Aligning strategy and digitalisation activity as an incremental or radical innovation in family farms

Family ownership

From a farming perspective, farmers are attached to their land and incentivised to take care of it (De Rosa and Bartoli, 2016). Since there is some risk with the cost/benefit of PATs due to their capital intensity, high entry costs and fixed transactions (Vecchio et al., 2020), a farmer may not be willing to risk their land to invest in these technologies (De Rosa and Bartoli, 2016).

Family firm research asserts that such firms may be less inclined to invest in new technology and avoid risk (Gómez-Mejía et al., 2007) in order to preserve their SEW (Miller et al., 2015). This is especially true in radical innovations (Hu and Hughes, 2020). Such reluctance is associated with the closed nature and propensity to be inward looking, and consequently not seeking and/or utilising external knowledge of some firms (Cassia et al., 2012). Although this line of argument may not apply to publicly listed family firms (Szewczyk et al., 2022).

Specifically, family ownership may negatively impact the introduction of big data (Arzubiaga et al., 2021) and the internet of Things (Ceipek et al., 2021). Ownership identity may negatively impact the probability of investing due to the additional cost associated with reputational risk of failure, and this is expounded by potential issues that may emerge from using digital technologies, i.e. security issues (Arzubiaga et al., 2021). In contrast, ownership identity positively associates with e-commerce marketing that may utilise the perception as a human brand (Rashid and Ratten, 2020; Muñoz-Bullón et al., 2020).

Family management

From a farming perspective, farmers must have an awareness and capabilities to ensure their farms are a viable economic entity (McElwee and Smith, 2012). Farmers have had a history of being entrepreneurial (McElwee and Smith, 2012), but in relation to digitalisation, they are assumed to lack digital skills (Rolandi et al., 2021). Farm managers may perceive PATs as complex and exhibit organisational inertia, rooted in familiar routines, reducing adoption speed (Vecchio et al., 2020). Research shows that family farm managers are more likely to adopt PATs if they have knowledge on the technology's ease of use (Vecchio et al., 2020).

Family firm research on the family management's influence on digital innovation is mixed. Some studies claim family managers have a negative impact (Liang et al., 2013). Ceipek et al. (2021) illustrate family managers constrain IoT (digitalisation), and this constraint increases the more family managers are involved (as SEW increases in parallel with family members). Higher levels of SEW have been found to alter the research and development (R&D) trajectory (Ceipek et al., 2021). Moreover, Prügl and Spitzley (2020) found that family managers may refrain from external activities to avoid any reputational risk that threaten the firm's SEW (manifested in reputation) despite the potential to advance the firm.

Family's next generation

Farming research has shown that younger people are more likely to attain funds (such as grants) to trigger the farm's growth (De Rosa and Bartoli, 2016). Whilst, an older farmer correlates more with not adopting digital technologies (Barnes et al., 2019). Furthermore, an older farmer with limited energy attempting to pursue new activities may instead lead to the farm suffering due to neglect of core activities (McElwee and Smith, 2012). In contrast, having some maturity may be helpful since the success of implementation of PATs depends on age, level of education and years of on- and off-farm experience (Vecchio et al., 2020). This aligns with the family firm literature which asserts that the renewal of family bonds through dynastic succession increases the likelihood of innovation using new technologies. New technologies may be championed as a transgenerational investment that is required in the succession process (Arzubiaga et al., 2021).

Size of farm and employees (non-family)

Farming research shows the larger the farm, the more likely they are to adopt enough technologies to receive a return on investment (Barnes et al., 2019). Large farms have a capacity to absorb costs and risks associated with PATs investments (Vecchio et al., 2020). Thus, the planning of technology adoption is complex and relies on an appropriate strategy (Barnes et al., 2019). Small farms typically face more barriers due to information asymmetry, policy barriers and resource constraints (McElwee and Smith, 2012).

