Journal of Family Business ManagementEmerald Article: The innovativeness of family firms through the economic cycleJosep Llach, Pilar Marquès, Andrea Bikfalvi, Alexandra Simon, Sascha Kraus

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To cite this document: Josep Llach, Pilar Marquès, Andrea Bikfalvi, Alexandra Simon, Sascha Kraus, (2012),"The innovativeness of family firms through the economic cycle", Journal of Family Business Management, Vol. 2 Iss: 2 pp. 96 - 109

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The innovativeness of familyfirms through the economic cycleJosep Llach, Pilar Marques, Andrea Bikfalvi and Alexandra Simon

Business Administration and Product Design,University of Girona, Girona, Spain, and

Sascha KrausUtrecht University, Utrecht, The Netherlands and University of Liechtenstein,

Vaduz, Liechtenstein

Abstract

Purpose – The purpose of this paper is to understand whether the innovative effort of organizationsincreases or decreases over time, especially when the competitive environment is changing, as hasbeen the case in the current economic downturn. For this reason, the objective of this article is to gaugethe possible differences in innovative behaviour between family firms (FFs) and non-family firms(NFFs) when the business environment becomes increasingly hostile.Design/methodology/approach – The approach is a natural experiment study, which the authorsuse to analyse the possible differential behaviour of FFs in the recession context in contrast to theprevious growth context. The empirical data for the present study were compiled through the Spanishsub-sample of the European Manufacturing Survey’s (EMS) 2006 and 2009 editions. To test thehypothesis the paper uses a matched-pairs method that increases the comparability of the availabledata.Findings – Family firms have a significant higher reduction of R&D in comparison to nonfamilyfirms. But contrary to some of the hypotheses, the other innovation dimensions have no significantdifferences, although most results indicate that family firms systematically and generally reduce theirinnovation more than NFFs.Originality/value – This research contains two original features. First, the authors have been able toanalyse the change in innovation behaviour of a comparable set of FFs and NFFs. The second relevantfeature is the analysis of the specific interaction of FFs’ differential traits with the different types ofinnovation. The availability of detailed empirical data on innovation adoption enabled this study andis also one of its contributions. This research has also value since the results can be read as a challengeto existing approaches on the preferences and nature of FFs that have either a positive or negativeeffect on innovation.

Keywords Family business, Economic recession, Innovation, Spain, Family firms

Paper type Research paper

1. IntroductionInnovativeness is a vital component of the entrepreneurial behaviour of firms and canbe used to achieve competitive advantages and survival (Miller, 1983). Nevertheless,innovation is currently not being intensively studied in the context of the ongoingglobal crisis, probably because there is a general belief that innovation does not occurduring economic downturns (Filippetti and Archibugi, 2011). However, the relationshipbetween innovation and the dynamics of economic development has in fact beenstudied (Freeman, 1984; Perez, 2002). According to Filippetti and Archibugi (2011), twocompeting hypotheses can be outlined regarding the relationship between innovationand business cycles: innovation is cyclical and therefore firms tend to reduce theirinnovation efforts during periods of recession; and innovation is counter-cyclical andrecessions are a fertile environment for firms to innovate.

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/2043-6238.htm

Journal of Family BusinessManagementVol. 2 No. 2, 2012pp. 96-109r Emerald Group Publishing Limited2043-6238DOI 10.1108/20436231211261853

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In an economic crisis, the business environment becomes more hostile andless munificent (Zahra, 1993). Due the lack of demand that exists in an unstableenvironment (Miller, 1988) and the lack of resources (Zahra and Bogner, 2000),innovative efforts will typically decrease. Some authors have considered environmentalfactors and their relationship to innovative behaviour, specifically as they relate tofamily firms (FFs) (Cruz and Nordqvist, 2008). The reason for this is that FFs are of theutmost importance, constituting on the one hand the vast majority of enterprises inEurope’s economies (Kraus et al., 2011). In spite of this, their innovation activities arestill regarded as a clearly under-investigated research topic (Roßl et al., 2010).

