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The influence of family business characteristics on innovation
Author: Adrian Caprioara Student number: 10602658
Programme: Msc Business Studies/Business Administration Track: Entrepreneurship and Innovation
Supervisor: Dr. W. van der Aa Second reader: Dr. G.T. Vinig Date: 28 October 2014
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Abstract
Family businesses play an important role in the overall development of the economy of the majority of nations. The productivity, employment and other economic opportunities provided by the family businesses play an important role for the growth of GDP in most nations. Although family businesses have remained to be an important element of the economy, many researchers have ignored analyzing innovation existing in such firms. Family businesses are seen to follow a number of traditional concepts of business development and operations. This hinders the growth and innovativeness. Most family businesses which are small or average sized invest
comparatively less in innovation. They tend to be conservative and follow old concepts of operation. This research primarily aims to analyze the degree of innovation existing in family businesses and some specific factors that might affect their innovation and innovativeness.
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INTRODUCTION ... 5
INNOVATION IN FAMILY BUSINESS ON A GLOBAL SCALE ... 9
REWARD SYSTEM FOR INNOVATION ... 12
SMALL SCALE RISK EMBRACING ... 12
CLEAR DIRECTIONS ... 12 OWNERSHIP ... 12 INCREMENTAL INNOVATION ... 12 FAILURES ... 13 RESEARCH QUESTION ... 13 LITERATURE REVIEW ... 144
ENTREPRENEURSHIP AND INNOVATION ... 14
CHARACTERISTICS OF FAMILY BUSINESS... 15
INNOVATIVE ORIENTATION OF FAMILY BUSINESSES ... 15
INVOLVEMENT OF GENERATIONS IN FAMILY BUSINESSES ... 17
INNOVATION AND ITS RELATIONSHIP WITH FAMILY BUSINESS’S GROWTH ... 18
CONCEPTUAL MODEL ... 19
SUMMARY ... 21
SIMILARITIES AND DIFFERENCE OF OPINIONS ... 233
ANALYSIS OF THE EMPIRICAL LITERATURE ... 24
KEY FINDINGS OF THE EMPIRICAL RESEARCH ... 26
METHODOLOGY ... 27
RESEARCH QUESTION ... 27
VALIDITY AND RELIABILITY OF RESEARCH ... 27
RESEARCH APPROACH ... ERROR!BOOKMARK NOT DEFINED.7 SURVEY TECHNIQUE ... 28 ETHICAL CONSIDERATION ... 288 RESEARCH PLAN ... 288 DATA COLLECTION ... 29 DATA ANALYSIS ... 29 LIMITATIONS ... 300
DATA AND RESULTS ... 311
AGE PROFILE OF THE RESPONDENTS ... 311
POSITION OF THE RESPONDENTS ... 311
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EFFECT OF DISCRIMINATORY BEHAVIOR WITH EMPLOYEES UPON INNOVATION ... 333
EFFECT OF FINANCIAL STRUCTURE UPON BUSINESS INNOVATION ... 344
EFFECT OF DISPERSED OWNERSHIP ... 355
LACK OF KNOWLEDGE... 366
EFFECT OF FAMILY CONFLICTS ... 377
DIFFERENTIAL PRIORITIES ... 388
RETENTION OF OLDER EMPLOYEES ... 39
POSITIVE IMPACT OF SUBSEQUENT GENERATIONS ... 400
EFFECT OF SUCCESSION UPON INNOVATION ... 411
SOCIAL CAPITAL AND PRODUCT INNOVATION ... 411
TRUST, FAITH AND SHARED VALUES ... 422
GOAL ORIENTATION ... 433
DISCUSSION ... 44
CONCLUSIONS ... 53
REFERENCES ... 544
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Introduction
In the past few years, family businesses have been a focus of attention in a lot of literature and it is important to consider that they are the most common types of businesses in the world. Even though this is the case, there are still areas that are associated with family business that need to be explored (Sorenson, 2013).
Innovation is seen as very important in the success and growth of businesses. In the innovation management literature the role of family owned businesses seems under-researched (OECD, 2008). Family businesses generally differ from other types of businesses since the ownership and control of the business overlaps with family membership and this makes them a type of business that is extremely complex (Brockhaus, 2004). As a result of this, the researchers that deal with innovation have to focus on specific groups separately but still there is very little research as far as innovation in the family business is concerned (Nordqvist, 2011).
Family businesses are vital since their economic contribution is significant and have long-term constancy while showing obligation that is explicit to the populations that they operate in. The owners also have a responsibility and have a set of values that they promote and stand for. Therefore, the main objective of this thesis is to understand the environment that family businesses operate in and how this affects the innovation that is associated with them.
A family business can be defined as one that is owned and managed by one or more family members. It can also be considered to be a business that is influenced by more than two extended members of the family through exercising their relationship ties, management positions and ownership privileges. These businesses invest their funds collectively and one or more family members are mandated to be a part of the management and play an active role. Mainly they are defined in terms of ownership management by the amount of involvement that the family puts into the business. In a practical setting, the members of a family must own more than a quarter of the business for it to be considered a family business where the company directors will double up as the shareholders (Craig and Dibrell, 2006).
Innovation and entrepreneurship are the main drivers that are associated with economic development and they generally occur across broad scopes which may be new or old, and even
6 public or private organizations. The levels of innovation and entrepreneurship can be determined by knowledge creation, people, and trust as well as relationship networks regardless of whether the business that in question is a family business or a multinational corporation (Chrisman, Holbrook and Chua, 2002).
Researchers have started to develop an increased appreciation as far as family businesses are concerned and this has greatly helped in contributing towards collective wisdom and as a result, the field has posted some sort of development. Scholarship that is associated with family businesses can no longer be considered to be emerging since it has moved to a phase that is characterized by rapid growth. In spite of the trends that are emerging, the development of theories that are related to family business is delayed to the point that this deficiency can be considered to be among the main contributors that are slowing down the coming up of family businesses as a scholarly field that is respected (Poutziouris, Smyrnios and Goel, 2013).
Innovation is a very wide topic (Craig and Dibrell, 2006), and in the literature that deals with innovation, it is found that the term is used to cover a variety of explanations that describes both the procedure that is employed to come up with new products as well as the new products that are developed. What comes out of the innovation can be considered to be the adoption of a system, program, product or a service that was in not in the adopting company initially. The innovation procedures generally begin with the capability that the company has to innovate and this is normally called the innovation capacity (Reihlen and Werr, 2012). Innovation output and performance that is related to innovation is wholly dependent on innovative capacity, even though innovation output cannot always be used to determine whether a particular business is innovative, since there are many attributes that are linked to it that hinder an accurate measurement.
