Family Business Innovation: Doing Less; Doing it Better

by John Ward

A recent academic article[1] explored what’s known about innovation in family firms. My conclusion is: Family firms do it less and do it better.  (The article focused on technological innovation – not ownership or leadership or management innovation where one might find the more special family business particularities.)

Family firms innovate for diversification and long-term security.  They do less R&D and less globalization.  They do less because of an aversion to risk, because there may be family-owner conflicts of investments in innovation, and because they see fewer outside opportunities due to their more internal perspective.

On the other hand, family firms do what they do better and more successfully.  Family ownership provides stronger and more long-term oriented project leadership and more solid commitment of resources. There is also a more long-term patience for the benefits of innovation. And, because of inherent frugality, there is more productivity from innovation initiatives. Further, family firms assess innovation opportunities faster and with the perspective of the greater good — altruism – rather than local selfishness.

One particular capability of family firms is their managerial “ambidexterity.” All these advantages are stronger if ownership is more concentrated.

Much more research is called for in other forms of innovation – such as administrative and ownership innovation.

[1] “Research on Technological Innovation in Family Firms: Present Debates and Future Directions”, Alfredo De Massis, Federico Frattini and Ulrich Lichtenthaler, Family Business Reivew, March 2013


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