From a family firm perspective, Rashid and Ratten (2020) found family-owned firms enhance their survivability by exploiting “digital skills” from employees. Adding to this, Arzubiaga et al. (2021) proposes binding social ties may have a positive impact on digitalisation, with younger family members more likely to understand the technology involved when placed alongside their peers (non-family employees with digital skills). Taken together, young family and non-family employees (with digital skills) may create a growth digital mind-set, which allows the business to reach a larger number of customers (Rashid and Ratten, 2020). In contrast, attention has been paid to non-family members, who may be undermined and their contributions not valued (Hu and Hughes, 2020). In addition, there is the emotional attachment to employees that family firms exhibit (Arregle et al., 2007), this attachment may increase the difficulty of removing obsolete employees. Thus, undermining and/or being too attached to employees may deter digitalisation.

Business national external environment

Farming research has found that adoption of digital technologies depends on the different countries and their digital agricultural priorities. For example priorities may vary between, domestic or international markets, technology or culture, people, or planet, open or closed, collaboration or competition (Fielke et al., 2020). More specific related external factors that varies per country are the territorial aspects, such as tillage (De Rosa and Bartoli, 2016), upland/midland/lowland (McElwee and Smith, 2012). From a macro perspective, digitalisation is instrumental, and this is shown by the abundance of initiatives the European Union (EU) has launched to enhance digitalisation in rural areas. The most notable example being the agricultural EU innovation partnership that seeks to increase the competitiveness of farming (EIP-AGRI, 2023). Ultimately, aiming to improve food health and safety, quality and supply. Achieving this requires farmers to accelerate their digital transformation. One means of achieving this is the introduction of innovation hubs to experiment and test artificial intelligence (AI) in agri-food (EIP-AGRI, 2023). A second means is to provide the youth with skills, training and experience to increase participation of digitalisation in rural areas (European Union, 2023). In addition, the EU calls for local and regional level actors to assess any variations between member states (European Union, 2023). Thus, introducing the ambiguity surrounding digitalisation in agriculture due to the insensitivity to the firm size/strategy/family level factors within these initiatives.

From the family firm perspective, geography has an influence, for instance, Pini (2019) found family firms located in southern Italy experienced more barriers to invest in digitalisation compared to family firms in northern Italy. In addition, family firms in the Mittlesland digital transformation are resisting digitalisation because of the high reputational risk (protecting their SEW manifested in their reputation for being steadfast engineers). Prügl and Spitzley (2020) propose “enterprising families that strongly identify with the focal family firm tend to refrain from engaging in innovation hubs through entrepreneurial corporate venturing activities, particularly when the acquisitive or alliance forming partner is a new entrant (start-up)” (p. 153).

Firm strategy

Inside the farming context, little attention has been paid to strategy and digitalisation. In general, Glover and Reay (2013) proposed a typology of family farms as business diversifiers, debt maximisers, “sacrificers” and compromisers. Prior to this, the rural entrepreneurship literature recognises different strategic behaviours according to the different farms' needs; a seminal contribution is work from McElwee (2006) identifying a farmer as an entrepreneur, rural entrepreneur, contractor or simple farmer. Both typologies identify whether a farm diversifies from traditional activity, invests in machinery and/or lacks the business skills to expand. Research shows 60% of holdings in the UK engage in diversification (McElwee and Smith, 2012) and it is widely known that farmers have moved away from their core business activities due to external pressures (McElwee, 2006). More recently, digitalisation is applied in farms to achieve “optimization of activities (e.g. milking and seeding), and resources (water, energy, land, fertilizer) to achieve economic or social benefits” (Rolandi et al., 2021, p. 4). Research shows that digitisation is a matter of aligning the farming practices and the technology, and how easy it is to integrate into the routine of the farm (Vecchio et al., 2020). However, the farming digitalisation literature does not acknowledge the previously mentioned typologies and more specifically how digitalisation may vary according to type.

