intrafamily succession, which in turn have different effects on firm innovativeness (Filser et al .…”

Contingent use of rational, intuitive and political decision-making in R&D

“…The interests and feelings of a dominant person or group in the organization can also increase the importance of intuition and politics. Based on the results of their study of 365 family-owned firms, Brinkerink and Bammens (2018) argue that most firm-owning families decide to relatively underinvest in R&D because they emotionally feel it is in the family's best interest. Oh and Barker (2018) argue on the basis of data from manufacturing firms that top executives tend to make R&D decisions that correspond with the R&D decisions made by firms they are socially tied to, for example, as an outside board member.…”

“…Yet, for years research in this area was non-existent, and to date it still is relatively scarce. Two recent studies focused on the interplay between intuitive and political decision-making (Brinkerink and Bammens, 2018;Elbanna et al, 2015), three studies focused on the interlinkages between rational and intuitive decision-making (Calabretta et al, 2017;Kester et al, 2009;Skrepnek and Sarnowski, 2007), and two research project studied rational, intuitive and political decision-making in conjunction (Behrens, 2016;Stanczyk et al, 2015).One element that remains understudied, also in the above-mentioned research, is the dynamic aspect. Research has not addressed the question whether and how the use of these decision-making dimensions in innovation processes changes over time.…”

Owners and Ecological Corporate Entrepreneurship: The Effect of Family Ownership on Eco-innovation

“…This distinguishes familyowned firms from nonfamily firms in which, it is argued, financial considerations typically dominate and nonfinancial utility is of subordinate importance. Second, SEW scholars have started to delineate specific socioemotional dimensions and to map the correlates of these dimensions (Berrone, Cruz & Gomez-Mejia, 2012;Brinkerink & Bammens, 2017). Compared to earlier work, in which socioemotional wealth was treated as a monolithic construct, the delineation of SEW dimensions increases the predictive power of SEW-based models.…”