Family-owned businesses generally tend to be less innovative than those businesses which are non family owned (Kreitner, Cassidy and VanHuss, 2014). The manner in which resources are managed and utilized in a family business is deeply linked with the relationship shared between the owners and the entity. What makes family businesses unique is the pattern of ownership, governance structure, management regulations and succession of managers. (Kreitner, Cassidy and VanHuss, 2014). These might have an effect on the objectives of the firm. The manner in
7 which business plans are made, strategies are designed and put into practice are all crucially impacted by the ownership structure of the organization.
Family business concerns display characteristics which are fundamentally different from other forms of businesses. Dominant power of owners is seen to be higher in family owned business concerns. Although family owned enterprises are lesser in number as compared with non family owned businesses, the impact of such business concerns upon the economy is large (Poza, 2013). Therefore it is essential to analyze how family owned business concerns function and incorporate innovation so as to positively impact the economy. It would be irrational to assess that family business concerns have come to play an important role in most economies of the world without the adoption of innovative measures (Craig and Dibrell, 2006).
In family business concerns, the importance of people and social practices is much higher than the importance given to technology. This may be considered as one of the reasons why innovative measures in family businesses especially those which are small in size, is low. Informal attitude of the owners and the importance given to traditional beliefs impact innovation in a negative manner. However large family business concerns are seen to consistently grow and incorporate innovation successfully. This is largely due to the abundant financial resources which are at disposal of large family business firms. In terms of an innovation that is supposed to be beneficial, human capital can be seen to be an integral part. This makes the skills that the people have in the company, the amount of involvement that the employees put in, the relationships that exist between the employees and teamwork as well as innovation goes a long way in making sure that the company is successful (Reihlen and Werr, 2012).
Most family businesses do not expand for a very long period. As a result the employee structure remains more or less the same for a longer duration. Owners of family owned business value their old employees and indulge in recruiting fresh talent not very often. As a result of such characteristics, the competencies of employees and the talent pool existing in the organization tends to be low. This acts as a major hurdle towards the incorporation of innovative measures. Owners fear that undertaking innovation might be a wasteful venture as due to the lack of talent existing in the organization, achieving the objectives of innovation becomes difficult. Family business concerns are seen to give greater importance to members of the family and place them in important positions of the organization, without giving much consideration to their respective
8 qualifications. As a result important managerial positions are taken up by less qualified personnel. This hiders attracting highly qualified employees, as they would not be interested in working under people who possess less knowledge and competencies than them. Without adequate competencies, it is difficult for firms to incorporate innovation (Reihlen and Werr, 2012).
The family characteristic of a business can also have positive effects in the area of skills and knowledge in the business that will be derived from the protective nature of the family businesses, which helps in the development of skills and knowledge that are unique, since they will be safeguarded and thus stay in the family for a number of generations (Del Giudice, Della Peruta and Carayannis 2011). The family members that are active in companies get their inclusion in to the businesses at a tender age and therefore have enough time to know the way it runs in terms of the competitors and customers. They will also receive apprenticeship training from the members of the family that are already skilled in the business that the family is operating. The workforce turnover in the family businesses is also lower compared to the rates that are experienced in the non-family business and this means that there are skills that will be kept in the business for a long time, making the business successful (Schuman, Ward and Stutz, 2010). As a result of low workforce turnover, obsolete talent stays in the organization for longer durations. The existence of fresh talent and up to date skills are highly important for the successful implementation of innovation. Hence innovation related needs cannot be fulfilled if the existence of talent within the organization is low and is characterized with low employee turnover.
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Innovation in family business on a global scale
Family businesses play a major role in contributing towards the economy of most nations of the world. The data below was collected from over 30 nations and 1952 family businesses.
Figure 1: Global family business
(Source: Pwc, 2014)
Family entrepreneurship business is seen to be a growing sector in many nations of the world. Family business concerns are seen to be highly overlooked. Many fail to realize that it is an important segment which contributes towards the GDP of different nations. Family businesses exist not only in the form of small and medium sized organizations but also large establishments such as BMW, Samsung and Wal-Mart. One-third of the S&P 500 companies consists of family
10 owned businesses. Almost 40% of the 250 largest companies of Germany and France consist of family owned business concerns. The figures reveal that family owned business concerns have a significant impact upon the global economy (Caspar, Dias and Elstrodt, 2010). Without innovation, it would not have been possible for family business firms to expand and grow. The growth and success of family business concerns across many nations were essentially due to the indulgence in innovation related activities.
Figure 2: Key issues faced by family business concerns across the globe
(Source: Pwc, 2014)
The above figure shows that most of the family owned business sectors across the globe face the challenges related to competition and the manner in which business requires to be conducted. Other significant challenges arise out of the economic, social and market conditions existing in the environment.
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Figure 3: Passing on of family business concerns
(Source: Pwc, 2014)
Majority of the family business concerns across the globe are seen to pass on their business to the next generation. The objective is to maintain the business with the family itself without selling it out. However a significant proportion of family business concerns are seen to sell their ownership to other firms or individuals due to the inability to face competition and earn sufficient revenues. A significant proportion of companies also prefer to incorporate external professional managers into their family businesses to obtain greater efficiency.
The data collected on the global family business sector reveals that family business plays an important role in the global economic platform. Many large and successful firms initially begun as family businesses. In respect of innovation, it has been seen that families which invest in innovation related activities are seen to do well and succeed in the long term. On the other hand family businesses which do not invest in innovation related activities are seen to find it difficult in generating adequate amount of revenue (Romano, Tanewski and Smyrnios, 2001). Some of the innovation related tactics followed by successful family owned businesses across the globe are discussed below.
12 Reward system for innovation
Family run business firms encourage employees to innovate and develop better ways of operation by providing rewards and recognition. Organizations believe that by way of smaller innovations, employees are motivated to be more creative and contribute greatly towards the development of the business. The reward systems are set by considering the objectives of the business and their long term goals. Companies which foster innovation are often seen to do so by establishing suitable reward systems.
Small scale risk embracing
Innovation comes with an aspect of risk. The newly developed ideas must be implemented to test their success. Many firms although encourage innovation are seen to remain less confident in respect of implementing them in the normal course of the business. In order to achieve competitive advantages and tap greater sections of the market, organizations must consider implementing new ideas (Romano, Tanewski and Smyrnios, 2001).
