Innovation processes in family firms: the relevance of organizational flexibility

The current study attempts to broaden our understanding of the processes underlying successful innovation in family firms by studying not only research and development (R&D) but also organizational flexibility as drivers of innovation performance. Building on existing theoretical and empirical work, we formulate hypotheses on the relationship between family ownership and R&D and organizational flexibility, and on how this translates into successful innovation. Using a sample of 2604 firms and 3140-year observations, we find that family firms engage less in R&D, but are more flexible in the way they organize and that this organizational flexibility enables them to successfully develop new products and even outperform non-family owned businesses when it comes to process innovation. This research contributes to the family business field by disentangling R&D and organizational flexibility as processes underlying the relationship between family ownership and innovation performance. It illustrates how family firms’ organizational flexibility can result in an innovation advantage and thereby has important implications for practitioners.