The Impact of Family Involvement on the R&D Intensity of Publicly Traded Firms

Abstract

This study examines the impact of family involvement in ownership and control on firms’ R&D intensity, relying on panel data on publicly held firms in Canada over the 2004 to 2009 time period. The literature on the link between family firms and R&D is unclear: although some characteristics may promote R&D intensity in family firms, others factors may have a negative effect. Thus, the authors propose a theoretical framework whereby differences in R&D intensity between family and nonfamily firms are explained based on key conditions, including time horizon, agency costs, resource endowment, or risk-taking behavior. The findings of this study show that publicly traded family firms in Canada record lower R&D intensity compared with nonfamily firms and, therefore, support one side of the previous literature over the other.

Innovation activities during intra-family leadership succession in family firms: An empirical study from a socioemotional wealth perspective

“…These studies have reported contradictory results: Some studies report a positive relationship between family influence and innovation (Gudmundson et al, 2003;Hsu & Chang, 2011;Llach & Nordqvist, 2010) as well as entrepreneurial activities in general (Zahra, 2005;Zahra, Neubaum, & Huse, 2000). Other studies find a negative relationship between family influence and innovation (e.g., Block, 2012;Chen & Hsu, 2009;Chin, Chen, Kleinman, & Lee, 2009;Czarnitzki & Kraft, 2009;Munari, Oriani, & Sobrero, 2010;Muñ oz-Bulló n & Sanchez-Bueno, 2011). The conflicting results might partly be due to the oversimplified measurement of family influence by merely considering potential family influence through ownership and control.…”

CEO innovation orientation and R&D intensity in small and medium-sized firms: the moderating role of firm growth

“…Recent research on R&D intensity has mainly focused on large publicly traded companies (e.g., Chen and Miller 2007;Muñoz-Bullón and Sanchez-Bueno 2011). In Germany, small and medium-sized companies represent 99.7 % of all businesses, produce 38 % of taxable turnover, account for nearly 49 % of total net value added by companies, and provide approximately 60 percent of all jobs requiring social insurance contributions (German Federal Ministry of Economics and Technology 2013).…”

“…In this context, firm growth may have a moderating effect rather than a direct effect on the relationship between CEO innovation orientation, which describes a behavioral intention of a CEO to engage in innovative activities, and R&D intensity. Although small and medium-sized firms represent the majority of innovative behavior (European Commission 2013) and are critical for understanding entrepreneurship (Acs et al 1999;Schumpeter 1934), research on this topic is under-researched in the field of small business economics, as recent studies have focused mainly on large publicly traded companies (e.g., Chen and Miller 2007;Muñoz-Bullón and Sanchez-Bueno 2011).…”

Empirical research on Innovation in Family Business: literature review and proposal of an integrative framework

“…On one hand, FBs are usually long-term oriented, because their main aims are keeping heritage and transferring the firm to next generations (Muñoz-Bullón & Sánchez-Bueno, 2011). Long-term perspective encourages FB to engage in innovative investments, preventing an underinvestment problem with R&D (Chen & Hsu, 2009).…”

“…Family members may take assets out of the businesses they own, and are reluctant to turn great portions of financial slack into R&D investments (Kim, Kim, & Lee, 2008). That situation may cause, for instance, favoring high dividends over R&D investments (Muñoz-Bullón & Sánchez-Bueno, 2011). In this line, there is little doubt that family members might pursue their own private interests, and conflicts of interest between the family and the business may appear.…”