Research on Technological Innovation in Family Firms: Present Debates and Future Directions

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1 466258FBRXXX / Family Business ReviewDe Massis et al. Research on Technological Innovation in Family Firms: Present Debates and Future Directions Family Business Review XX(X) 1 22 The Author(s) 2012 Reprints and permission: sagepub.com/journalspermissions.nav DOI: / Alfredo De Massis 1, Federico Frattini 2, and Ulrich Lichtenthaler 3 Abstract The purpose of this article is to review and systematize prior work on technological innovation in family firms and to open up an agenda to guide future research into this promising area. The study shows that family involvement has direct effects on innovation inputs (e.g., R&D expenditures), activities (e.g., leadership in new product development projects), and outputs (e.g., number of new products), as well as moderating effects on the relationships between these steps of technological innovation. The article uses theories applied in family business research (e.g., agency theory) to discuss opportunities for extending technological innovation frameworks by considering family involvement. Keywords innovation, technology, research & development, R&D, family firm, family business Introduction Family business research is moving forward and gaining momentum today (Sharma, Chrisman, & Gersick, 2012), and technological innovation in family firms has become a topic of increasing interest in management research in recent years (De Massis, Sharma, Chua, & Chrisman, 2012). According to the established processbased conceptualization (Tidd & Bessant, 2009), technological innovation can be defined as the set of activities through which a firm conceives, designs, manufactures, and introduces a new product, technology, system, or technique (Freeman, 1976). Research indicates that technologically innovative companies may outperform their competitors (Geroski, Machin, & Van Reenen, 1993). This explains why technological innovation has been the subject of extensive theoretical and empirical studies and is now widely acknowledged as an important determinant of sustained superior performance (Blundell, Griffiths, & Van Reenen, 1999). Besides the ubiquity of family businesses (e.g., La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 1999; Villalonga & Amit, 2009), technological innovation in family firms is a relevant and promising research area because there are strong theoretical reasons to believe that the antecedents and effects of technological innovation are different in family and. First, as different types of owners may differ with respect to investment horizons, risk aversion, diversification plans, and return aspirations (Thomsen & Pedersen, 2000), ownership structure is likely to affect the firm s technological innovation activities and technological innovation outcomes (Hoskisson, Hitt, Johnson, & Grossman, 2002; Kochhar & David, 1996). Family involvement in ownership may therefore affect technological innovation. For instance, firms owned by a controlling family may have a different rate of disruptive innovations as a consequence of their higher long-term orientation (Zellweger, 2007; Zellweger, Nason, & Nordqvist, 2012) 1 University of Bergamo, Bergamo, Italy 2 Politecnico di Milano, Milan, Italy 3 University of Mannheim, Mannheim, Germany Corresponding Author: Alfredo De Massis, University of Bergamo, Center for Young & Family Enterprise (CYFE), Viale G. Marconi 5, Dalmine, 24044, Italy. alfredo.demassis@unibg.it

2 2 Family Business Review XX(X) relative to. At the same time, family firm owners aspiration to protect their socioemotional wealth (Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007) may reduce their propensity toward collaborative innovation projects. Moreover, family involvement in ownership, management, and governance can result in the development of resources unique to the family firm (Habbershon & Williams, 1999). These distinctive resources can then be leveraged in ways that may influence technological innovation. For example, the unique characteristics of family firms social capital (Sirmon & Hitt, 2003) can affect their tendency to rely more on the contribution of external sources of knowledge during the innovation process. Furthermore, the distinctive incentives, authority structures, and legitimacy norms that characterize family firms (Gedajlovic & Carney, 2010; Gedajlovic, Lubatkin, & Schulze, 2004; Jensen & Meckling, 1976) have been shown to create particular advantages and barriers that may significantly affect technological innovation. Thus, family involvement is very likely to affect technological innovation, pointing to the importance of investigating innovation among family firms. The topic further is highly relevant from a practical point of view because there is a growing body of empirical evidence showing that family firms use technological innovation to nurture their competitive advantage and to overcome economic and financial downturns (e.g., Gudmundson, Hartman, & Tower, 1999). Innovative family firms have thus become an object of growing attention for management scholars and practitioners (Block, 2009; Hoy & Sharma, 2010; Miller & Le Breton-Miller, 2005). In response to the high theoretical and practical relevance of the topic, this article focuses on the intersection of technological innovation and family business. The goals of this article are to review and systematize the extant literature on technological innovation in family firms and to develop a future research agenda aimed at suggesting major research avenues to guide future theoretical and empirical research toward a better understanding of technological innovation in the context of family firms. Although work on technological innovation in family firms is still at a nascent stage of development, a structured analysis of the contributions published on the topic is beneficial to inform future theoretical and empirical research (Reuber, 2010) that is expected to grow rapidly in the near future (De Massis, Sharma, et al., 2012). The structure of the article is as follows. The next section briefly describes the method used to identify the existing contributions dealing with technological innovation in family firms. This is followed by a section that reviews the contributions to date. Next, we develop a detailed research agenda by drawing on technological innovation frameworks and some theories used in family business research. The final section concludes and discusses contributions of the study and implications for practice. Method To identify prior theoretical and empirical contributions dealing with technological innovation in family firms, we first needed to define technological innovation. According to Drucker (1985), innovation is the tool of entrepreneurs by which they exploit change as an opportunity. Prior work has defined innovation as the process through which firms identify new opportunities for change, turn them into reality, and capture value from them (Tidd & Bessant, 2009). Innovation can have as output either new ways of doing things or new products, services, or techniques (Porter, 1990). Whereas the former is called administrative innovation and is more related to the managerial aspects of the firm (e.g., organizational structures, administrative processed and human resources), the latter is labeled technological innovation (Crossan & Apaydin, 2010). This article focuses on technological innovation, defined as the set of activities through which a firm conceives, designs, manufactures, and introduces a new product, service, or technique (Freeman, 1976). In the technological innovation process, research & development (R&D) plays a crucial role. It comprises those activities, that is, basic and applied research and new product design and development, that serve to generate new technological knowledge and turn it into new products, services, and techniques, which are then manufactured, implemented, marketed, and distributed throughout the remaining phases of the technological innovation process (Chiesa, 2001). Starting from these definitional issues, we designed and pursued the following search procedure. Our search started from the family business literature. In particular, we considered the 215 articles in family business research annotated in De Massis, Sharma, et al. (2012), who provide an extensive bibliography of the most influential contributions in family business published in the period 1996 to These 215 articles across 33 journals were searched using the keywords innovation, innovative, R&D, and technology. On this

3 De Massis et al. 3 basis, we found 14 articles. Afterwards, each of these 14 articles was subject to an in-depth reading and discussion process to determine whether or not it dealt with technological innovation in family firms, and 10 articles were finally considered to be relevant in this regard. To minimize biases against relevant articles published more recently, we also searched the 2012 issues of the 33 journals considered in the annotated bibliography (as of March 2012). This additional search led us to include another four articles. Finally, to cover a wider time period and to include potential articles before 1996, we reviewed, using the keywords specified above, the 226 articles annotated in Sharma, Chrisman, and Chua (1996), a bibliography of family business research published in the period 1971 to However, no further article was found to meet our research criteria. Then we focused on the technological innovation literature. In particular, we considered the world s top 14 innovation management journals as identified in Thieme (2007). We removed from this list of journals Administrative Science Quarterly, Academy of Management Journal, and Academy of Management Review as they had already been considered in De Massis, Sharma, et al. (2012) and Sharma et al. (1996) when searching the family business literature. We systematically searched all the articles published in the remaining 11 journals over the same period covered in our analysis on family business literature (1971 to March 2012), using the keywords family business, family firm, family-owned, family enterprise. This procedure allowed us to identify 138 articles, which entered the same reading and discussion process that was described above to verify whether or not they deal with technological innovation in family firms. Only four articles emerged to be focused on technological innovation in family firms and were added to those selected for review. In sum, this procedure led to the identification of 18 articles on technological innovation and family firms that were thoroughly reviewed for this article. The articles were published in 14 different academic journals between 1997 and 2012, with a peak of interest in 2012 (four articles). This indicates the contemporary nature of research on technological innovation in family business and the substantially growing interest in the phenomenon. Moreover, we also identified two forthcoming peerreviewed journal articles (De Massis, Frattini, Pizzurno, & Cassia, 2013; Lichtenthaler & Muethel, 2012), bringing the total number of journal articles to 20. Finally, as technological innovation has been conceptualized as a dimension of entrepreneurship (Antoncic & Hisrich, 2001), and following the recommendation of an anonymous reviewer, we examined the studies reported in the literature reviews on entrepreneurship in family firms by McKelvie, McKenny, Lumpkin, and Short (in press) and Nordqvist and Melin (2010) to identify further contributions dealing with technological innovation. 1 This search yielded three further journal articles. In sum, our review of the literature on technological innovation in family firms included 23 peer-reviewed journal articles. We limited the review of the literature to influential articles published on established peer-reviewed journals as articles in academic journals can be regarded as validated knowledge and likely have a major impact on the field (Ordanini, Rubera, & DeFillippi, 2008; Podsakoff, MacKenzie, Bachrach, & Podsakoff, 2005). Established influential journals are acknowledged to shape the research in a field by setting new horizons for investigation within their frame of reference (Furrer, Thomas, & Goussevskaia, 2008). We therefore feel that this approach provides an accurate and representative picture of relevant scholarly research. An Overview of Prior Research In this section, we offer a discussion of the main theoretical and empirical findings on technological innovation in family firms emerging from our review of the literature. We outline these studies in Table 1. Methodological and Issues Our review highlights that 17 out of the 23 studies that were identified compare family versus and that most empirical analyses focus on publicly listed firms. The subject of analysis is generally medium to large publicly listed firms (e.g., Block, 2012; Chrisman & Patel, 2012; Muñoz-Bullón & Sanchez-Bueno, 2011), with the exceptions of Cassia, De Massis, and Pizzurno (2011); Classen, Van Gils, Bammens, and Carree (2012); Craig and Dibrell (2006); De Massis, Frattini, et al. (2013); Gudmundson, Tower, and Hartman (2003); Lichtenthaler and Muethel (2012); Pittino and Visintin (2009); and Sirmon, Arregle, Hitt, and Webb (2008), which examined small and medium enterprises (SMEs). To the best of our knowledge, the only study that purposefully focused on both small and large firms is the one by Cassia, De Massis, and Pizzurno (2012).