Clear directions
Organizations will only be able to realize the importance of innovation if they forecast the requirements of the business in the future. Forecasting helps companies to analyze the risks that may arise in the future. Accordingly firms must undertake suitable innovation measures that help in sustaining the business in the future. However forecasting is only possible if the organizations have established clear directions for the future.
Ownership
Most entrepreneurship firms consider that ownership mentality strongly motivates undertaking innovation. Owners of the business who belong to new generation realize that their future economic success lies in the success of the business. This motivates them strongly to undertake innovation.
Incremental innovation
Constant innovation is an essential requirement of the present day business concerns. Fast paced economic conditions and high competition makes entrepreneurs to adopt innovation so as to
13 sustain in the market in the long run. In order to encourage innovation, most organizations have set innovation as an important performance object. Appraisals are also conducted on the basis of the targets set by the firms in respect of innovations (Rogoff and Heck, 2003).
Failures
Researchers have specified that tolerating a certain degree of failure is necessary to encourage adopting innovation. Innovations involve risk and there are high chances of failures as well. An innovated new product may or may not be accepted by the consumers at large. However the risk aspect should not discourage entrepreneurs to undertake innovation.
Research question
Family businesses normally come up from a one entrepreneur that is focused on a single market and therefore has strong relations with the customers and also the suppliers and has a long term orientation in the business strategies that they established. In this thesis we focus on the effect that family businesses and their characteristics might have on innovation. The thesis also seeks to understand whether innovation in the family businesses is more or less encouraged than in non-family businesses (Gerybadze, 2010).
The research question is as follows;
What is the relationship between certain characteristics of family owned firms (such as specific knowledge, successive ownership, discriminatory behavior, retention of older employees and family conflicts) and the innovativeness of the firm?
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Literature review
Entrepreneurship and Innovation
The research world has seen an increasing rise in the study of family entrepreneurship, particularly due to their widespread and ever increasing business across the globe. Over past few years, entrepreneurship has grown substantially and a large portion of these are family entrepreneurs. They play an influential role in overall development of economy as well as enhancing quality and standard of life (Littunen and Hyrsky, 2000).
Researchers have identified entrepreneurship and innovation as two major drives related to positive development of economy as well as growth of business. Entrepreneurship and innovation are not limited to private or public enterprises, but can also occur in smaller and medium level firms or businesses that are owned by families. Entrepreneurship is perceived as a broad domain covering variety of subjects. Entrepreneurship activities are critical as well as necessary, due to value added to the business, innovations made, wealth produced as well as employment opportunities created. Entrepreneurship helps in growth and expansion of business and without this, businesses might never achieve full potential and can even stagnate and fail (Timmons, 1999). Many businesses are also identified as non-entrepreneurial, fulfilling personal goals and not opting for risks and innovation. Researchers have defined entrepreneurship according to their personalities as well as activities. For instance, an entrepreneur is dynamic, risk-taking and motivated for continuous achievement and growth.
Innovation can be described as any idea, object or practice, which is considered new by units or individuals adopting it. Innovation can also be defined as the process through which significant value is added either to the company or for customers. In business aspects, innovation can be described as a process of establishing new ideas profitably and effectively with the objective of stakeholder satisfaction. Innovation in family owned businesses basically refers to adoption of tactics and strategies that will help in performing business faster, cheaper and better with limited resources and succeeding in generating high profits (McCann, Leon-Guerrero and Haley 2001). In order to survive and grow in this competitive business environment, companies need to constantly innovate, irrespective of company size. Early business founders and owners used
15 innovation for achieving two specific goals. First was to increase production efficiency of their family oriented business. The second goal was to use innovation as a function for communicating the unique offerings of a service or product. According to Kellermanns, et al. (2008) innovativeness is directly proportional to performance and success of family oriented business.
Characteristics of Family Business
According to Litz (1995, p. 103), “a business firm may be considered a family business to the extent that its ownership and management are concentrated within a family unit, and to the extent its members strive to achieve and/or maintain intra-organizational family-based relatedness.” Family businesses can be considered as a complicated activity, which is mainly due to interaction of two different systems together: business and family. This interaction has been found to have both positive and negative consequences.
Family firms have the capability of effectively handling their social capital, human capital, survivalist capital, financial capital, governance structures and operations. Human capital is beneficial in family entrepreneurship as owners have extensive knowledge of the firm and show a higher commitment. Also, their relationship with other partners and members are friendly, avoiding conflict of interest. However, family owned businesses do not prefer outside professionals managing their businesses, which might limited exposure of family entrepreneurs to external environment and knowledge associated with it. At the same time, access of family businesses to external finances is less as majority of equity is shared among family members. This provides them with a higher incentive to manage the capital effectively while conduction of the business. Family entrepreneurs are more focused on long-term growth and development of the business. Therefore, it is observed that family entrepreneurship can be both advantageous and disadvantageous. Creativity and innovation is increasingly touted as a beneficial and long-term strategy for maintaining, developing, combining as well as leveraging family resources.
Innovative orientation of Family Businesses
Family entrepreneurship has received significant attention in recent years due to their ownership structure as well as management. Variation, in terms of firm value and economic output, is
16 higher compared to other business structures. This can be due to peculiar family governance trait reflecting dynamic interrelationship between the family preferences, values of the owner, organizational policies and profit-maximization policies generated by competitive conditions of the industry. Families that are long-term oriented, tend to be risk taking and to invest in innovation, subsequently empowering the family businesses. At the same time, many family businesses tend to be conservative, unable or unwilling to take risks and uncertainties associated with innovation and entrepreneurship. A very frequent trend is that of descendents of the company owner being appointed as CEOs, irrespective of their knowledge, experience or entrepreneurship skills. These trends might limit innovative and entrepreneurial attitude in the organization and harm overall growth (Casillas, Moreno and Barbero, 2010).
As discussed above, long-term oriented family businesses tend to be more innovative and dynamic compared to firms, focusing on short term objectives and goals. Nonetheless, even in long-term family firms, risk is minimized and carefully managed as one of the major strains is protecting wealth of the family for coming generations. Innovation is also positively related to internationalization of family businesses. Here, dynamism, pro-activity and individual decision making capability of the family entrepreneurs come into action. Further, implementation of a growth strategy can help managers in taking strategic decisions; enhance overall entrepreneurship orientation; and subsequently facilitating innovativeness in the family oriented business (Litz and Kleysen, 2001).
