Strategic innovation and new product development in familyfirms An empirically grounded theoretical framework
Lucio Cassia and Alfredo De Massis Department of Economics and Technology Management and
CYFE – Center for Young and Family Enterprise, University of Bergamo, Bergamo, Italy, and
Emanuele Pizzurno Department of Management, Economics and Industrial Engineering,
Università Carlo Cattaneo – LIUC, Castellanza, Italy
Abstract Purpose – This study aims to investigate the relationship between the presence of the family variable within a business enterprise and the managerial factors affecting the success of new product development (NPD). This can be structured into three research questions: What is the relationship between the presence of the family variable within a business enterprise and the managerial factors affecting the success of NPD activities? How the managerial factors affecting the NPD process are faced in family firms? Which are the main differences (e.g. strengths and/or weaknesses) in dealing with the managerial factors affecting the NPD process between family and non-family firms?
Design/methodology/approach – The study employs a grounded-theory and case-study approach to investigate the relationship between the presence of the family variable within a business enterprise and the managerial factors affecting the success of NPD. The starting point is an in-depth literature review on the managerial factors differentiating family from non-family firms, and the managerial factors affecting NPD success. Then, a multiple case-study on five Italian family firms and five Italian non-family enterprises is conducted. The case-studies lead to the development of an empirically grounded theoretical framework that outlines how the distinctive characteristics of family businesses are related to the managerial factors affecting NPD success.
Findings – Family firms clearly emerge as more long-term oriented than non-family enterprises. The long-term orientation of family businesses vs non-family companies seems to play a pivotal role in originating NPD projects with long-term thrust. If a company is long-term oriented it is reasonable to expect that it will put its long-term vision in NPD programs, thus reaching a NPD long-term thrust.
Research limitations/ implications – The study advances research on strategic innovation and NPD in family vs non-family firms. It develops new theory at the important intersection of family business and innovation/NPD research, filling a gap in the literature and providing justification and guidance for the design of more comprehensive studies. Future research could investigate and test the theoretical framework on a wider empirical base, using either qualitative or quantitative methods.
Originality/ value – The paper addresses the failure of innovation management research to recognize, embrace, and deliberately incorporate family firms. It therefore fills a gap in the literature and extends prior research by introducing specific propositions that are supported by the case data and originally integrating them in the general research stream on NPD and family-firm characteristics. The originality of the study lies also in the fact that it appears to be the first comparative analysis on this specific topic involving both family and non-family enterprises.
Keywords Family business, Family firms, New product development, Innovation, Strategic entrepreneurship, Italy, Innovation
Paper type Research paper
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Received 13 November 2010 Revised 20 February 2011 Accepted 11 April 2011
International Journal of Entrepreneurial Behaviour & Research Vol. 18 No. 2, 2012 pp. 198-232 q Emerald Group Publishing Limited 1355-2554 DOI 10.1108/13552551211204229
Introduction Strategic innovation and New Product Development (NPD) are important dimensions of strategic entrepreneurship (Hitt et al., 2007; Ireland et al., 2003). This study is focused on NPD in the important and most significant form of organizational enterprises: family firms.
Although there is no commonly accepted definition of what is meant by the term “family business” (Kraus et al., 2011; Chua et al., 1999; Westhead and Cowling, 1998), in this study we follow Chua et al. (1999) in defining a family business as “a business 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.” This definition is consistent with the fact that the term family business is typically used to define organizations in which the behavior of actors and the nature of relationships within them are influenced by the family vision that is oriented to trans-generational pursuance and controlled by a familial dominant coalition.
The firms that fit this definition play a crucial role in all the economies of the world (Neubauer and Lank, 1998; Aronoff and Ward, 1995; Churchill and Hatten, 1987).
However, given that the family firm is a very important organizational form today, it is surprising that only a few studies in the mainstream management literature have included the family as a variable and most of the management journals and books seem to have rather ignored it (Dyer, 2003; Schulze et al., 2001). This is true, in particular, in the field of innovation management and new product development where a small number of researches have been published (Cassia et al., 2011, Craig and Moores, 2006; Litz and Kleysen, 2001) about the managerial and organizational practices related to innovation in the specific and prevailing context of family firms. More specifically, the field of new product development within family businesses has been largely ignored and it requires more in-depth investigations (as suggested by Souder and Thomas, 2003), considering the crucial role NPD plays as determinant of sustained company performance (Ernst, 2002; Cooper and Kleinschmidt, 2007). In fact, it is nowadays largely accepted that NPD is remarkably important for the survival, sustainable competitive advantage and performances of every company (Cormican and O’Sullivan, 2004; Di Benedetto et al., 2003; Song and Parry, 1997; De Brentani, 1989), and also for the specific category of family firms (Souder and Thomas, 2003; Hausman, 2005; Craig and Moores, 2006). This consolidated relevance can be demonstrated also by the huge amount of contributions studying factors affecting NPD success as presented in the following sections (among the others: Cooper and Kleinschmidt, 2007; Ernst, 2002; Calantone et al. 1997).
We must question whether current innovation and NPD management theory and practice can be generalized to the important population of family firms and how the presence of a family within a business enterprise may affect its innovation and NPD activities. The failure of innovation management research to recognize, embrace, and deliberately incorporate family businesses may lead to family-related factors being missed that would make existing theories more robust and valuable to family and non-family firms alike.
To address this gap in the literature, this study deals with the topic of NPD in family vs non-family firms. In particular, it attempts to investigate the relationship
between the presence of the family variable within a business enterprise and the managerial factors affecting the success of NPD. It provides an empirically grounded theoretical framework that outlines how the distinctive characteristics of family businesses (compared to those of non-family firms) are related to the managerial factors affecting NPD success, thus providing an exploratory understanding of how the presence of a family in the business may affect the success of NPD activities.
