Family Firm Radical Innovation: The Role of the Owner’s Fearful Emotion on Maintaining SEW Endowment and Family Firm Resources

Abstract

Family firms are found to behave in a risk-averse manner, and they normally pursue fewer innovation activities than their non-family counterparts. The reasons are commonly attributed to family owners’ intentions to preserve SEW. However, there are two deficiencies with this perspective. The first is that whether family owners’ apparent intention to preserve SEW matters depends on which dimensions of SEW are given importance by the family owners. Only in those firms where the fear of loss of particular dimensions of SEW is given importance should we expect implications for innovation behaviour. Second, even in the face of positive intentions to innovate given a desire to prevent the loss of SEW, the firm’s ability and willingness to innovate is likely to be impacted by the resource stocks of the family firm. Both of these explanations have received very little investigation. Accordingly, and based on these two positions, the present study generates two investigations to observe family firm innovation by relying on an empirical sample of 412 completed surveys from family firms in the manufacturing industry in Chongqing, China. The first study investigates the relationship between family owners’ fearful emotion placed on improper future maintenance of specific SEW dimensions and family firm innovativeness based on the negative emotion and problem-solving theory. On the assumption that family owners fearful of losing particular dimensions lead owners to make strategic decisions on supporting innovation activities, the authors found that fear of losing family patient capital and fear of losing renewal of family bonds are negatively and positively related to firm innovativeness, respectively. The findings of the first study extend the existing family firm innovation literature by showing that firm innovativeness can be changed when SEW is in a ‘safe mode’. The finding of the first study enriches our understanding by highlighting that family owners’ fearful emotion is important to influence firm innovative activities.
The second study investigates the relationship between family firm resources and family owners’ willingness to pursue radical innovation based on the attention-based view. On the assumption that firm and family resources bear attention-guiding and behaviour-directing properties, the study finds that family idiosyncratic resources (family patient capital, family human capital and family social capital) have a major impact on family owners’ willingness to pursue radical innovation while marketing resources (marketing knowledge, reputational resources, relational resources, technological resources, financial resources and human resources) are entirely unrelated to the family owners’ willingness. The finding of the second study extends the existing family firm innovation literature by evidencing the primacy of family idiosyncratic resources, and empirically demonstrating the effects among a group of family and firm resources overlooked by previous family firm studies. Contributions and implications from both studies are reported and discussed as well as important directions for future research.