4 4 Family Business Review XX(X) Table 1. Selected Studies on Technological Innovation in Family Firms Study Type Key Findings Sample Description Comparative Study Bergfeld and Weber (2011) Block (2012) Cassia, De Massis, and Pizzurno (2011) Cassia, De Massis, and Pizzurno (2012) Chen and Hsu (2009) Chin et al. (2009) Chrisman and Patel (2012) Classen et al. (2012) Craig and Dibrell (2006) Craig and Moores (2006) (qualitative (qualitative (qualitative Successful dynastic families strive to secure their long-term wealth by applying radical and progressive innovation as mechanisms to diversify the orientation and assure the future-proofness of their firms. Family ownership is negatively associated with the level of R&D, and consequently innovation, intensity, and productivity. Family firms with shared family values, a high desire to raise the family name and reputation, high level of communication among family members, and low agency costs are likely to experience more successful NPD processes. Family involvement is proposed to affect the characteristics of the NPD process. For instance, family involvement is positively associated with NPD longterm thrust, the presence of a strong project leader in NPD projects, and the presence of adequate resources for NPD projects. Family ownership discourages R&D investments and this is likely to hinder the advancement of corporate innovation. Moreover, firms with high family ownership may increase R&D investment when the CEO chair roles are separated or when more independent outsiders are included in the board. The tight control characterizing the corporate ownership structure of family firms reduces the innovativeness of the firms in the sample, measured through (a) the quantity of patents received and (b) the quality, as measured by patent citations received and given, and patent claims. Family firms generally invest less in R&D due to the attempts of owners and managers to avoid perceived threats to their socioemotional wealth. Family firms have a lower search breadth, defined as the number of different external sources or partner types that firms rely on to acquire resources for their innovative activities. The educational attainment of a CEO and the proportion of external managers in the TMT are positively related to the search breadth of family firms. Family firms are able to more effectively utilize their natural environmental policy into strong competitive capabilities that resulted in strong relationships to firm innovation and to firm performance. The linkages between established family firms and innovation appear to be substantially stronger than currently assumed by many. In particular, family firms place substantial emphasis on innovation practices and strategies and manage and adjust to innovative strategy. 10 German dynastic family firms 154 S&P 500 companies belonging to R&D-intensive industries 4 Italian SMEs belonging to different industries 10 Italian firms belonging to different industries 369 Taiwaneselisted firms in the electronic industry 317 Taiwaneselisted firms in the electronic industry 964 manufacturing public-held firms included in the S&P 1500 index 167 manufacturing SMEs located in Belgium and the Netherlands 391 U.S. SMEs in several different industry categories. 268 Australian companies (first wave) and 67 Australian companies (second wave). Only family firms Only family firms Only family firms (continued)

5 De Massis et al. 5 Table 1. (continued) Study Type Key Findings Sample Description Comparative Study Czarnitzki and Kraft (2009) De Massis, Frattini, et al. (2013) Gudmundson et al. (2003) Hsu and Chang (2011) Lichtenthaler and Muethel (2012) Llach and Nordqvist (2010) McCann et al. (2001) Munari et al. (2010) Munoz-Bullon and Sanchez- Bueno (2011) Pittino and Visintin (2009) Sirmon et al. (2008) Wagner (2010) Westhead (1997) (qualitative Firms where the capital shares are broadly distributed are more innovative (i.e., file more patents) than other companies, like family firms. Family firms differ from nonfamily ones as regards product innovation strategies and organization of the product innovation process. Small family businesses implement more innovations than nonfamily businesses. Family ownership is significantly related to the use of behavioral strategic controls that, in turn, have a significantly positive effect on family firm innovation. Family involvement is positively related to selected dynamic innovation capabilities, such as sensing innovation opportunities and transforming a firm s innovation processes. There are differences between family and with regard to the role of human, social, and marketing capital for innovation. In particular, family firms have a potential advantage in the resource pools that positively affect their innovative behavior. Family firms attach an important role to innovation in their competitive market position and performance. The identity of large shareholders affects firms R&D investments. Family ownership is negatively associated with R&D investment due to the limited risk propensity of this type of controlling shareholders. Publicly traded family firms in Canada record lower R&D intensity compared with and are therefore less innovative. Product, process, and business model innovation strategies and their importance to the firm s competitive advantage are influenced by specific characteristics of family SMEs. A typology of family SMEs innovation strategies is identified and validated by applying the Mile and Snow s configurational model. Family-influenced firms are less rigid in their responses to threats of imitations, reducing their R&D investments and internationalization significantly less than firms without family influence. Being a family firm positively moderates the relationship between corporate social performance and innovation with high social benefits. Family businesses offer a wider range of new products and services in the search for superior competitive advantage in comparison with nonfamily companies. 279 German jointstock companies 10 small-sized Italian firms belonging to different industries 4,262 individual responses from 89 U.S. SMEs 124 individual responses from 76 Taiwanese-listed firms 119 German manufacturing SMEs 151 Spanish manufacturing firms 271 U.S. family firms from the Washington state 1,000 publicly traded firms from France, Germany, Italy, Norway, Sweden, and the United Kingdom 736 Canadian publicly listed firms 141 small- and medium-sized Italian family firms 2,531 French SMEs in manufacturing industries 252 U.S. firms in the S&P 500 index (panel data set with 1,759 observations) 427 U.K. independent unquoted companies Only family firms Only family firms Only family firms Note. SME = small and medium enterprises; NPD = new product development; TMT = top management team.