While family entrepreneurship is regarded as a significant contributor to the world economy, very few linkages have been identified between innovation and family firms, partly because of inadequate empirical and theoretical investigation and partly as a result of conservative and reserved nature of the family entrepreneurs (Craig and Moores, 2006). Consequently, even the conflicting studies of family business and innovation cannot be evaluated properly. As such, many studies have argued that tendency of creativity, innovation as well as change is less significant compared to non-family businesses. Family firms are less oriented towards creativity and innovation and are more conservative and traditional. In addition, they are inwardly directed as well as unwilling to collaborate with external parties.
McCann, Leon-Guerrero and Haley (2001) have confirmed the above tendency by stating that new product development processes in family firms is lower compared to other business
17 structures. Researchers also argue that innovation in family firms is majorly the responsibility of young entrepreneurs from the family. For this, these younger generations should be trained appropriately and then allowed to innovate. This can be due to the focus of founders on maintaining comparatively stable businesses, rather than continuously innovating. Even so, to be able to succeed in every generation, family firms need to stop implementing risk-averting strategies. Also, proper support, attention as well as funding are required for embedding innovation in the family firm’s core competencies.
According to Craig and Moores (2006), new age and established family businesses are giving importance to innovative practices and strategies. At the same time, researches focusing on small family businesses have demonstrated that in smaller firms, decision making and power is concentrated or limited to few members or even one member. Hence, innovativeness in such family owned businesses are intrinsic. Singular and dominant relationship of business owners stretching for a long period might induce risk adverse attitude and stifle innovativeness and creativity that arises due to cognitive conflicts. For instance, long residing CEOs confront norms of the industry and are not likely to compromise their status quo. Similarly, long tenure was found to be associated with lesser risk taking attitude. At the same time, newer management and top executives are found to be more focused towards innovation and strategic change. Consequently, long tenure of the CEO can be utilized for building valuable and long-term relationships among other business constituents. These relationships can further enhance comfort and knowledge and help the CEO to pursue risky decisions for innovation and entrepreneurship (Kenyon-Rouvinez, 2001).
Involvement of generations in Family Businesses
Entrepreneurial activity can also be influenced by the generation, which is in-charge of the family business. For instance, third generation managing the family business will be able to understand and evaluate the critical relationship between internal and external firm factors and their influence on innovative activities pursued by a firm. Similarly, second generation managers will be able to interpret the influence of competitive environment. Firm characteristics also play an influential role in overall entrepreneurial behaviour; for example, while a hostile environment will lower pro-activeness and enhance risk, a dynamic environment will moderate the family generation’s influence on innovation orientation (Craig and Moores, 2006).
18 Involvement of multiple generations in a family business results in diverse perspectives among individuals and higher input, subsequently enhancing entrepreneurial characteristics in the family firm. Newer generations will help in implementing innovative ideas. While founders of the family businesses start by innovative ideas, often they lose their innovative edge over time. In such situations, subsequent generations can help in enhancing flexibility, entrepreneurship abilities and innovation within the family business. Second and third generation members help in adding fresh momentum to the business by suggesting alternative ways of conducting business (Janszen, 2000).
Innovation and its relationship with family business’s growth
Innovation in family entrepreneurship can also result from creation of new ventures such as, exploitation and recognition of opportunities by reconfiguration of new as well as existing resources, helping in achieving competitive advantage for the firm (SuLian and Lili, 2009). This innovative behavior is essential so that it can adopt as well as properly respond to changes in the environment such as, competitor action, technological development and consumer preferences. Market expansion and venturing into related and unrelated business is deemed as necessary for growth and survival of family firms as this leads to creation of new jobs as well as increasing overall wealth of family members (Serrano, et al., 2006).
The relationship between performance and entrepreneurial orientation of a family-oriented firm has been one of the major subject topics in research area. Strict correlation has been observed, which is higher among smaller companies and subsequently declines as the firm size grows. This can be due to growth process of the firm. Family managers mostly continue to follow their previous generations affecting overall capability of the business so as to engage in innovative activities (Timmons, 1999).
19 Conceptual Model
Innovation and enterprise management is important for family-owned businesses, not only for their survival but for sustained growth and development as well (Ming, 2004). Innovation in family business refers to breaking down of the business’s own limits, policies and guidelines and building an entirely new structure and culture that supports innovation and continuous development (Milhim and Schiffauerova, 2013).
a. Succession and conflicts
Most of the senior members of a family enterprise are relatives or family members as the relationship is highly informal. Therefore, owners find it difficult to recruit external managers or non-family members into senior positions limiting their innovation capabilities. This leads to discriminatory behavior and conflicts amongst employees and the managements, hampering innovation (Milhim and Schiffauerova, 2013).
b. Knowledge and talent pool
Reports and surveys on family businesses have suggested that training and investment for family enterprises can be a contributive factor in enhancing overall innovation capabilities among the family members. For instance, during emergencies or any other serious situation, family businesses can upgrade their technology or reduce their unprofitable ventures. These solutions can be achieved through proper training as well as investment preferences. However in most family oriented businesses it is seen that older employees are retained for longer periods. Suitable measures are also not taken so as to improve and upgrade the skills of the employees. Hence innovation capabilities are hampered to a large extent (Milhim and Schiffauerova, 2013). c. Discriminatory behavior
Tolerance refers to the expectation and provision of rewards as well as punishment. For instance, errors made my family-members are neglected while those made by non-family members are not. Increasing this tolerance level by family enterprises can increase overall innovation capabilities. Most of the time, decision–making preferences are given to family-members rather than non-family members, thereby reducing their enthusiasm for innovative contribution and de-motivating their talents (Milhim and Schiffauerova, 2013).
20 d. Trust, faith and shared values
Small family oriented organizations are based upon age old traditions and beliefs. The trust amongst employees and the management is seen to be strong. However since old customs are followed with very little changes, innovative capabilities get impacted.
e. Goal orientation
Family businesses are seen to be short term oriented majorly. Since long term outlook is low, innovative capabilities are negatively impacted (Ward 1988).
f. Financial structure
Big family oriented firms are seen to financially strong and therefore can fulfill innovation needs to certain extends. However in respect of smaller family business concerns, innovation needs become difficult to meet as financial strength is low (Sharma 2004).
g. Dispersed ownership
Family businesses are seen to have dispersed share holdings where shares of the business are held with the members of the family themselves. This creates a number of difficulties in taking important decisions as the owners become numerous and are related to each other.
