When the owner meets the manager: the innovativeness of family-owned and family-managed firms

Abstract

PurposeThis study examines how the extent of family ownership and the degree of family involvement in management influence innovation outcomes in family firms, particularly in the context of emerging European innovation systems.Design/methodology/approachUsing a unique dataset of nearly 3,000 manufacturing firms from ten Central and Eastern European countries, the paper applies propensity score matching and multivalued treatment effect estimation to assess the effects of family ownership and managerial control on both incremental and radical product innovation.FindingsThe majority family ownership is positively associated with firm innovativeness. However, when family ownership is combined with strong family involvement in key management positions-especially above 75%-the propensity to innovate, particularly through radical innovation, significantly declines. This suggests the presence of principal-principal conflicts and a tendency toward entrenchment.Research limitations/implicationsThe study is based on secondary survey data, which restricts the inclusion of additional constructs such as family culture or values that could enrich understanding of family firm innovation behaviour. Future research should explore digital and green innovation dimensions and consider broader sets of organisational and contextual variables.Practical implicationsFamily firms in emerging economies should balance ownership control with professionalised management to enhance innovation performance. Incentivising openness to external managers and collaborators may counterbalance risk aversion and capability constraints.Originality/valueThis study contributes to the literature by integrating agency, stewardship, and entrenchment perspectives and offering empirical evidence on the nuanced interplay of ownership and management in shaping innovation outcomes in family firms within less mature innovation ecosystems.