To this aim, a grounded-theory approach has been employed (Glaser and Strauss, 1967) and a multiple case-study (Strauss and Corbin, 1998; Yin, 1994; Handler, 1989) on five Italian family firms and five Italian non-family enterprises has been conducted.
The paper is organized into five main sections. The following section extensively describes the theoretical context of the study, and is structured in three distinct subsections providing a review of the previous literature on:
(1) the relationship between the family variable and the management of a business;
(2) innovation and npd in family firms, focusing on the few contributions in this field specifically related to family businesses; and
(3) the managerial factors affecting the success of NPD.
Afterwards, the research questions and methodology are presented. This is followed by the section dedicated to the empirical study and the implications of the empirical findings. Finally, in the last section an empirically grounded theoretical framework is proposed, the several contributions and limitations of the study are discussed, and directions for future research and theory development are outlined.
Literature review The family as a key variable in the management of the business Some researches suggest that the exclusive intersection between the family subsystem, the business subsystem, and the individual organizational members, generate a bundle of unique resources and capabilities (Chua et al., 1999; Olson et al., 2003; Zahra et al., 2004). The outcome of these intersections has been referred to as “familiness” (Habbershon et al., 2003), a variable that can differentiate the firm, resulting in a competitive advantage, as suggested by the resource-based view (RBV) (Habbershon et al., 2003; Sirmon and Hitt, 2003; Habbershon and Williams, 1999; Prahalad and Hamel, 1990; Barney, 1991). The family is, indeed, a variable that influences behavior at the individual, group and organizational levels of analysis, resulting in a significant impact on the management of the firm (Dyer, 2003).
This is confirmed by some studies revealing that family firms are different from non-family enterprises in the way they operate and are governed (Dunn, 1996; Stoy Hayward, 1989, 1990, 1992; Donckels and Frolich, 1991; Welsch, 1991). The primary reasons of this difference can be found in two primitive “family features” that characterize relationships and drive behavior in family firms: family goals and values (Fukuyama, 1995; Tagiuri and Davis, 1992; Dyer, 1986). The goals of a family are generally to develop, support and take care of family members. Conversely, non-family firms base their goals on profits, efficiency and other economic measures. Research on family firms indicates that family goals and needs often are key influential issues in decisions regarding business strategy, financial strategy, and organizational structures, such as plan location (Mishra and McConaughy, 1999; Kahan and Henderson, 1992). The value of altruism also plays a crucial role in family firms that is
not generally found in non-family companies. As asserted by Schulze et al. (2001), altruism induces family members to be considerate of one other, promote and sustain the family bond; and this in turn promotes loyalty and commitment to the family firm’s long-run prosperity. But when the value of altruism is infringed in families, it may conduct to antipathy and jealously, originating conflicts in the firm (Hilburt-Davis and Dyer, 2003).
Family goals and values characterize relationships and drive behavior in family firms. Relationships and behaviors in a firm have a significant impact on several managerial factors, such as long-term orientation, “conservativeness” of strategic behaviors and risk aversion, governance mechanisms, etc.
A list of the managerial factors that are likely to differentiate family firms from non-family enterprises, a short summary of key findings from the family business literature and a few selected bibliographic sources are reported in Table I.
Time orientation (long-term vs short-term). There is an accumulation of evidence supporting that family goals and values lead family businesses to be characterized, if compared to non-family companies, by a long term view resulted in less pressure for short term paybacks and more attention to ensure the longevity of the business (Dunn, 1996; Stoy Hayward, 1992, 1993; Stein, 1989, 1988). This clearly affects the strategic decisions (Sharma et al., 1997).
“Conservativeness” of the strategic behavior and risk aversion. Donckels and Frolich (1991) state that a major difference of family firms is that their strategic behavior is “conservative”, with a concentration on incremental, regional expansion rather than rapid or wider international expansion. This characteristic, mainly due to the risk-aversion of family entrepreneurs, emerges also from the research of Dunn (1996) and Stoy Hayward (1993). Dunn (1996) and Donckels and Frolich (1991) assume that family firms are cautious and stable rather than progressive or dynamic forces in their economies because their owner managers are significantly less profit and growth oriented than managers in non-family firms.
Degree of “progression” of human resources issues and appropriateness of staffing. Family firms are considered to be “less progressive” in terms of human resource issues such as employee involvement (Donckels and Frolich, 1991). Furthermore, the study by Dunn (1996) on ten Scottish small and medium family firms showed that a common characteristic for many of them was over-staffing, with potential risks of less efficiency in the execution of their business activity.
Motivation, cohesiveness and commitment of workforce. Family businesses tend to pay higher wages than non-family firms and care significantly more about the satisfaction of their employees (Donckels and Frolich, 1991; Stoy Hayward, 1989). This may result in a generally superior motivation of the workforce (Dunn, 1996), that feels a significant sense of responsibility to the family and is highly committed to pursue shared goals and values, thus potentially creating a unique source of competitive advantage (Fukuyama, 1995; Lyman, 1991).
“Openness” toward social capital/networks and external environment. Family businesses are “closed family related systems” (Donckels and Frolich, 1991) and “familiness” influences social capital and resource networks (Fukuyama, 1995; Wong et al., 1992). Family firms appear to be more “inward looking” (Dunn, 1996) and “introverts” (Stoy Hayward, 1989, 1990) than non-family businesses. They need fewer socio-economic networks and are perceived as rather “independent” and with “less
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