Figure 4: conceptual framework of innovation in family business firms
Innovation in family businesses Succession and conflicts (a) Knowledge and talent pool (b) Discriminatory behavior (c)
Trust, faith and shared values (d)
21 The above diagram is a conceptual model depicting how different characteristic features of family businesses influence innovation in the same. Such features may either positively or negatively impact innovation.
Thus, it can be concluded that innovation capabilities in family-owned businesses is highly restricted due to the non-involvement of non-family members, managers and other business owners. Family influenced capabilities and resources can have both negative and positive aspects on innovation in these businesses. For instance, emotional attachment with core business of the family can induce fear of losing it as well as exposing the family to a doubtful future (Litz and Kleysen, 2001). As such, entrepreneurs tend to avoid risky business opportunities. Similarly, when a member of the family business tries to engage in strategies having the potential of threatening values, customs and traditions of core business, families can end up constraining these entrepreneurial activities. This results in loss of growth and development opportunities for the family business (Harris, Martinez and Ward, 1994). These entrepreneurial strategies may include market expansion, new market entry, expansion of service or product expansion and development of new service or products. At the same time, family entrepreneurs engaging in above activities need sources for equity funding in case the family alone is not able to fund the business.
Summary
The above study focused on innovation in family owned businesses. For this, the study involved an extensive study of external and internal forces supporting as well as hindering growth of innovative attitude in a family owned business. Researches in business and markets have shown that innovation has become an important facilitator or pillar for continuous growth and development in family firms (Hoopes and Miller, 2006).
Apart from that, the conceptual model depicting the relationship between characteristics present in family businesses and innovation capabilities, suggests that those family enterprises which do not allow non-family member’s contribution in strategy making and other operational and business decisions are confined in terms of innovative business ideas. The literature review was also able to fill the research gap that existed in due to lack of proper and in-depth research on
22 family entrepreneurship and the influence of family members, their decision and preferences in the innovation capabilities of the family-owned businesses.
The key findings of the literature review have been summarized by selecting few of the important papers written by eminent scholars. These have been shown in the table below.
Authors Journal Key findings
Casillas, Moreno and Barbero (2010)
Family Business Review Long term orientation of firm’s positively affects innovativeness. Craig and Moores (2006) Family Business Review Longer tenure of CEO’s, small size and lack of up-gradation of firm impact the innovative abilities of family businesses negatively.
Kellermanns, Eddleston, Barnett and Pearson (2008)
Family Business Review Financial capability of family businesses are weak and therefore negatively impacts innovation .
McCann, Leon-Guerrero and Haley (2001)
Journal of Small Business Management
Importance given to innovation is low in family oriented businesses.
Milhim and Schiffauerova (2013)
Journal of Integrated Design and Process Science
Ownership characteristics which are restricted to family members negatively impact innovation.
The studies conducted in framing the literature review for the current thesis has brought into focus certain aspects regarding innovation in family businesses that are commonly stated by majority of the researchers. It has been identified that innovativeness in family business is low as compared with other forms of businesses and almost all research works included in this paper support this school of thought. The most commonly identified reasons of lack of innovativeness
23 are the orientation towards personal goals rather than the goals of the business as a whole. The deep association with the traditional norms is also major hindrances towards innovative capabilities. Researchers have also commonly identified that family businesses have lower risk taking abilities. Innovation can only be effected when owners are not apprehensive about taking risks. Since majority of the family businesses are small in size and have very limited resources, they are not willing to undertake risks very often. Another factor identified by most of the researchers is the concentration of decision making power. Since important decisions are taken by the family members, excluding the non family members, a discriminatory environment gets created. Such an environment may subsequently lead to lack of job satisfaction and have negative impacts upon innovation. Innovation can only be effected when employees are highly motivated. However if there are discriminatory policies existing in the business, employees may not positively contribute towards innovation.
Similarities and difference of opinions
Similarities in research work Dissimilarities in research work
Lack of innovative capabilities Short or long term orientation Importance of personal goals rather than business
goals
Tenure of management
Association towards traditional norms Lower new product development process Lower risks taking abilities
The research conducted has also brought into limelight some key findings which vary from other scholarly work. Casillas, Moreno and Barbero (2010) had stated that the goal orientation of the business plays a crucial role in giving effect to innovation. Firms which are long term goal oriented are seen to incorporate innovative measures. On the other hand family business concerns which only focus upon the present results and neglect long term needs are seen to adopt less innovative measures. The aspect of long term and short term planning and its association with the innovative capabilities of a firm were not identified by many researchers. Similarly Craig and Moores (2006) had distinctively identified that the tenure of CEO’s and the management has a considerable impact upon the innovative capabilities existing in a family business. Long residing CEO’s and managers have lesser risk taking capabilities and are
24 therefore seen to remain reluctant towards innovation. However modern day and newly recruited managers are not scared of implementing change in the organization. Craig and Moores (2006) had also identified that family business concerns undertake new product development process vary rarely. The products which are developed at the set-up stage of the business are only continued to be produced, incorporating very less changes.
Management tenure, retention of older employees, conflicts, discriminatory behavior, succession of ownership, trust, shared values and goal orientation are variables that radically impact the manner in which business is conducted. Since talent pool does not get replenished from time to time, the overall level of knowledge and valuable experience tends to be low in such organizations. Modern family business concerns are however seen to incorporate innovation with greater ease. It is also identified that family business organizations are bound with age old traditions and beliefs which hamper adapting to modern needs of business and also impact innovativeness in a negative manner. Firms which are long term oriented and critically analyze the success needs for the future, adopt innovation at a larger scale.