6 6 Family Business Review XX(X) Firms in the articles in our sample are generally in the manufacturing industry (e.g., Chrisman & Patel, 2012; Classen et al., 2012) as opposed to services or utilities, and some of the studies included multiple industries within their sampling frame (e.g., Gudmundson et al., 2003). Some of the multi-industry studies did not account for any industry peculiarities, which may lead to differences in technological innovation. There are some exceptions, such as the study by Czarnitzki and Kraft (2009) that deliberately acknowledge that the opportunities for technological innovation may differ among industries and employ 12 industry dummies in their regression model to capture this industry effect. The studied firms are geographically distributed across several countries: Australia (e.g., Craig & Moores, 2006), Belgium and the Netherlands (Classen et al., 2012), Canada (e.g., Muñoz-Bullón & Sanchez- Bueno, 2011), France (Sirmon et al., 2008), Italy (e.g., De Massis, Frattini, et al., 2013), Spain (e.g., Llach & Nordqvist, 2010), Taiwan (e.g., Chen & Hsu, 2009), the United States (e.g., Block, 2012; Craig & Dibrell, 2006; McCann, Leon Guerrero, & Haley, 2001), and Western Europe (e.g., Munari, Oriani, & Sobrero, 2010). This is perhaps not surprising given the fact that family firms are crucially important parts of many economies around the world (La Porta et al., 1999; Villalonga & Amit, 2009). However, there are a number of important regions where research in technological innovation in family business is underrepresented in the journal literature, including Eastern Europe, Africa, Latin America, and Asia despite these regions importance to understanding family business phenomena (Nordqvist & Melin, 2010). All the 23 studies are empirical, and they adopt an operational definition of family firms that is most frequently based on family involvement in ownership and management. However, there are also some studies combining family involvement with the essence approach (Chua, Chrisman, & Sharma, 1999), such as Classen et al. (2012), which use CEO s perception as a family firm and the involvement of multiple relatives in the firm as further definitional criteria. In one study (Llach & Nordqvist, 2010) the only criterion to distinguish family from has been the selfperception of the firm itself to be a family firm. Chrisman and Patel (2012) employ both a binary measure of family firms (based on ownership and family involvement in governance and management) and a continuous measure of family involvement based on the percentage of ownership held by the family. Sirmon et al. (2008) focus on family-influenced firms, defined as firms where a family member is the CEO while the family owns at least 5% of the firm. Moreover, they examine other levels of ownership and employ a continuous measure of family influence in robustness checks of the results. Regarding methodological issues, the reviewed studies are mainly based on quantitative methods, with the exception of four qualitative studies (Bergfeld & Weber, 2011; Cassia et al., 2011, 2012; De Massis, Frattini, et al., 2013) that adopted a multiple case studies approach. Of the 19 quantitative studies, 6 studies used primary data sources collected through surveys (Classen et al., 2012; Craig & Dibrell, 2006; Craig & Moores, 2006; Gudmundson et al., 2003; Hsu & Chang, 2011; Lichtenthaler & Muethel, 2012; Westhead, 1997), whereas the remaining studies were based on secondary data sources (e.g., Block, 2012). In the surveys, the response rate ranged between 8.9% and 81%. The sample sizes ranged between 76 and 2,531 firms. The majority of studies used cross-sectional data, with only seven studies employing panel data or longitudinal design (Chen & Hsu, 2009; Chin, Chen, Kleinman, & Lee, 2009; Chrisman & Patel, 2012; Craig & Moores, 2006; Czarnitzki & Kraft, 2009; Muñoz-Bullón & Sanchez-Bueno, 2011; Wagner, 2010). This review highlights, therefore, a relative lack of conceptual and qualitative studies on technological innovation in family firms. Topics Reported An analysis of the 23 studies on technological innovation in family firms that emerged from our review of the literature leads to the identification of several recurrent topics. In Figure 1, we propose a framework, inspired by the work of Lumpkin, Steier, and Wright (2011), to organize extant research on technological innovation in family firms. The framework identifies three major steps of technological innovation, that is, innovation inputs, innovation activities, and innovation outputs, as well as the relationships linking these three steps. Studies on direct effects of family involvement on technological innovation inputs. A first recurrent topic in the literature on technological innovation in family firms is the impact of family involvement on the level of a firm s R&D expenditures. The findings from these studies are largely consistent, and they point to a negative relationship between family involvement and investments in R&D. For instance, Block (2012) uses an agency theory

7 De Massis et al. 7 Figure 1. Framework for organizing selected research on technological innovation in family firms Note. The number of items displayed is 25 because two studies Block (2012) and Craig and Dibrell (2008) are displayed twice since they investigate the direct effect of family involvement on two different steps of technological innovation. perspective and a panel dataset of large and public U.S. firms in research-intensive industries and finds that family ownership is negatively associated with the level of R&D intensity. Family-owned firms often suffer from inner family conflicts, which create new agency costs associated with R&D spending that lead to lower levels of R&D intensity in these firms relative to others. In a similar vein, Chen and Hsu (2009) use a sample of 369 Taiwanese firms in the electronic industry and find that family involvement in ownership is negatively correlated with the level of R&D investments. These findings may point to the fact that family ownership discourages uncertain and long-term R&D investments but also that family-owned firms have a higher R&D productivity and therefore need less R&D in relation to firms with no family ownership. Munari et al. (2010) find, in a sample of 1,000 public traded firms from France, Norway, Sweden, Germany, Italy, Sweden, and the United Kingdom, that family ownership is negatively associated with R&D investments, due to the limited risk propensity of their controlling shareholders. Muñoz-Bullón and Sanchez-Bueno (2011) show that publicly traded firms in Canada have lower R&D intensities than. A novel contribution to this debate is offered by Chrisman and Patel (2012), who use a sample of 964 manufacturing public-held firms in the S&P 1500 index and integrate the behavioral agency theory with the myopic loss aversion framework to explain variations in the R&D investments of family firms. They find that family firms usually invest less in R&D than and the variability of their investments is higher, especially when performance is below aspiration levels. Otherwise, with performance above aspiration levels, the R&D investments of family firms will tend to increase and their variability decreases, in comparison with nonfamily firms. Another major contribution on the relationship between family involvement and R&D investments