From the family firm theory perspective, Correani et al. (2020) identify critical building blocks for a successful digitalisation arguing resources, capabilities, activities and stakeholders are all required. Stakeholders particularly contribute, for example Muñoz-Bullón et al. (2020) found that family firms benefit from external knowledge when combined with internal loci derived from the long-term history embedded in such firms (such as a long standing farm). Specifically for innovation labs, Schleef et al. (2020) identified drivers (training employees, efficiency gains, to facilitate co-operation with other firms) and barriers (interference of top management, unwillingness of middle management) family firms face.

Overall, research on family firm digitalisation is yet to fully understand how it differentiates from family firm innovation (De Massis et al., 2022) and under appreciates how important family firm heterogeneity is when discussing digitalisation activity. Thus, farming digitalisation research can enrich the family firm digitalisation literature and vice versa, by focusing on shared research caveats. We attempt to reduce these caveats by firstly, strengthening the link between family farm innovation and digitalisation. Secondly, considering a context in which innovation activity is most likely to relate digitalisation activity. Therefore, we ask the following research questions:

The research context

As previously discussed there are a high propensity of family firms in the agricultural sector in the UK (IFB, 2019), with most family firms apparently not engaging in digital activity (Yin et al., 2022). Rural firms are often dichotomised with urban firms (Newbery and Bosworth, 2010) and are thought to underperform compared to urban areas (Department for Business, Energy and Industrial Strategy, 2017). Digitalisation in the research context chosen, is therefore both interesting and with potentially useful findings (Verhoef et al., 2021).

Useful findings are needed to help adjust to the “common agricultural policy” (CAP) scheme which is altering farming (Gove, 2018). This is of significance since some farms get 90% of their income from subsidies (Department for Environment Food and Rural Affairs, 2019). These alterations mean that farms must now meet specific conditions to ensure the sustainable production of food (Gove, 2018) in response to pressures to become more sustainable (Benton, 2020). Thus, innovation is required and insight on family firm innovation and digitalisation may help resolve sustainability issues (De Massis et al., 2022), pertinent to this context given the density of family firms in this area. However, firms in this area are often “cash poor” and make low margins, meaning they may not have the financial means to digitalise.

In addition, the national lockdown in the UK (Government, 2021) related to COVID-19 caused an economic contraction in 2020 (ONS, 2021), and as such findings can help contribute to the literature on family firm reactions to disruptive events (Żukowska et al., 2021; De Massis and Rondi, 2020). Generally, the literature asserts digitalisation occurred due to COVID-19 (Skulmowski and Rey, 2020), thus offering insights for both rural and family firm literature (Stough et al., 2015) in the context of our study.

Linking scaling strategy and incremental digitalisation activity of family farms

This section presents the activities that have been digitised through incremental innovation within the scaling strategy. It shows that participants have been transforming digitally for some time. This has helped develop their products and efficient production processes, to match the increasing demands of the supply chain. This digitalisation includes product development, process development and management development (operations management, managing staff) operations inputs, monitoring conditions, controlling conditions, monitoring outputs and connections with consumers, buyers and suppliers. The participants recognise the need for managers to be able to use technology, and that managers now must be “computer literate because computers rule everything we do” (P1A). One participant discussed the change management due to computers (P4A) and that this has created vast changes in the way farms operated compared to 20 years ago (PR1). This increases the productivity per person, hence: “this enables one man to cover so much ground because all sorts of things can be detected” (PJ1).

Process development and digitalisation

Digitalisation in process development includes the ability to control inputs to boost outputs, monitoring and controlling conditions to increase outputs. The point of digitalising this process is to increase output, hence “the computers change how you do the output and the amount you can get out of the farming unit” (PF1).