Analysis of empirical literature
Apart from the above literature research on innovation in family business, in the current section was performed a meta-analysis to evaluate and discuss the various empirical evidences found in authentic articles and survey reviews in order to understand the correlation between innovation and family business. Carrasco-Hernández and Jiménez-Jiménez (2013) surveyed 282 family-owned enterprises in an empirical study. The findings revealed that a positive relationship existed between social capital and product innovation among family firms. Also, firms were people were bounded with faith and trust, shared values and mutual understanding were more innovative compared to firms that un-cooperative towards external members. Another case study and grounded theory approach from Cassia, Massis and Pizzurno (2011) revealed that family firms having long-term orientation gave more thrust to new product development plans and strategies compared to firms that were short-term oriented. Another research survey revealed an interesting relationship between knowledge, innovation and family-business. According to reports from Price, Stoica and Boncella, (2013), after researching 430 SMEs, it was found that knowledge of the leaders in a family owned enterprise played a pivotal role in determining the extent of innovativeness within that firm. It was found that leaders who gained knowledge either
25 through foreign studies and experiences or through working in outside and non-family enterprises were more innovative as well as open towards new and unique ideas compared to those family leaders who did not have similar and relevant experiences and knowledge base. Morck and Yeung (2003) further analyzed the factors that limited the innovation behavior among family firms. A family structure that is rigidly disengaged has low cohesion and low flexibility. The rigidity is shown in terms of authoritarian leadership, unchanged behavior, strict disciplines as well as family roles. Family members are neither loyal nor close and tasks are performed independently. Therefore, adapting and changing as per industry trends is difficult for these families. These families are essentially committed to repeating strategies and maintaining continuity. Also, they are not ready to risk their socio-emotional wealth such as social reputation, employment, trans-generational control and power within the community.
In an article from Cassia and Massis (2012), various researches were studied to evaluate the factors responsible innovation among family-owned businesses. These included time orientation, human resources, motivation, workforce harmony, group dynamics, agency costs, monitoring, conservativeness, power within the community and opinion about the external environment. For instance, family firms limiting their group activities and decision making process to their own family members tend to be more conservative and less open to change, thereby less innovative. Comparatively, family firms wherein motivation among work force was equal and attitude towards outside environment was positive, flourished though innovative business ideas.
Another factor that has been deemed important after numerous surveys on family firms and their innovative features was the human condition. This not only includes harmony between family as well as non-family members, but also characteristics such as mutual tolerance, harmony, peace and coordination that help the enterprise to enhance their competitiveness and cohesion (Cassia and Massis, 2012).
Cassia and Massis (2012) conducted a study on family businesses to evaluate and analyze the extent of technological innovation across family firms and create relevant suggestions that can be used by family firms in future course. The study concluded that involvement of families in the business directly impacts multiple innovation inputs such as research and development expenditures, leadership activities such as taking care of new product or service development
26 projects as well as multiple innovation outputs such as quantity and quality of new services or products. The study also concluded that the involvement of the family business owners were in turn, affected by the rigidity of their business principles.
Key findings of the empirical research
The key findings of the empirical analysis of the literature are as follows:
Factors identified through empirical research Impact on innovation and strength between variables
Positive relation between social capital and product innovation
Positive and strong
High trust, faith and shared values Positive and strong
Long term goals Positive and strong
High experience, knowledge and openness to learning
Positive and strong
The above set of findings can be stated to be much similar to the core findings obtained from the main literature review. In order to discuss the findings obtained from selected papers of the empirical research, certain factors were selected. The factors are based upon the research topics and the findings of the papers analyzed in the current section. On the basis of the empirical data, it is seen that social capital and innovation are positively related. When employees and other interest groups who are associated with the business are satisfied with the organizational policies, innovation related measures can be easily undertaken. The positive attitude of employees plays a key role in developing innovation. The same was also identified in the literature review. When there are discriminatory policies in the organization, employees are seen to be dissatisfied with the work environment and innovation does not get easily adapted. Similarly long term goal orientation, high knowledge and openness to learning are factors which positively impact innovation. One of the distinctive findings of the empirical analysis of the literature is that the string trust, faith and shared values of family businesses positively impact innovation. This however is not seen to be true for all family businesses. Firms which incorporate changes frequently are only seen to benefit from this virtue.
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Methodology
Research question
The research mainly seeks to answer the following question:
What is the relationship between certain characteristics of family owned firms (such as specific knowledge, successive ownership, discriminatory behavior, retention of older employees and family conflicts) and the innovativeness of the firm?
The characteristics identified in the literature review were taken as the basis for conducting the research. The survey and other data collection procedures were carried out based upon these identified characteristics.
Validity and reliability of research
Validity testing involves comparing the data collected with actual internal and external conditions so as to understand the affectivity of the research. The validity of the research in respect of the current studies was tested by comparing the findings of the paper with the empirical findings of eminent scholars included in the literature review.
Reliably is an important criterion for reaching accurate conclusions while conducting a research. Complete efforts were taken to ensure that the information collected for conducting the research is reliable and suitable for the needs of the study.
Research approach
The current study follows the inductive approach. Since the study incorporates statistical as well as theoretical studies, the inductive approach was deemed most suitable. Moreover the inductive approach also provides the researchers with the liberty to incorporate their own idea and thoughts in the study.
The current study incorporates utilizing both the experimental and the non-experimental techniques. The non-experimental technique facilitates analyzing data in different ways using
28 theoretical studies. The experimental technique facilitates conducting on field research such as questionnaire survey (Gratton and Jones, 2010).
Survey technique & sampling
The current research has been done on the basis of the survey technique. The data collected from different sources has been statistically analyzed and examined in order to draw relevant conclusions. The questionnaire survey technique was used in the current research to obtain data from respondents.
The current study is based upon the random sampling technique as all the respondents of the questionnaire had the equal probability of being part of the research. The respondents obtained for the questionnaire survey were randomly selected from a group of managers and owners of small and medium scale family owned businesses.
Ethical consideration
Before conducting the survey, the respondents were made aware of the fact that their identities will not be revealed in the course of the research. Also the responses will be shown in a
collective manner without highlighting any particular response. By maintain such ethical considerations, it is possible to encourage respondents to provide accurate and less biased responses.
Research plan
In the current study, the first step of research was to identify and study the theory pertaining to the subject of innovation in family entrepreneurship. Based on the knowledge gained, primary and secondary data of information is collected and analyzed. The final step is to draw conclusions from the findings of the research. The analysis of the information is done using both theoretical and quantitative tools. Establishing a suitable research plan guides the researcher in terms of the direction of the study.
29 Data collection
The prime objective of the research is to identify the relationship existing between the characteristics of family business and the extent of innovation existing in such business concerns. The research also aims to analyze the importance of family business innovation and whether innovation plays an important factor for the long term success. The study also incorporates analyzing certain characteristics of family businesses and analyzing the effect of such characteristics upon business. Family businesses are characterized with aspects such as lack of knowledge and conflicts amongst family members. The influence of such aspects upon innovation has been analyzed and studied. The respondent of the survey includes managers and small scale business owners. The respondents were approached through references obtained from friends, family members, fellow students and instructors. Most of the respondents present in this research were represented by family businesses from Romania and a few from other EU states such as Germany and The UK .The questionnaires were provided to the respondents directly and
Research question: Family business
characteristics and their impact upon innovation
Data collection:
• Empirical data from existing research
• Global data on family business innovation
• Data collected through questionnaire survey.
