From entropy to knowledge synergy

Research Paper Title:

“Radical innovation in (multi)family-owned firms”

Authors:

Francesco Chirino (Macquarie University)

Duane Ireland (Texas A&M University)

Daniel Pittino (Jonkoping University)

Valeriano Sanchez-Famoso (University of the Basque Country UPV/EHU)

Background:

While practical evidence (ranking by Forbes; historical ranking by the Boston Consulting Group), shows that some family firms invest largely to produce radical innovations, the literature generally suggests that family firms are a conservative form of organization with a greater focus on incremental innovation. Examining within-family firm heterogeneity is thus critical to efforts to advance this debate and challenge existing assumptions. The number of unrelated families owning a single business is a key dimension along which family firms vary. Building on a sample of Spanish firms, the authors theorize and find that family member's commitment to change mitigates the negative moderating effect of multifamily ownership by ensuring the effective translation of integrated knowledge into radical innovation within the firm. Overall, our results highlight the complexity of radical innovation in (multi)family-owned firms as a product of the joint effect of knowledge integration, the number of unrelated owning families, and a commitment to change.

Highlights:

• The number of unrelated owning families negatively moderates the relationship between knowledge integration and radical innovation.

• When commitment to change is high, the moderating role of the number of unrelated owning families becomes positive.

• In sum, our theory and results highlight the complexity of radical innovation in (multi)family-owned firms.

Methodology:

• Sample Description:

  • Nonlisted companies included in the Spanish database, the SABI (the Iberian Balance Sheet Analysis System).

• Sample Size:

  • 236 family firms

• Analytical Approach:

  • Regression analysis

Hypothesis:

1. An increased number of unrelated owning families in a business interacts with knowledge integration such that there is a negative effect on radical innovation in family firms. That is, the increasing number of owning families negatively moderates the relationship between knowledge integration and radical innovation

2. The three-way interaction among knowledge integration, the number of unrelated owning families, and commitment to change has a positive effect on radical innovation in family firms. That is when commitment to change is high, the number of unrelated owning families positively moderates the relationship between knowledge integration and radical innovation.

Results:

1. Multifamily ownership negatively moderates the relationship between knowledge integration and radical innovation

2. Commitment to change mitigates the negative moderating effect of multifamily ownership by ensuring the effective translation of integrated knowledge into radical innovation within the firm.

Conclusion:

Our results highlight the complexity of radical innovation in (multi)family-owned firms as a product of the joint effect of knowledge integration, the number of unrelated owning families, and a commitment to change.