Research provides some empirical evidence of the effect of perceived environmentalmunificence on innovation in FFs. For example, Blake and Saleh (1995) proposethat FFs operating in environments that are uncertain but generous in terms ofopportunities show greater innovative activity than FFs in more stable environmentswith fewer opportunities. Similarly, Kellermanns and Eddleston (2006) establish thatFFs perceiving higher levels of technological opportunity in their environment aremore likely to be associated with corporate entrepreneurship. Tanewski et al. (2003)deal with environmental hostility, although they find no support for their hypothesisthat firms experiencing greater environmental hostility and uncertainty will adopt thestrategic posture of prospectors. Goto (2008) more recently found that well-establishedFFs have some common traits, including their sensitivity to environmental change, andtheir flexibility to adapt the firm to environmental changes. Also, Cruz and Nordqvist(2008) explore the effect of a set of external factors (equivalent to environmentalmunificence) on entrepreneurial orientation.

However, most of the scarce research that has been published focuses on theassessment and explanation of the relationship between innovative capabilities andenvironmental factors at a given point in time. The present research contributes tothis debate as it aims to understand whether the innovative effort of organizationsincreases or decreases over time, especially when the competitive environmentis changing, as has been the case in the current economic downturn. For this reason,the objective of this paper is to gauge the possible differences in innovative behaviourbetween FFs and non-family firms (NFFs) when the business environment becomesincreasingly hostile.

In general terms, the Spanish economy is severely affected by the crisis, situationreflected by different indicators and official competitiveness reports. It is the case of theGlobal Competitiveness Report that situates Spain according to its global competitivenessindex on position 28 for 2006-2007, ranked 29 in 2007-2009, dropping to position 42in 2009-2010. The data showed by the European Competitiveness Report (EuropeanCommission, 2010) shows that Spain and Ireland, among a series of considered countries,are the ones experimenting considerable falls of percentage of GDP starting with 2006.

In this situation it is interesting to analyse how firms, family and non-family, evolve,react and struggle and up to what degree innovation is a feasible solution, in theSpanish context.

2. Types of innovationInnovation can take several forms (see Table I), such as R&D based, which issometimes a precursor to product innovation, and may also occur in the form of serviceinnovation and organizational innovation. The quantity of resources needed for eachtype of innovation is different and the perceived level of risk associated with them isdifferent as well.

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Innovation is commonly seen as a key to success and essential for thriving in afast-changing world (Baumol, 2002; Cefis and Marsili, 2006). But innovation and itsrelationship with possible determinants is a complex issue. The type of organizationcould especially influence the relationship between innovation and its determinants(Damanpour, 1991).

2.1 Innovation in FFsGiven the heterogeneous character of FFs and their diverse characteristics, it shouldbe noted that the different goals of FFs are a driving force in directing the companybehaviour. FFs usually pursue a combination of family-oriented goals next tobusiness-oriented goals (Chua et al., 2003). Therefore, it should be clear that the goalsof a family business can provide a fruitful path towards the innovative behaviour offamily businesses.

Previous (mostly non-empirical) research widely assumed that FFs show lowerlevels of innovation since they are risk averse, and primarily concerned with the wealthof their firm for future generations. Or, FFs show a low affinity towards externalfunding in order to stay in control and, because of this, decrease the resources availablefor innovation. But more recently the idea has evolved that FFs are in fact moreinnovative than would be expected (Roßl et al., 2010). For example, Short et al.(2009) showed that FFs are less risk loving and proactive, but not less innovative.Lumpkin et al. (2010) looked at the effects of having a short-term vs a long-termorientation on innovativeness, and the willingness to innovate. Having a long-termorientation could benefit innovativeness by increasing tolerance towardsexperimentation, thus expanding the time for creativity and the achievement oflong-term goals. Having a short-term orientation could however benefit innovativenessby increasing the urgency to innovate. More evidence was found that characteristics ofFFs enhance innovation and the effect of innovativeness on growth (Casillas andMoreno, 2010; Sharma, 2011).

So-called “dynasties”, i.e. FFs that are successful for more than 100 years, seeinnovation as the skill to continuously look for new technologies and new marketswhile combining this with a long-term strategy (Bergfeld and Weber, 2011). Byrom andLehman (2009) point to the South Australian “Coopers Brewery”, one of the fewremaining family-owned brewers, which has relied on their traditions using a nichestrategy while at the same time emphasizing ongoing innovation in order to make theproduction process more efficient.

Gudmundson et al. (2003) also show that FFs, compared to NFFs, implementinnovations more frequently. Chang et al. (2010) showed that stock market-listed FFsand NFFs firms alike see an increase in their stock price after innovationannouncements, while FFs benefit less from these kinds of announcements.

