Academic journal article Entrepreneurship: Theory and Practice

The Impact of Family Involvement on Dynamic Innovation Capabilities: Evidence from German Manufacturing Firms

Academic journal article Entrepreneurship: Theory and Practice

The Impact of Family Involvement on Dynamic Innovation Capabilities: Evidence from German Manufacturing Firms

Article excerpt

Drawing on the capability-based view, we provide new theoretical arguments related to innovation capabilities rather than realized innovation output in firms with family involvement. We focus on technology-based product innovation capabilities and use data from a sample of 119 German manufacturing firms to show that family involvement is positively related to dynamic innovation capabilities. Specifically, the degree of family involvement, which describes the owner family's ability to influence firm behavior, is positively related to sensing innovation opportunities and to transforming a firm's innovation processes, while it is insignificantly related to seizing innovation opportunities. The findings suggest that dynamic innovation capabilities are an important characteristic that differs between firms with varying levels of family involvement.

Introduction

In recent years, the interest in family firms has grown substantially (Debicki, Matherne, Kellermanns, & Chrisman, 2009; Eddleston & Kellermanns, 2007; Kellermanns & Barnett, 2008; Schulze & Gedajlovic, 2010; Verbeke & Kano, 2010), and there are several excellent overviews of prior research (Chrisman, Chua, & Sharma, 2005; Chrisman, Kellermanns, Chan, & Liano, 2010; Sharma, 2004; Zahra & Sharma, 2004). Extant research has pointed to specific effects of family involvement, which has implications for the management of firms (Chua, Chrisman, & Sharma, 1999). Particular characteristics, such as a long-term orientation, illustrate that the activities of firms with family involvement differ from those of other firms (Le Breton-Miller & Miller, 2006). Thus, the specific characteristics of firms with family involvement may affect multiple organizational processes (Dyer & Whetten, 2006; Eddleston, Chrisman, Steier, & Chua, 2010; Gedajlovic & Carney, 2010; Kellermanns & Eddleston, 2006; Ling & Kellermanns, 2010; Miller, Le Breton-Miller, & Lester, 2010; Nelson, 1991; Peng & Jiang, 2010; Schulze, Lubatkin, & Dino, 2003; Sirmon, Arregle, Hitt, & Webb, 2008). Drawing on the different characteristics of family and nonfamily firms, some studies point to performance differences, whereas other studies do not find support for such differences (Demsetz & Villalonga, 2001; Jaskiewicz, Gonzalez, Menendez, & Schiereck, 2005; Sciascia & Mazzola, 2008).

These diverging findings may partly be explained by the situation that the involvement of a family primarily affects different activities and processes, which in turn impact firm performance (Chua et al., 1999; Miller & Le Breton-Miller, 2006). Thus, there may be some indirect effects of family involvement on firm performance through the organizational characteristics of family enterprises. In addition, recent work has underscored distinct characteristics among family businesses (Craig & Moores, 2006; Fiegener, 2010; Schulze & Gedajlovic, 2010; Zahra, 2005). Accordingly, a mere distinction of family and nonfamily firms may be insufficient for capturing the effects of family involvement on the activities, processes, and ultimately performance of companies (Sirmon et al., 2008). Rather than a binary distinction of family and nonfamily firms, it seems critical to consider the degree of family involvement based on a continuum of potential family involvement in order to capture the differences among family enterprises (Astrachan, Klein, & Smyrnios, 2002; Schulze & Gedajlovic).

One key characteristic of firms with family involvement is the typical long-term orientation. Because of the particular ownership structure, firms with family involvement tend to have longer planning and investment horizons than other firms (Le Breton-Miller & Miller, 2006). It may therefore be assumed that firms with substantial family involvement have stronger innovation capabilities than others because the positive effects of innovation usually need some time to materialize (Kellermanns, Eddleston, Barnett, & Pearson, 2008; Le Breton-Miller & Miller). …

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