8 8 Family Business Review XX(X) is the study by Sirmon et al. (2008), who use a sample of 2,531 French SMEs to investigate the role of family influence in responding to threats of imitation. They find that family-influenced firms reduce their R&D investments significantly less than firms with no family influence when confronted with threats of imitation. Studies on direct effects of family involvement on technological innovation outputs. A second recurrent topic is whether family involvement has an influence on the innovation outcomes of family firms. Chin et al. (2009) show that the tight control characterizing the ownership structure of family firms inhibits their innovativeness. By using a sample of Taiwanese companies in the electronic industry, the authors find that family involvement is negatively associated with the quantity and the quality of the patents received. Similarly, Czarnitzki and Kraft (2009) use a sample of German manufacturing firms and show that companies with broadly distributed capital shares are more innovative, that is, file more patents, than companies with other capital structures, such as family firms. Using questionnaire data from 4,262 individuals in 89 small businesses, Gudmundson et al. (2003) find that family ownership is positively associated with the ability to introduce new products and services. Moreover, Llach and Nordqvist (2010), using data from 151 Spanish manufacturing firms, find that family firms are more innovative than as a result of the characteristics of their human, social, and marketing capital. In this regard, Westhead (1997) studies 427 U.K. unquoted companies and finds that family firms are able to offer a broader range of product and service innovations, in comparison with, in their search for superior competitive advantage. Finally, Craig and Dibrell (2006) examine a sample of Australian companies and find that family firms, due to their more flexible structures and decision-making processes, are more successful in turning natural environmental policies into product and process innovations. There is also one study where no significant relationship is found between family involvement and innovation output. In particular, Block (2012) suggests that family involvement in ownership and management has no impact on the productivity of R&D. Finally, there are three studies that focus on particular outputs of the technological innovation process, that is, innovations with high social benefits (Wagner, 2010), impact of different types of technological innovations (e.g., product and process) on the firm s competitive advantage (Pittino & Visintin, 2009), and radical and progressive innovations as mechanisms to diversify the firm s strategic orientation and ensure its future-proofness (Bergfeld & Weber, 2011). Studies on direct effects of family involvement on technological innovation activities. Besides these two recurrent research topics, research into other areas associated with technological innovation in family firms is much more recent and dispersed. In this regard, a limited number of articles have addressed the direct effect of family involvement on technological innovation activities, in terms of processes and capabilities (rather than R&D expenditures and innovation outcomes). For instance, Cassia et al. (2012) compare 10 Italian family and, and they find that family involvement affects the characteristics of the new product development process in such a way that family involvement is positively associated with long-term thrust in new product development, the presence of a strong project leader in new product development projects, and the availability of adequate resources for new product development activities. Furthermore, Hsu and Chang (2011), using 124 individual responses from 76 Taiwanese firms, show that family ownership is positively associated with using strategic behavioral controls, which in turn has an important effect on how technological innovation activities are carried out. Classen et al. (2012) use survey data from 167 Belgian and Dutch SMEs to show that family firms have a lower search breadth, defined as the number of different external sources or partner types that firms rely on to acquire resources for their innovative activities. De Massis, Frattini, et al. (2013) use a rich body of empirical evidence collected through a multiple case study of 10 small-sized Italian firms to show that family firms differ from nonfamily ones under several aspects of the product innovation process. Moreover, Craig and Dibrell (2006) suggest that family involvement leads to more flexible structures and decisionmaking processes. Studies on moderating effects of family involvement on the relationships between technological innovation activities and outputs. Research is also dispersed with regard to the role of innovation activities for superior innovation outputs in family firms. For instance, Craig and Moores (2006), by using a large scale sample of Australian family companies, find that family firms information acquisition, both with regard to breadth of information and speed at which information is obtained, is positively

9 De Massis et al. 9 related to innovativeness. Cassia et al. (2011) present a case study on four Italian family SMEs and find that family firms with shared family values, a strong desire to raise the family name and reputation, a high level of communication among family members, and low agency costs are more likely to be more successful in new product development. In addition, the study of McCann et al. (2001) uses self-reported answers from 271 U.S. family firms, and it shows that family firms attach an important role to product and process innovation in their competitive strategy. However, the study does not test whether this perceptual measure of the importance of technological innovation turns into superior level of R&D investments or innovation outputs. Finally, Lichtenthaler and Muethel (2012), in their study of 119 German manufacturing firms, find that family involvement is positively related to selected dynamic innovation capabilities that are likely to affect innovation outputs. Integrative overview. Based on the organizing framework displayed in Figure 1, our review of the literature has shown that existing research on technological innovation in family firms has primarily focused on the direct effects of family