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Innovations in family businesses: Contextual factors, processes and Performance effects

Department of Business


Project Description

In family businesses, innovation behaviour is often largely shaped by the idiosyncrasies of the business family. For instance, the business family’s desire to sustain the business over generations provides long-term capital (patient capital) to the business and prompts family managers to make far-sighted investment decisions. Family businesses also often form part of strong and trusting social networks with stakeholders, creating many opportunities to mobilise people for new ideas.

However, despite the fact that family businesses retain a number of assets that are conducive to innovation, investigations comparing the innovation output in family businesses and non-family businesses show ambiguous results. These results suggest that family businesses are both more and less innovative. These inconsistencies may be due to paradoxical effects of family involvement, as the family not only constitutes a resource but also a liability for innovation. For instance, family businesses prefer to avoid projects associated with high risk because they do not want to gamble with the inheritance of family members. They prefer continuity which prompts them to rely on what is tried-and- trusted and adhere to family traditions, instead of trying new things. Empirical evidence also indicates that the innovative capacity of family businesses frequently decreases across generations. Thus, although family businesses often have great innovation potential, they are sometimes reluctant to make use of this. This phenomenon is also known as the ability-willingness paradox.

 

The question of how family businesses make use of their innovation capacity and why some family businesses are better innovators than others is therefore the focus of the current research project at the University of Applied Sciences Krems (in cooperation with the Research Institute for Family Businesses, Vienna University of Economics and Business).

 

The project is co-financed by the Province of Lower Austria (Department K3 - Science and Research) and leading companies in the region.



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