R&D Long term, high investment, high riskFavoured by low hostility, with high dynamism and heterogeneity

Product innovation Mid-term, moderate investment, moderate riskFavoured by high dynamism, with moderate hostility and heterogeneity

Service innovation Lower investment, internal resources, low risk, bridging social capitalOrganizationalinnovation

Lower investment, internal resources, low risk, bonding social capital

Cooperation Lower investment, internal resources, moderate risk, bridging social capital

Table I.Main characteristicsof different typesof innovation

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All in all, many FFs seem to be aware that innovation is a crucial aspect for survival.This is supported by Kellermanns et al. (2011), as the willingness to positively innovaterelates to performance in FFs, and by Kraus et al. (2012) who show that innovationintensity is positively related with corporate success in FFs as well.

Nevertheless, there is still a considerable gap in the literature concerning theinternal process of innovation in FFs (Gudmundson et al., 2003; Craig and Moores,2006), especially when it comes to large-scale quantitative empirical researchwhich is set within a particular context. In this line, Moores and Barrett (2003)suggest that FFs should manage the internal processes of the firm (such as innovation)as well as they should develop strategies to face the demands of the externalenvironment.

3. Development of hypothesesPrevious research argues that FFs are strong when it comes to product innovationbecause of their long-term orientation, patience and persistence in their strategic work(Miller and Le Breton-Miller, 2005). Another positive characteristic of FFs is that theyare less dependent on the external context and the external resources, which protectsthem from the effects of a less munificent environment. However, the environmentalchanges that occur in a downturn require that new decisions be taken, and in FFsthese will be influenced by higher risk aversion (Morris, 1998); a preference for moreconservative policies that tend to limit growth (e.g. Shepherd and Zahra, 2003); anda reluctance to take on more debt (Gallo et al., 2004; Poutziouris, 2006). This suggeststhat in recessionary contexts, the investments of FFs in resource-intensive types ofinnovation will be less attractive to FFs, since these investments entail a higherinvestment and risk. Furthermore, the risk aversion of FFs can lead them to refrainfrom innovation efforts. The reasoning presented above provides the foundation for thefollowing hypotheses:

H1. In a recession, FFs will reduce their R&D efforts more than NFFs.

H2. In a recession, FFs will reduce their product innovation more than NFFs.

Conversely, service and organizational innovation are more dependent on internal andcontrollable resources, which are relatively less scarce in recessionary contexts, sincereduced demand may result in some resources being under-used. The natureof FFs and their family links (Cabrera-Suarez et al., 2001; Habbershon and Williams,1999) is more likely to favour these types of innovation, since they depend more oninternal resources, and are more conservative when it comes to R&D and productinnovation.

Organizational innovation may transcend the boundaries of the firm, since it isrelated to customers, suppliers or other partners. For example, more and newways of cooperating along the value chain can also be considered to be a type ofinnovation. FFs have some advantages over NFFs in this type of intangible innovation,because they are better positioned to build social capital with other stakeholders (Dyer,2006; Carney, 2005), especially with customers (Gomez-Mejia et al., 2007; Tsui-Auch,2004), as is defended by stewardship approaches (e.g. Miller and Le Breton-Miller,2005). Cooperation is a relevant way to look for complementary resources andcapabilities, especially when stimulated by environmental changes, such as the effectsof economic turmoil, and is used as a way to achieve higher degrees of innovativeness

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(Bayona-Saez et al., 2002). This could encourage FFs to invest more in service andorganizational innovation. Thus:

H3. In a recession, FFs will invest more in service innovation than NFFs.

H4. In a recession, FFs will invest more in organizational innovation than NFFs.

H5. In a recession, FFs will invest more in cooperation than NFFs.

4. Methodology4.1 SampleThe empirical data for the present study was compiled through the Spanishsubsample of the European Manufacturing Survey’s (EMS) 2006 and 2009editions. The survey collects detailed information on the following aspects of firms:strategy, production modernization, production and organizational techniques,globalization of production, energy, production and firm characteristics, as well asperformance indicators.

The final dataset for 2006 consists of 151 valid entries, representing a 3.5 per centresponse rate. In 2009, the situation was slightly different, with 113 valid answersbeing obtained, meaning a response rate of 2.7 per cent. The low response rates may beattributable to the fact that the survey was not mandatory, rather new (only beinglaunched in 2006 and 2009) and, perhaps most importantly, to the present economicsituation (Table II).

