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Mastering Innovation in Family Firms: How to Resolve the Ability vs. Willingness Paradox

May 31, 2016 • Emerging Ideas, INNOVATION, STRATEGY & MANAGEMENT, Succession Planning

By Alfredo De Massis and Federico Frattini

Family firms represent a highly ubiquitous form of business organisation globally and are the backbone of many industrialised and developing world economies. This article discusses how can family firm managers use Family-Driven Innovation and unlock the innovation potential of the organisations in which they work.

 

Family firms are businesses “governed and/or managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families” (Chua et al., 1999). Family firms represent a highly ubiquitous form of business organisation globally and are the backbone of many industrialised and developing world economies (Villalonga and Amit, 2009).

From decades of theoretical and empirical research (e.g., De Massis et al., 2012), we know that family firms have a highly distinctive behaviour in areas such as internationalisation, entrepreneurship, diversification, financing. This peculiar behaviour – which differs from that of non-family businesses – stems from the involvement of one or more controlling families in ownership and management structures and their orientation to ensure sustainability of the business across generations. This has profound impacts on the choice of the organisational goals to be pursued (Kotlar and De Massis, 2013), the level of acceptable risk in strategic choices (Gómez-Mejía et al., 2007), and the length of the time horizons along which investment decisions are evaluated (Lumpkin and Brigham, 2011).



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One Response to Mastering Innovation in Family Firms: How to Resolve the Ability vs. Willingness Paradox

  1. A great read! My take-out is that there is no single ‘Silver Bullet” when creating and executing on an innovation strategy. The idiosyncracies of cultural and organisational nature impact the way companies approach and execute on innovation. In my experience, this is not only true for Family Businesses but for all businesses. The lack of innovation success or efficacy is abound as many companies adopt ways to innovate which work in particular environments, but not necessarily in their own environment. As a consequence, the belief that innovation will help the company forward diminishes. The key aspects in this are the soft-skill elements; it’s never about the actual process or the tool kit; it’s about understanding the cultural aspects and how these impact “the way we do things”. And it is precisely these sift skills that receive no of insufficient attention when drawing up innovation strategies.

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