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Innovation in Family Firms: the influence of Ownership and Management

From: 12 Jan 2022 - 12:00 To: 12 Jan 2022 - 13:00

Innovation in Family Firms: the influence of Ownership and Management

Spatial and Regional Economics Research Centre are pleased to invite you join our lunchtime speaker series

About the speaker

Niamh Lenihan is a lecturer in Economics at Munster Technological University, Cork. She is also a doctoral researcher in the Spatial and Regional Economics Research Centre, Cork University Business School. Niamh commenced her PhD in October 2020 and her doctoral research examines the innovative performance of family owned micro businesses across Ireland and the UK.

Overview of presentation

Innovation is essential for firms especially in today’s volatile and ever-changing economic environment, with globalisation and digitisation, a company’s abilities to innovate becomes critical for firm survival. Yet, surprisingly the knowledge of innovation in family firms continues to remain incomplete and inconsistent. Studies find mixed results on family firms’ innovation behaviour but its apparent that these firms have the ability to innovate but the willingness can vary. Scholars have been exploring how family involvement can enhance or hinder innovation behaviour. In response, this paper joins the conversation on how family firm ownership and management influences innovation performance.

Modelling the innovation value chain for family owned Irish and UK micro firms using the ERC Micro- business dataset (c. 7,754), we focus on how family firm’s ownership and management influences innovation success (sales from firms successfully bring new product and service to the market). Given the ambiguity surrounding family firm definition, we use two measurements of family ownership – family owned, and family owned generational succession firms. We also consider two types of management structures of family owned firms, i.e.  family managed, and professionally managed. Given family firm heterogeneity, we examined the direct and indirect effects of family ownership and management on innovation sales. 

Using the Tobit regression analysis, our results reveal that family owned generational succession firms are less innovative than nonfamily firms. Indirectly, family owned firm investing in innovation tends to have less of a return on innovation sales. Delving deeper into the firm, innovation behaviour can be influenced by the firms’ management structure. We find transgenerational firms that are family owned and family managed are less innovative than non-family firms. As anticipated, we find that family owned professional run firms have similar levels of innovation success as nonfamily firms, regardless of whether firms have undergone succession. We find professionally managed firms investing in innovation has a greater return on innovation sales. Therefore, this study prompts practitioners to become aware that different types of managers influence innovation. We also advocate, that given generational succession influenced innovation, from a policy perspective, continued support for transition is essential for family firms.