involvement on innovation inputs (e.g., R&D expenditures) and innovation outputs (e.g., number of new products and services). There is largely agreement regarding the fact that family involvement is negatively associated with the level of R&D expenditures because it reduces the firm s risk propensity, and due to the potential inner family conflicts that characterize many family-owned firms, it increases the agency costs associated with R&D spending. There are also several contributions on the impact of family involvement on innovation outputs, but collectively their findings appear to be still mixed. Although some scholars point to a positive association between family involvement and innovation outcomes, others rather document a negative relationship. In contrast, less emphasis has been given on how family involvement affects innovation activities. Indeed, only recently there have been some contributions on this topic, and how family firms carry out technological innovation is still to be uncovered. Developing a better understanding of this topic would be of primary importance for both academic research and management practice. In addition, prior research is almost silent regarding the indirect, moderating effects of family involvement on (a) the relationship between innovation inputs and innovation activities and (b) the relationship between innovation activities and innovation outputs. Studying what resources (e.g., technological, relational, financial) act as primary antecedents of superior capabilities in technological innovation in family firms, in comparison with, would be of particular interest for practice and academic research, as well as understanding what technological innovation practices and capabilities are precursors of superior innovation outputs. Future Research Agenda As the review of prior research has shown, major research gaps exist at the interface between technological innovation and family business. These research deficits raise important opportunities for future research. In this section, we examine these gaps with the aim to identify particularly interesting avenues for future research by mapping the research deficits onto the framework of research on technological innovation in family firms developed in the previous section (Figure 2). First, we focus on the research gap regarding the impact of family involvement on innovation outputs and we provide some suggestions that may guide future research to reconcile existing findings. Subsequently, we focus on the research gaps concerning the parts of our framework that have received insufficient attention in prior research (i.e., the direct effects of family involvement on innovation activities and the moderating effects of family involvement on the relationship between innovation inputs and activities as well as on the relationship between innovation activities and outputs). At this point, we identify some well-established frameworks in technological innovation that are at the center of current debates in the research arena, and we provide new conceptual arguments that challenge these well-established frameworks in technological innovation and identify several research questions representing opportunities for future research at the intersection of technological innovation and family business. This research agenda, which is summarized in Table 2, is not comprehensive, but it focuses on some highly interesting research questions that in our opinion deserve specific attention in the near future. Toward a Reconciliation of the Impact of Family Involvement on Innovation Outputs Our review of the literature has shown that past research has largely focused on whether or not family firms are

10 10 Family Business Review XX(X) Figure 2. Research gaps at the interface between technological innovation and family firms Note. The number of items displayed is 25 because two studies Block (2012) and Craig and Dibrell (2008) are displayed twice since they investigate the direct effect of family involvement on two different steps of technological innovation. more innovative than their nonfamily counterparts. However, taken together, prior studies have reported mixed results. Research Gap 1: Are family firms more or less innovative than? To address this research gap, we develop four suggestions that can guide future research to provide an integrative understanding of the relationship between family involvement and technological innovation outputs. First, we suggest adopting a more contextualized approach that is able to recognize the sources and contextual elements of heterogeneity of family firms. In recent years, family business researchers have increasingly moved from viewing family firms as homogeneous entities to viewing them as heterogeneous (e.g., García-Álvarez & López-Sintas, 2001; Sharma & Nordqvist, 2008; Westhead & Howorth, 2007). As observed by various researchers (e.g., De Massis, 2012; Sacristán-Navarro, Gómez-Ansón, & Cabeza-García, 2011), the effect of family involvement on family business behavior is likely to be influenced by a variety of mediating and moderating factors. Theoretically, recognizing the sources and contextual factors of heterogeneity is important because comparisons of family and that do not take heterogeneity into account could lead to conceptual inadequacies and empirical indeterminacies (Chrisman & Patel, 2012; De Massis, Kotlar, Chua, & Chrisman, forthcoming). Scholars are therefore encouraged to set

11 De Massis et al. 11 Table 2. Selected Opportunities for Future Research on Technological Innovation in Family Firms Type of Effects of Family Involvement on Technological Innovation Technological Innovation Framework Research Gaps (RG) Potential Theoretical Foundations Direct effects on technological innovation outputs Direct effects on technological innovation activities Moderating effects on the relationship between innovation inputs and innovation activities Moderating effects on the relationship between innovation activities and innovation outputs NA Open innovation Ambidexterity Absorptive capacity Critical success factors for product innovation Disruptive innovation RG1: Are family firms more or less innovative than? (methodological suggestions to guide future research to reconcile existing findings) RG2: How does socioemotional wealth influence family firms propensity toward collaborative innovation projects? RG3: To what extent do the characteristics of family firms external social capital increase the propensity toward relying on external knowledge during technological innovation? RG4: To what extent does the coexistence of family firms propensity for parsimony and family managers propensity to behave as stewards favors the development of ambidexterity in family firms? RG5: How does family firms ability to orchestrate resources over time influence their levels of exploration and exploitation