Controlling inputs to increase output

The findings show that digital devices can reduce waste material, for example “modern technology can reduce the use of sprays” (P4A). This is extremely relevant for increasing costs and sustainability issues, incremental savings aggregately making big improvements. The participants described:

Curious(ity as) to where the technology goes from here as it’s already sophisticated for example GPS mapping, fertilizer is supplied by GPS, soils are analysed, the spinner comes on and puts according to what the soil analysis is and the demands of the crop it’s a very exact science (P6A).

… The past 10 years with GPS, tractor control, all the big tractors that go in straight lines nothing drove straight before then (P6A).

Digital technology precisely measures feed for animals and data can be collected and analysed to make judgements to determine the feed required to make them meet the required weight for slaughtering. For example: “… If the chickens don't move the next day, the food and water level will not have moved … the water drops when the birds are not very well but if you see it the day before in terms of that lack of movement it's because they don't feel well, so you know when they're not moving before water or feed show up … ” (PS1).

In monitoring inputs, digitalisation provides more accurate faster data which enables farmers to become more efficient and intelligent in optimising their produce. Ultimately, it allows farmers to become more efficient, and predict outputs.

Monitoring conditions to increase output

Monitoring and controlling conditions using digital technology provides the farmer with more information. This enables them to take better actions to increase yield, hence:

Pigs are moved along the slaughtering process through the computer … they are less stressed because they don’t see any humans in this process, whereas before the humans used to stress the pigs out which makes them tense and reduces the quality of the meat (PM1).

The computer controls allow measurement of sunlight, a mini weather station on-site. Once so many watts of sunlight have clocked up so many watts of radiation, so much water can be inputted (PM1).

… We monitor them with sensors. We monitor where they are moving and identify areas where they are too dense. This allows the ventilation to be even throughout the house … The computer informs us that there has been a 20% drop in movement (PS1).

The computer provides a list of numbers who haven’t drunk enough for today so the temperatures can be checked … These little management tools are very, very handy (PS1).

The improvement in technology is described by one participant; “the camera technology is fantastic” (PN1), another participant recognises:

… The technology isn’t new it’s just miniaturised. Now reports can be delivered to a mobile phone every five minutes, specifying the place of the cattle, who’s drunk in the last 20 minutes. For instance, with 200 cows the amount they drink can determine who needs milking (PZ1).

This links to profitability hence:

… Now with birdhouse management the alarm system can kick-in when there are abnormal readings from the chicken, maybe a bad reaction to a vaccine. Then the vet gets involved to find out how hard that was on the animal and whether the vaccine is appropriate. In chickens the first one is killed in 28 days. If the chickens lose a day in growth (be)cause of x or y, it’s been held back for a day, that’s money. That’s how the technology is involved with growing the birds (PS1).

Thus, monitoring of conditions enables farmers to take better care of their stock and consequently increase profitability. Secondly, family farms can manipulate conditions. For example:

Glass houses are computer controlled the environment is controlling the heat and ventilation … The weather station enables us to set these different parameters. The clocked-up watts of radiation activate the irrigation cycle, so the irrigation pump comes on and all the plants will get a predetermined amount of water, it could be a glass full per plant, and then the light metre is set to zero again and once it clocks up another 100 W … The environment is controllable; it’s not like growing a field of crops in Cambridgeshire … the levels of humidity and CO² is controlled (PC1)

Overall, monitoring and controlling conditions helps appropriate value to the farm, through this form of digitalisation.

Digitalisation of outputs

Product development, the change in farming, has led to it being more sophisticated, but this has not necessarily equated to more income, at least from the participants' perspectives. One participant discusses:

… [Discussing the change] now more processing of the product in the last 40 years …. Before it was sold on the bone and the farmer was getting more pence per pound than now … Now with bacon the rhymed is being removed, the bones are being taken out, it is being defatted, sliced, and selling for between £1.15-£1.30 a pound whereas in 1984 the price was between 97p and £1.10 and that would be rhymed on the bone as a piece. This kicks back down the chain (PA2).