In general terms, a set of common core questions represent the backbone ofthe questionnaire. A series of country-specific questions complement them in orderto adapt the method to each partner’s interest and idiosyncrasies. For bothrounds Spain decided to include a block of questions related to family businessesand their characteristics. Although the absolute number of responses decreasedbetween 2006 and 2009, the proportion of FFs (two-thirds) to NFFs (one-third)remained constant.

EMS – Spain 2006 EMS – Spain 2009

Population 43,260 44,786Target population 4,450 4,300Survey conduction period April-July 2006 May-September 2009Valid answers 151 113Response rate (%) 3.5 2.7Responding unit Manufacturing establishment Manufacturing establishmentUnit’s minimum size(employees)

20 20

Stratification By economic activity and numberof employees

By economic activity and numberof employees

Selection criteria Fomento de la Produccion database2006 edition

Fomento de la Produccion database2009 edition

Instrument used EMS questionnaire EMS questionnaireCountry-specific topics Family firm and health and safety Family firm and health and safetyReference period 2003-2005 2006-2008

Table II.Methodological summaryof the study

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4.2 Matched-pairs methodIn this section we present the method used to match firms in 2006 and 2009, as well asthe method used to validate variables and measures for the concept of intangibleinnovation (see Figure 1).

Matching methods have been widely used in the evaluation of policy interventionsand, more recently, in the evaluation of innovation policy at the micro level (e.g.Czarnitzki and Licht, 2006), and also in FFs research (e.g. Allouche et al., 2008; Llachand Nordqvist, 2010). The nearest neighbour matching method is the most widely usedprocedure, and is the one used in this paper.

As presented in Table III, the treatment variable is FFs, while the variable usedto match the nearest neighbour is the economic activity according to the NACEcode reported by both types of firm, as the sector of activity is considered to be abasic differentiator in both the general behaviour and the innovative behaviour of firms.Afterwards, in order to estimate the nearest neighbour, we used five other variables.

We used the SPSS nearest neighbour matching procedure. Since the matching criteriaare rich, the procedure is quite demanding. Consequently, only 22 matching pairs of firmswere obtained (22 FFs in 2006 with 22 FFs in 2009, and 22 NFFs in 2006 with 22 NFFs in2009). In total, 88 firms entered the analysis, 44 for each of the periods under consideration.

The descriptive statistics of the matched pairs of FFs show no statisticallysignificant differences for mean values. FFs meeting the matching criteria in 2009

Method

Nearestneighbourmatching I

Nearestneighbourmatching II

Factoranalysis

Aim

To match FFs according to size, age, sector,firm’s position in the supply chain and productcomplexity in 2006 with similar firms in 2009

To match NFFs according to size, age, sector,firm’s position in the supply chain and productcomplexity in 2006 with similar firms in 2009

To validate the measure of innovation

Outcome

22 pairs of FFs in2006 and 2009(44 firms)

22 pairs of NFFs in2006 and 2009(44 firms)

Construct of serviceand organizationalinnovation

Step 1

Step 2

Step 3

Figure 1.Stepwise chronological

method used

Variables Values

Treatment variableFamily firm 1, family firm indicates that the firm is a family firm

0, otherwise

Variable used to match the nearest neighbourEconomic activity NACE codes

Variables used to estimate the nearest neighbourSize (log) Log of number of employees in 2005 and 2008Age (log) Log of years since foundationSupplier of components 1 indicates that the firm is a supplier of components

0 otherwiseProducer of finishedproducts

1 indicates that the firm is a producer of finished products0 otherwise

Product complexity 1 indicates one-piece products2 indicates multi-part products with a simple structure3 indicates multi-part products with a complex structure or complexsystems

Table III.Description of

matching variables

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achieved relatively higher sales, and had fewer employees and a lower share of exports.Statistically significant differences for mean values are detected for the matchedNFFs which in terms of both sales and employees were smaller in 2009 and had half theshare of exports.

4.3 Measurement analysis for organizational and service innovationsIn the present study we extend traditional innovation types to include organizationaland service innovations. The organizational innovation construct was measured basedon five types of organizational innovations. On the other hand, the service innovationconstruct was measured based on four different types of product-related services(see details of all variables in Table VI). In all cases, we used a five-point Likert scale tomeasure the extent of use of each type of innovation.

A principal component analysis (PCA) was performed in order to validate the itemsto be considered for organizational and service innovations, and the results arepresented in Table IV. A varimax rotation was applied to better interpret thecomponents. There is convergent validity because the items of each stream load on asingle factor. There is also discriminant validity because no items load on more thanone factor.