in the innovation process? RG6: To what extent does family firms propensity for personalism weaken the positive relationship between R&D investments and absorptive capacity? RG7: How and to what extent does the relationship between innovation inputs and absorptive capacity vary as a function of the typically smaller and more cohesive decision-making processes of family firms? RG8: How do the distinctive incentives, authority structures, and norms of accountability that characterize family governance create unique efficiency (dis)advantages in the management and organization of technological innovation? RG8a: To what extent do parsimony and personalism influence the degree of formalization and systematization of the innovation process? RG8b: To what extent does particularism influence the (non)adoption of rational-calculative decision criteria to incentivize the attainment of technological innovation projects goals? RG9 To what extent does the long-term orientation characterizing family firms human capital increase their propensity to respond to disruptive innovations? RG10: To what extent do family firms disadvantages in accessing financial resources, such as debt or outside equity financing, limit their responsiveness toward potentially disruptive opportunities? RG11: How does socioemotional wealth influence family firms propensity toward creating and commercializing disruptive innovations that may require ceding shares to outside parties, such as venture capitalists or institutional investors? RG12: How does family firms propensity for parsimony hinder their inclination to experiment with costly and radically new technological opportunities? NA Behavioral theory Resource-based view Agency theory and Stewardship theory Resource orchestration Agency theory Resource-based view Agency theory Resource-based view Dynamic capabilities Behavioral theory Agency theory

12 12 Family Business Review XX(X) up future research that takes into account the contextual factors of heterogeneity, thus enabling a better understanding of how differences in family firms characteristics (e.g., size, generation, degrees of family involvement in ownership, management, and governance) affect their propensity toward technological innovation and, more generally, their behavior in technological innovation. For instance, technological innovation outputs are likely to differ on the basis of firm size. In small family firms close kinship relationships and a lack of resources may have a strong influence on the ability of the firm to introduce new products and services. Moreover, the consequences of innovative behavior are likely to differ from a publicly traded firm. As such, the potential differences between small and private versus large and public family firms may provide major challenges to our ability to generate cumulative knowledge in this area. Efforts to clearly lay out the differences in family firms characteristics and how this may impact their innovative behavior would be helpful to categorize our research findings. The region of the studied firms may be another source of heterogeneity. Our review of prior literature showed that many studies on technological innovation were carried out in the United States and Western Europe, whereas many other regions (e.g., Eastern Europe, Latin America, Africa, Asia) received limited attention in the literature. There may be heterogeneity across countries in terms of type and frequency of technological innovation outputs. Important differences across natural cultures, for example, social collectivism versus individualism (Earley, 1989) and uncertainty avoidance (Hofstede, 2001) may inform institutional perspectives on how the effect of family involvement on technological innovation outputs may vary in family firms from different regions worldwide. Second, for exploring variations of technological innovation outputs across different family business forms, scholars may rely on family business types (e.g., Gersick, Davis, Hampton, & Lansberg, 1997; Westhead & Howorth, 2007) or continuous scales capturing family influence across multiple dimensions, such as ownership, management, and generational involvement (e.g., the F-PEC scale by Klein, Astrachan, & Smyrnios, 2005). This approach may also help to reconcile previous inconsistencies in the empirical literature grounded in the use of different operational definitions of family firms. In many previous studies, the definition of family firms was based on ownership and management criteria although many variations were found. In the future, it would be desirable to employ a more consistent definition by using also the essence approach (e.g., Chua et al., 1999; Churchill & Hatten, 1997) that adds intentions, goals, and influence to family involvement. Another interesting alternative would be looking at whether the propensity toward technological innovation is different when the definition of a family firm is based on all four criteria (ownership, management, intrafamily succession intention, self-identification) or on one, or two, or three of them. It may be interesting to develop a framework for integrating various earlier approaches by distinguishing different levels and types of family involvement and essence. Finally, concerning methodology, previous studies are all empirical and mainly quantitative. In the future, qualitative studies would be a useful complement to deepen our understanding of the numerous and complex contextual factors that could affect the propensity for technological innovation (Eisenhardt, 1989; Yin, 2003). Specifically, multiple case studies that are particularly suited to answering how and why questions (Eisenhardt, 1989) will be needed. They will make possible an in-depth investigation of the phenomenon (Yin, 2003) and the identification of similarities and differences with a cross-case comparison. Direct Effects of Family Involvement on Technological Innovation Activities Family involvement may directly influence the way in which innovation activities are conducted. Specifically, it may potentially affect open innovation and ambidexterity, among other factors. First, regarding open innovation, innovation management research shows that firms have increasingly pursued collaborative innovation processes, whereby they systematically access and use knowledge available outside their boundaries and exploit their technologies through external paths to market (Chesbrough, 2003). As a result, a wealth of theoretical and empirical research has been conducted to investigate the advantages, disadvantages, and the factors affecting firms willingness and ability to engage in collaborative innovation (Chesbrough, 2003; Dahlander & Gann, 2010). However, no serious efforts have been done to consider whether and how family involvement could affect a firm s willingness to engage in such activities along the innovation process.