Data analysis:
• Analysis of the results from survey.
• Correlating survey results with other research
Discussion and conclusions: • Discussion of
empirical findings and survey results.
30 also through e-mail. Most of the questionnaires were handed and completed in person; this facilitated the data collection process as it allowed for some very short informal interviews to be conducted. The collected data was then thoroughly scanned to check for omissions and incompleteness.
Data analysis
The primary data relates to the information obtained through the questionnaire survey. The results obtained from the questionnaire and interview survey are summarized and shown. The survey size is of 25 respondents. The net questionnaires distributed were 50 but only 35 of them returned. Many of the returned questionnaires were only partially filled. Hence in order to sufficiently meet the needs of the survey 25 was selected as the sample size from the questionnaire survey. The results obtained were statistically arranged using Microsoft excel tools. Graphical representation of the data facilitated easy analysis. Conclusions were drawn based upon the statistical data results obtained through the survey. The current research includes data from both primary and secondary sources. The data analyzed through the questionnaire survey is also supported by the information obtained from different research papers and the empirical evidences therein.
Limitations
The primary limitation of this study was the lack of primary data and the small sample for the survey. It was difficult to obtain an adequate number of respondents who were the owners of family entrepreneurship businesses and willing to participate. Another major constraint was the lack of time. It was also a challenging task to procure secondary data in respect of the innovation indexes in family businesses. However considerable efforts were taken to ensure that reliable information was generated via the survey.
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Data and results
Age profile of the respondents
Figure 5: Age of the respondents
The above figure shows that the maximum respondents belong to the age group of 36 to 50. This signifies that the young population shows sufficient interest in participating and contributing towards the growth of the family business. Increase of population and the lack of availability of jobs have encouraged more number of people to participate in family business
Position of the respondents
Figure 6: Position of the respondents
25-35 36-50 50-65 Above 65 Respondents 3 12 6 4 0 2 4 6 8 10 12 14
Senior manager Chairman CEO directorsBoard of
Respondents 14 4 2 5 0 2 4 6 8 10 12 14 16
32 The respondents selected for this survey mainly belongs to the upper management category which included senior managers, CEO’s, chairmen and the members of the board of directors. In order to understand the aspect of innovation in family businesses, it was considered suitable to select such a class of respondents as they have better insight regarding the nature of family businesses. The above figure reveals that the maximum number of respondents belongs to the category of the senior managers.
Importance of innovation in business
Figure 7: Innovation importance in business
Innovation can be defined as the process of developing new concepts, ideas and technologies which enhance the existing levels of efficiency and productivity of organizations. Developing innovative products and services, facilitates organizations to expand to new markets. as a result the revenue earned gets enhanced. Innovation is also necessary for the long term survival of firms. Along with the changing needs of the society and technological advancements, firms are required to develop improved products and services. Innovation is also seen to induce modernity within societies and set new trends. Consumers are always on the lookout for new and unique products and services. Therefore only those firms which indulge in research and develop new products are able to sustain in the long run. Innovation is also an effective way of responding to changes in the external factors of business environment. Hence irrespective of the category of business, all organizations are required to invest in innovation.
Strongly agree Agree Niether agree nor disagree Disagree Respondents 15 5 3 2 0 2 4 6 8 10 12 14 16
33 From the survey conducted, it is perceived that majority of the respondents are seen to remain supportive of the fact that innovation plays a strong role in the development of the business concerns. Entrepreneurs and the administrators of family business concerns are aware about the fact that innovation plays an important role in the development of business concerns (Morck and Yeung, 2003).
Effect of discriminatory behavior with employees upon innovation
Figure 8: Negative impact of nepotism in family business concerns
In family business concerns it is generally seen that important organizational decisions are taken as per the interest of the members who are part of the family which runs the business. It is also observed that members who are related to with the family are provided with important organizational positions, irrespective of their experience or knowledge. Non family employees of the organization feel discriminated and are less motivated to perform highly. Their interest towards innovation also reduces. Non family employees consider that their hard work would not be recognized by the organization since credit and recognition is mainly provided to the family members only. Such factors are seen to impact innovation in a negative manner. This also becomes a negative aspect in attracting external employees who are talented (Craig and Dibrell, 2006).
Yes No Not sure
Respondents 20 0 5 0 5 10 15 20 25
34 Effect of financial structure upon business innovation
Figure 9: Self finance in business concerns acts as a hindrance
Most family business firms are self financed. Self financing refers to obtaining fund for running the business from internal sources such as the excess revenue from sales. Capital obtained from owners of the business forms the basis of developing family business concerns. Family run businesses are less motivated to undertake risks. As a result obtaining debt finance is not considered to be profitable for the business. The fund raised from within the organization may not be adequate in meeting the needs of the firm. This reduces the scope of gaining the ability of investing in innovation projects. Family businesses are reluctant to acquire finance from external sources. All the operations of the business are majorly run from the internal sources of fund. If at all family owned business concerns obtain fund from external sources, they are seen to remain associated with those types of activities which yield sure income. Since innovation cannot guarantee income, fund obtained from external sources are not utilized for such purposes. Majority of the respondents participating in the survey agree to the aspect that the lack of fund availability in family businesses is one of the major reasons behind the inability to innovate (Sharma, 2004).
Strongly agree Agree Niether agreenor disagree Disagree
Respondents 17 3 5 0 0 2 4 6 8 10 12 14 16 18
35 Effect of dispersed ownership
Figure 10: Negative Influence of concentrated ownership upon business
Dispersed ownership is a prominent feature of the family business concerns. Concentrated ownership gives greater direction and integration to the decisions and operations undertaken by the administrators. It has been seen that majority of the shares in respect of family business concerns are held by the members of the family themselves. This limits the powers of other stakeholders. When power is dispersed amongst many shareholders there are a number of issues regarding consent obtainment while taking decisions. If the major shareholders do not utilize their powers effectively it may adversely affect the growth of the business. The owners of most family business concerns are reluctant to incorporate many changes. This hinders the adoption of innovation measures. In a family business since majority owners are members of the family itself, more support is received by the decisions taken by them. Therefore if the owners of the business are inclined towards maintaining the traditional aspects of the business, there would be no or very little motivation towards innovation. The survey results indicate that majority of the respondents are supportive of the fact that concentrated ownership leads to a number of issues in family owned business concerns (Ward, 2011).