The reliability of the resulting two constructs was assessed using Cronbach’s a, aspresented in Table V and both exceed the recommended minimum value of 0.6suggested by Malhotra (2004). This indicates that the items included strongly measurethe underlying constructs.

5. Results5.1 Testing of hypothesesThis section presents the results obtained when comparing the two similar subsamplesof 44 FFs and 44 NFFs in 2006 and 2009 according to the previously presentedframework of measures. Comparing FFs and NFFs is a commonly used method in FFresearch (e.g. Llach and Nordqvist, 2010; Kraus et al., 2012).

The constructs analysed are R&D and product innovation and cooperation forthe match-paired subsamples of FFs and NFFs in 2006. The non-parametricMann-Whitney U-test is used for assessing whether the two subsamples’ observations

Component1 2

Organizational innovations (a¼ 0.631)Time bank for flexible working hours 0.668Integration of tasks 0.726Creating customer- or product-focused lines/cells in the factory 0.590Team work in production 0.600Internal zero-buffer principle (kanban) 0.564Product-related services (a¼ 0.750)Product-related services: assembly, initial start-up 0.711Product-related services: training 0.676Product-related services: maintenance 0.859Product-related services: operation of the product/equipment for the customer 0.743

Notes: Extraction method: PCA and rotation method: varimax with Kaiser normalisation a rotationconverged in two iterations

Table IV.Rotated componentmatrix for non-tangibleinnovations

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come from the same distribution, since this test is robust enough for the small size ofthe two subsamples of matched pairs.

For the period of analysis 2006-2009, FFs show lower levels in all values consideredin 2009 compared to 2006, meaning an obvious decrease in the analysed items.Statistically significant mean value differences show an important decrease in thecooperativeness of FFs. They also have a lower proportion of employees devoted toR&D tasks. The incomes generated by products that are new to the firm and new to themarket also decline (see Table V).

The situation in the case of NFFs is, to some degree, different. This group has moreemployees devoted to R&D tasks and product innovation, although the differences for theyears considered are statistically significant only for 2006. The use of cooperation decreases,but the results should be interpreted with caution since they are not statistically significant.

For detail on the difference between innovative behaviours among FFs and NFFs, inthe case of R&D, product innovation and cooperation, Table VIII shows that significantdifferences were found only in the first of the constructs.

Thus, H1, which states that in a recession environment, FFs will reduce theirR&D efforts more than NFFs, is statistically supported (see Table VI) since there is aclear opposite trend: NFFs’ samples present significantly larger means in 2009 incomparison to 2006, while FFs have non-significant lower results in 2009 than in 2006.

For product innovation, H2 proposes that in a recession environment, FFs willreduce their product innovation more than NFFs. Although there is no statisticalsignificance, Table VI supports this point with clear reductions in FF productinnovation, opposite to the increasing indicators for NFFs.

H5 proposes that in recession contexts FFs’ investment in cooperation will be lessreduced than with NFFs. Our results do not find support for this hypothesis becauseFFs’ levels of cooperation in the 2009 sample are lower than in 2006 (see Table VIII).However, FFs preserve a larger mean result for two out of the three items in thecooperation construct. As with H2, there is also no statistically significant differencebetween the differences in the period 2006-2009 for both FFs and NFFs.

Non-familyfirms Family firms

2006 2009 Significance* 2006 2009 Significance*

R&DQualified employees 13.682 22.500 0.155 20.000 17.600 0.394Proportion of employees devotedto R&D tasks 2.211 6.267 0.011* 4.900 2.941 0.306Product innovationProportion of new products into the market 15.571 18.316 0.557 20.706 16.773 0.767Proportion of new market products into themarket 4.772 14.600 0.156 13.706 7.800 0.336CooperationCooperation with other firms in production 0.250 0.190 0.649 0.591 0.250 0.054**Cooperation with other firms in purchasing 0.250 0.143 0.392 0.545 0.158 0.005*Cooperation with other firms in services/sales/distribution 0.350 0.333 0.911 0.682 0.250 0.006*

Notes: *,**Mann-Whitney test is significant at po0.05 and po0.10, respectively (two-tailed test)

Table V.R&D, product innovationand cooperation in family

and non-family firms(2006-2009)