13 De Massis et al. 13 Behavioral theory (Cyert & March, 1963) has been used as the basis for proposing that family firms, if compared with, are more willing to create and preserve socioemotional wealth for the family (Gómez-Mejía et al., 2007). Evidence indicates that in pursuit of socioemotional wealth family firms develop strong concerns about potential control losses (Gómez- Mejía et al., 2007). Such concerns may complicate collaborative relationships with external partners when open innovation implies a restriction to the firm s control over the product s technological trajectory (Almirall & Casadesus-Masanell, 2010). On the other hand, if we adopt a resource-based view (RBV) perspective (e.g., Habbershon & Williams, 1999), it could also be argued that the superior ability to nurture and develop prosperous, long-standing relationships with the stakeholders (Miller & Le Breton-Miller, 2005; Gómez-Mejía, Nunez- Nickel, & Gutierrez, 2001) and the greater inclination to raise visibility and family reputation with outside interested parties (Dunn, 1996), which are unique characteristics of their external social capital, may enhance family firms willingness and ability to conduct open innovation activities in close interaction with external partners. Thus, the propensity to acquire and commercialize knowledge outside the firm s boundaries may well vary between family and nonfamily companies (Van De Vrande, Vanhaverbeke, & Duysters, 2009). Understanding whether and how willingness to collaborate in technological innovation differs between family firms and their nonfamily counterparts is therefore an interesting avenue for future research. Research Gap 2: How does socioemotional wealth influence family firms propensity toward collaborative innovation projects? Research Gap 3: To what extent do the characteristics of family firms external social capital increase the propensity toward relying on external knowledge during technological innovation? Second, regarding ambidexterity, it can be argued that family involvement affects the extent to which a firm is able to combine and balance heterogeneous goals and tasks, for example, efficiency and adaptability, exploration, and exploitation. This firm-level capability has been called organizational ambidexterity (Gedajlovic, Cao, & Zhang, 2012). Existing research suggests that family involvement in ownership, governance, and management may potentially affect the firm s ability to realize such an ambidextrous organization. For example, under an agency theory perspective (e.g., Jensen & Meckling, 1976), the family governance archetype is acknowledged to generate an organizational propensity for parsimony (Carney, 2005), meaning that the use of family wealth ensures that resources will be employed efficiently (Durand & Vargas, 2003; Gedajlovic et al., 2004). Furthermore, family managers often act as stewards (Miller, Le Breton-Miller, & Scholnick, 2008), perceive the firm as an extension of themselves (Carney, 2005), and see the exploration of opportunities as important means for corporate and personal growth. Consistently, a recent study by Gedajlovic et al. (2012) shows that the overlap of ownership and management, which is a common characteristic among family firms (Carney & Gedajlovic, 2002), is positively associated with ambidexterity. In a similar vein, under a resource orchestration perspective (Sirmon, Hitt, & Ireland, 2007), the distinctive ability of family firms to dynamically orchestrate resources in response to changing conditions (Chirico, Sirmon, Sciascia, & Mazzola, 2011) may influence processes of exploration and exploitation of innovation opportunities (Sharma & Salvato, 2011), and whether one might have priority over the other. Additional research is necessary however to better understand how family involvement influences a firm s ability to achieve such firm-level capability. Research Gap 4: To what extent does the coexistence of family firms propensity for parsimony and family managers propensity to behave as stewards favor the development of ambidexterity in family firms? Research Gap 5: How does family firms ability to orchestrate resources over time influence their levels of exploration and exploitation in the innovation process? Moderating Effects of Family Involvement on the Relationships Between Innovation Inputs and Activities Family involvement may have an important role in the relationship between innovation input and activities. Specifically, prior research into the characteristics of family business suggests that family involvement may