Yes No Cant say
Respondents 23 0 2 0 5 10 15 20 25
36 Lack of knowledge
Figure 11: lack of sufficient knowledge
Knowledge is an important criterion in the development of a business concern. Knowledge in respect of business refers to the awareness and understanding of corporate functioning, expertise relating to technology and different theories that impact business. In other words knowledge refers to the know-how and the talent pool existing within an organization. If the talent pool of a business concern is large, it positively impacts growth. It is seen that owners have less experience and knowledge outside their family business. As a result change in the business activities is slow. Due to less experience and knowledge regarding the external environment, the initiative taken by such organizations in respect of innovation is also slow. From the above figure it can be seen that majority of the respondents agree to the fact that lack of sufficient knowledge is one of the major drawbacks of the family business concerns to undertake innovation (Carlock and Ward, 2001).
Strongly agree Agree Niether agreenor disagree Disagree
Respondents 18 5 2 0 0 2 4 6 8 10 12 14 16 18 20
37 Effect of family conflicts
Figure 12: Influence of family conflicts upon innovation
Family business firms are highly influenced by the internal family conflicts. Favoritism and discriminatory behavior amongst family members may cause different issues relating to the ownership and power to take decisions. Owners of the business may take decisions favoring certain family members. This may cause conflicts amongst the other family members and stakeholders of the business. As a result of such conflicts, it becomes difficult for organizations to implement the innovation related measures. The above figure shows that majority of the respondents have agreed on the aspect that conflicts hinder undertaking innovation related decisions (Kuratko and Hodgetts, 2001).
Yes to a very large
extend Yes but to a smallextend No, not really
Respondents 22 3 0 0 5 10 15 20 25
38 Differential priorities
Figure 13: Negative effect of diversified priorities upon the business concern
A family business concern has different stakeholders such as employees, internal and external shareholders, investors and suppliers and business clients. Decisions are required to be taken taking into perspective the interest of all the stakeholders. However in case of the family owned business concerns, it is majorly seen that decisions are taken by considering the interest of the family members who own the business and their reputation. External shareholders are given little power to take major decisions. The owners of family owned businesses are largely concerned with their own profits. They do not consider the long terms needs of the business such as innovation (Miller, Steier and Le Breton-Miller, 2003).
Strongly agree Agree Niether agreenor disagree Disagree
Respondents 12 8 5 0 0 2 4 6 8 10 12 14
39 Retention of older employees
Figure 14: Negative impact of retaining older employees
Respondents of the survey feel that retaining older employees acts as a major hindrance towards the undertaking innovative measures. Older employees cannot be trained effectively to adjust with new types of technology. As a result if majority of the employees have been working in the firm since a long time, it becomes difficult for the organization to undertake innovation. It is also observed that family business concerns do not consider hiring fresh talent due to cost concerns. This further hinders the scope to innovate (Zahra and Sharma, 2004).
Yes No Cant say
Respondents 23 2 0 0 5 10 15 20 25
40 Positive impact of subsequent generations
Figure 15: Business run by subsequent generation’s impacts innovation positively
It has been analyzed during the survey that majority of the respondents consider that if family run business is inherited over generations, there are higher chances of incorporating innovation. The new generations which take over the business have knowledge regarding the current market scenario. They are also considered to have better knowledge and skills. Such aspects are likely to impact family business concerns in a positive manner (Zahra, 2005).
Yes No Cant say
Respondents 20 3 2 0 5 10 15 20 25
41 Effect of succession upon innovation
Figure 16: Business concerns which are based upon succession do not undertake innovation
In the above figure it is seen that respondents disagree to the statement that family businesses which are run on succession basis do not undertake innovation. Younger generation who take over their family business bring along with them superior knowledge and efficiency in respect of the manner in which the operations are conducted. They also bring in innovative ideas which may help the business concern to achieve greater market potentials (Chua, Chrisman and Steier, 2003).
Social capital and product innovation
Social capital or people capital in family businesses is a key aspect to its success. Since there are no direct methods of analysing the impact of social capital upon product innovation in family businesses, it is generally through aspects such as turnover and absent rates. In general, studies reveal that that family owned business firms are able to manage their social capital in a better way than other forms of business. As the per the research conducted by Bacon, Hoque and Siebert (2013) the reason is that family owned business firms are able to create a better relation between the employees and the workplace. The involvement of the family members in the day to day operations of the business facilitates the developing better relations between the owners and the employees of the firm. Such an organization may be termed to be owner-managed. In large family owned businesses such characteristics are not essentially present. In large business houses
Yes No Cant say
Respondents 7 16 2 0 2 4 6 8 10 12 14 16 18
42 it is observed that family owners appoint manager, from outside the family for managing the business. Under such circumstances the business shifts to becoming owner-governed rather than owner-managed. In general owner-managed business firms have lower turnover than owner governed and non family owned business concerns. Similarly the rate of absenteeism is also low in owner-managed businesses as compared to the others (Bacon, Hoque and Siebert, 2013). Due to such characteristics existing in family owned and managed business, employees remain stagnant with the organization for a potentially long period of time. As a result innovation and product development gets influenced in a negative manner.
Trust, faith and shared values
Family owned business firms have exhibit higher levels of trust between the owners and the employees. Since owners of family owned business pay closer attention to their staff and are directly in touch with them on a regular basis, it becomes possible to develop deeper trust and faith. Employees working in a family owned business concern are seen to have deeper faith in their employers than those working in the non family owned business concerns. Since employee retention in such firms is high, it is observed that a stronger culture of shared values gets developed. Employees working in such organization also feel that their managers are more likely to treat them fairly. Hence with regards to trust, faith and shared values family owned businesses outperform other types of businesses. However, since large family owned businesses are seen to be managed by non-family managers, such characteristics are not visible. Such organizations therefore portray a low level of trust and faith. However shared values are developed in a similar manner in such firms as in smaller family managed businesses. Since in family owned businesses, owners and administrators do not change very frequently, the cultural environment developed in such organization stays more or less similar for a long duration (Bacon, Hoque and Siebert, 2013). However studies conducted in this respect reveal that there are very less evidences in respect of the influence of such factors upon innovation. In general when the employee employer relationship is strong, innovation is positively impacted. But in case of family businesses since other characteristics such as traditional values, conflicts between family owners, lack of knowledge and longer tenure of employers are stronger factors which influence innovation in family owned business concerns.