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Table VII shows the extent of use of organizational and service innovations for FFsand NFFs. Overall, FFs show a clear reduction in all the variables measured, which fororganizational innovations generates statistically significant differences in meanvalues for flexibility in working hours, integration of tasks and the creation ofcustomer- or product-focused lines/cells in the factory. With regard to product-relatedinnovation, the decrease in FFs offering training and operation of the product/equipment for the customer are statistically significantly lower in 2009 compared with2006. The results for NFFs reveal that there is not a clear, significant change inorganizational innovation for NFFs, although four out of five means are lower in 2009than in 2006. The decrease is only statistically significant in the case of creating

Familyfirms

Non-familyfirms

2006 2009 2006 2009Mean Mean Significance* Mean Mean Significance*

Organizational innovationsTime bank for flexible working hours 0.36 0.10 0.048* 0.450 0.286 0.258Integration of tasks 0.86 0.48 0.007* 0.727 0.619 0.454Creating customer- or product-focusedlines/cells in the factory 0.64 0.35 0.067** 0.681 0.429 0.099**Team work in production 0.18 0.06 0.261 0.863 0.909 0.639Internal zero-buffer principle (kanban) 0.82 0.67 0.510 0.318 0.273 0.744Product-related servicesProduct-related services: assembly,initial start-up 0.48 0.43 0.759 0.270 0.400 0.388Product-related services: training 0.57 0.25 0.039* 0.450 0.450 0.977Product-related services: maintenance 0.48 0.25 0.138 0.270 0.350 0.593Product-related services: operation of theproduct/equipment for the customer 0.33 0.10 0.075** 0.090 0.150 0.560

Notes: *,**Mann-Whitney test is significant at po0.05 and po0.10, respectively (two-tailed test)

Table VII.Intangible innovation infamily and non-familyfirms (2006-2009)

Difference NFFs(2006-2009)

Difference FFs(2006-2009) Significance*

R&DQualified employees 8.818 �2.400 0.059**Proportion of employees devoted to R&Dtasks 4.056 �1.959 0.010*Product innovationProportion of new products into the market 2.745 �3.933 0.693Proportion of new market products into themarket 9.828 �5.906 0.413CooperationCooperation with other firms in production �0.060 �0.341 0.513Cooperation with other firms in purchasing �0.107 �0.387 0.258Cooperation with other firms in services/sales/distribution �0.017 �0.432 0.134

Notes: *,**Mann-Whitney test is significant at po0.05 and po0.10, respectively (two-tailed test)

Table VI.Differences in R&D,product innovationand cooperation forthe period 2006-2009

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customer- or product-focused lines/cells in the factory. In the case of service innovation,items for 2009 either decrease their means or maintain their value, although thechanges are not statistically significant.

When we analyse the differences in the reductions of all the variables we cannotaffirm that FFs and NFFs have similarly reduced their efforts in both organizationalinnovations and product-related services, but differences are not statisticallysignificant (see Table VIII).

Thus, our findings do not support H3 or H4, which state that in a recessionenvironment, FFs respectively invest more in service innovations and organizationalinnovations.

6. ConclusionIn the current times of economic instability, with some countries perceived to bevirtually on the brink of financial collapse, FFs’ orientation to long-term survival issupposed to be contributing to the avoidance of panic and general hysteria, thusfacilitating a more stable economy and society (Astrachan et al., 2009). However, ourresults for Spain, a country still in a clear recession in 2009 when the companies weresurveyed, indicate that FFs are under-investing in innovation just as much ascomparable NFFs.

Our results indicate that FFs only deviate significantly from NFFs in R&D efforts,since FFs in our sample decrease these indicators, while NFFs increase them. Forother components of innovation, i.e. product innovation, cooperation, organizationalinnovation and product-related services, differences were generally not significant inour analyses. Up to this point our results modestly challenge existing theoreticaldebates that stress the different preferences and nature of FFs that would predicta worse innovation performance than NFFs. This means that we do not find muchof the negative effects on innovation of the higher risk aversion (Morris, 1998),conservatism (e.g. Shepherd and Zahra, 2003), under-investment (Gomez-Mejıa et al.,2007), or reluctance to take on debts (Allouche et al., 2008) argued in the literature.

