Innovation in family firm from developing countries: the role of ‘Familiness’

Abstract

Family in business and innovation are considered vital for firm performance and economic growth. Scholars claim that studying this relationship is important, as there are ‘strong theoretical reasons’ to believe that a firm’s innovation, hence firm performance, is positively and/or negatively influenced by the family. Research on the interception of the two fields is growing in developed countries, but is still nascent in developing country contexts. Hence, this study seeks to explore and further existing knowledge on this relationship in such a context. This investigation’ explores how family influences the firm’s innovation activities. It explores particularly the concept of ‘familiness’, which depicts those resources unique to a firm due to the involvement of the family members. Two approaches to ‘familiness’ are adopted, dimensions and resources. Concerning dimensions, three characteristics: components of involvement, essence and organisational identity were explored. The resources approach in this study includes four elements: financial, physical, human and social. In addition to this, the positive or negative nature of the family influence on each resource is considered. These two approaches of ‘familiness’ serves as the theoretical lens for understanding innovation comprehensively by taking into account the types, magnitudes, strategies and sources. This study adopted a qualitative approach to explore this phenomenon. Data were collected from six Colombian family firms through a self-administered questionnaire, followed by in-depth semi-structured interviews with family and nonfamily members in the form of a multi-case study design within purposefully selected firms. Triangulation was achieved by using different sources of information, such as documents, catalogues, newspapers, websites, and academic case studies. Due to the deductive and inductive nature of this study, data were explored and thematically analysed by coding into pre-existing categories suggested by the initial conceptual framework, while new themes emerged from the data. Results showed that when all three ‘familiness’ dimensions are present, there is an impact on the innovation activities within family firms. With respect to resources, the study highlighted the importance of the family influence on the firm’s human resource, and its impact on organisational innovation. This is particular the case when non-family members are more involved in top management teams. An intriguing finding is the relationship between the family’s foreign background and its influence of the firm’s overall innovation activities. In addition to this, by viewing the findings in this study as a whole, it is demonstrated that family firms in developing countries are innovative, which is contrary to existing studies on this subject area. Furthermore, it is advocated that this phenomenon would be better understood and further captured through the entrepreneurship lens. Hence, this is in line with recent views calling for a closer interception of family business and entrepreneurship. This study addresses these issues by weaving in Schumpeter’s ‘creative destruction’ and Kirzner’s ‘entrepreneurial discovery’ approaches to innovation to reconciliate inconsistent findings in the field of ‘innovation and family firms’. This is due to all firm’s engaging in innovative activities in an incremental (Kirznerian) nature, as opposed to a ‘radical’ (Schumpeterian) one, whereby the latter has been the main focus of previous studies. This thesis advocates the need for public and private institutions to implement family business and innovation courses at various levels throughout the country, in order to enable young generations to be expose to the challenges and opportunities that globalisation brings to developing economies. The study highlights the importance of exploring this phenomenon using the family itself as the unit of analysis, as opposed to the firm, in order to move the field forwards. Future research should test the conceptual framework that emerged from this study, both qualitatively and quantitatively, in family firms from other industries, and context within Latin America or beyond.