However, FFs in our study present a generalized reduction of all types of innovationfor each of the single indicators used. In contrast, NFFs present some positive dynamic

Difference NFFs(2006-2009)

Difference FFs(2006-2009) Significance*

Organizational innovationsTime bank for flexible working hours �0.164 �0.26 0.794Integration of tasks �0.108 �0.38 0.226Creating customer- or product-focused lines/cells inthe factory �0.252 �0.29 0.532Team work in production 0.046 �0.12 0.176Internal zero-buffer principle (kanban) �0.045 �0.15 0.668Product-related servicesProduct-related services: assembly, initial start-up 0.130 �0.05 0.565Product-related services: training 0.000 �0.32 0.165Product-related services: maintenance 0.080 �0.23 0.355Product-related services: operation of the product/equipment at/for the customer 0.060 �0.23 0.165

Notes: *,**Mann-Whitney test is significant at po0.05 and po0.10, respectively (two-tailed test)

Table VIII.Differences in

organizational innovationsand product-related

services for the period2006-2009

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differences, including R&D, for product innovation and product-related services aswell. These reductions visualize the erosion of the pre-existent good results of FFs inR&D and product innovation. When it comes to cooperation, FFs maintain a slightadvantage with two out of three indicators.

On the whole, statistically significant results, and observed but statisticallynon-significant reductions present concerns on the ability of FFs to build on theirrelative strengths in the current environment and boost their innovation. Thus, ourfindings are not in line with the expected positive effects of familiness (Habbershon andWilliams, 1999), social capital building capability (Dyer, 2006) or stewardship (e.g.Miller and Le Breton-Miller, 2005).

This research contains three original features. First, we have been able to analysethe change in innovation behaviour of a comparable set of FFs and NFFs. Therelatively extreme economic context in 2009 in comparison to 2006 sets a very goodcontext for this dynamic natural experiment. The second relevant feature is ouranalysis of the specific interaction of FFs’ differential traits with the different types ofinnovation. We aimed at an integrative approach of FFs’ characteristics to explainthe different behaviour for each type of innovation, thereby also contributing to theongoing question of the relationship between FFs and entrepreneurship (e.g. Krauset al., 2012). Finally, the availability of detailed empirical data on innovation adoptionenabled this study and is also one of its contributions.

Although more empirical research is needed, our results indicate the need forfurther research on the nature and functioning of resources and capabilities thatinfluence FFs’ behaviour in recessionary contexts. For example, this paper has beengrounded in the environmental dimensions found in previous literature, with therationale that perceptions about the environment influence behaviour. Accordingly,research should consider individual and collective processes that lead to perceptionsabout the environment and how these perceptions influence innovative behaviour asone of the dimensions of entrepreneurship. A better understanding of these processescan then be used to develop the capabilities of FF leaders, allowing them to be betterable to build on their strengths and reduce the impact of their weaknesses. Trainingand consultancy could then be better oriented.

We have used matching methods to look for comparable companies in 2006 and 2009,for both family and NFFs. This is the strength of this research since it allows acomparison of similar types of firms, offering more reliability than a comparison ofsamples containing heterogeneous firms. However, the similarity of our subsamplesof firms is limited, and it is not comparable to the case of a panel of firms at two stages ofthe economic cycle, which would have been an ideal analysis but was not possible withour data. Moreover, our research does not claim to be statistically representative but onlyexplorative. Possible limitations of our study remain the age of the data and the samplesize. Both aspects could be solved and further analysis in the same line of reasoning willbe possible with the EMS 2012 edition. More empirical research would be needed in thisdirection to understand how FFs are adapting their strategies in the current difficultcontext. If the empirical evidence is to some degree similar to our findings, theoreticalresearch should better reconsider which are the main challenges for FFs.

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About the authors

Josep Llach is a Lecturer at the University of Girona (Spain). He holds an Industrial Engineerdegree and a Master’s in Business Innovation and Technology Management. He combines hisresearch studies based on R&D management and innovation Management.

Pilar Marques is Associate Professor of Management at the Universitat de Girona (Spain),where she is currently the Director of the Chair of Family Business. Her main research interestsare innovation and strategy in family firms.

Andrea Bikfalvi is a Lecturer at the University of Girona (Spain). She holds a degree inBusiness Administration and a PhD in the same area.

Alexandra Simon is a PhD Student at the University of Girona (Spain). Her current researchinterests include innovation, family businesses and quality management.

Sascha Kraus is Chairholder/Professor of Entrepreneurship at Utrecht University(The Netherlands) and Research Professor at the University of Liechtenstein. Further, he isVisiting Professor at the University of Girona and the Autonomous University of Barcelona (Spain).Sascha Kraus is the corresponding author and can be contacted at: sascha.kraus@wu.ac.at

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