This illustrates that the production processes added to the product that the customer expects. This kind of development has been required to keep up-to-date with the rising standards of the industry. The findings also show how technology was integrated into monitory outputs through traceability and quality checks:

The traceability is now far greater … All the meat now is tagged electronically …. However, accountability has always existed and look at the pork industry slaughterhouses as an example … For decades they’ve known what the date was, what the pig number was, they could go into their [analogous] records and say they have got a problem with this pig which has come from this farm; it would work by phoning up the agency and identifying a problem with the leg of a beast, the code could then indicate which slaughterhouse it was, from which farm and the date it had been killed (whereas now it's digital) (PP1).

Detectors are also used in milk detectors … Milk detectors detect anything wrong with the milk and put it online. Online milk detectors detect anything that is wrong with the milk, all sorts of issues (PPJA).

This creates an increase in quality control and means that farmers experience more than before as another participant notices the increased “demands for farms. From a technological point of view, traceability, systems for cleanliness have gone through the roof” (PM1). Another participant said: “the changes are of the better because they are customer driven, it has to be for the better, more money no, work harder, yes, but it's for the better” (PS1).

This has been facilitated by “… supplier closeness” (PS1) and the increasing sophistication of the supply chain compared to 20 years ago (PN1). However, supplier traceability has always existed.

Traceability traditionally, you could follow along the chain these were minor things that cause problems because generally everywhere vets are on site do that process hasn’t changed and you know it hasn’t (PE1)

This is complemented by the digitalisation in processes in buyers' businesses, hence:

Before the packets, self-checkouts, and mobile shopping the customer had to go to the counter and specify the size and type of produce and interact with people, sometimes people didn’t know what to ask for … Especially for young people to go and ask for something it is considered embarrassing … For example, cheese a customer would go and ask for what variety of cheese, what weight and the nervousness of asking, and whether it’s obviously the right product or right weight, because most people wanted a certain amount of weight in the old days, so many ounces etc … The customer now looks at a packet and picks it up rather than going to a counter and saying I want that one … The customers as the generations have changed, they prefer less interaction with the counter staff (PM1).

Overall, the empirical evidence indicates that monitoring outputs and the power of buyers have increased, partly due to digitalisation.

Management digitalisation

Digitalisation has impacted the management of the farm by increasing communication and connectivity. Hence, “… it allowed us to gradually move things towards computers and systems determining what needs to be done and how to do it” (P1B). The communication is “… so much better and allows all the information to be centralised in one office” (P1R). Software, for instance cloud-based software, is used for rostering staff and providing financial information to reduce cost (P3A). This is incremental because it was first done in the 80's as a few participants recalled placing management information systems into their business at this time (PW1). Regarding connectivity and speed, a participant reflects:

You can now email things, scan things, mobile technology has changed operations. For example, if somebody is planting spuds five mile away previously the only time to know would be to go and see them. Now the mobile phone has come along you can ring them up and say how it is going, so long as their judgement is trusted, even by photograph evidence. So long as the judgement is trusted (PR4).

As noted above, this does not replace trust and other key mechanisms required for a functioning farm, but digitisation has “made people more and more efficient” (P2A). Whilst this has enabled increased communication, it can create problems with other communication technologies described as “taking things out of context and leading to misinterpretations” (P5A).

Radical digitalisation as part of the diversification strategy

The incremental and scaling strategy serves larger farms, whereas a diversification strategy aims to serve customers and is for the smaller farms. In smaller farms, that tend to diversify by either a farm shop, attraction and/or café (as well as a few other unique ventures), digitalisation has influenced this strategy by creating new channels to interact with customers and in a few instances to digitalise the product.

Digitalisation of interactions with customers

Digitalisation of interactions with customers was accelerated due to social restrictions during the COVID-19 pandemic. This specifically involved alterations to the business model, new access channels for customers and communications with the customers including blogging.

The research findings indicate that many family farms performed alterations to their business model during this time. For example, requesting customers to book online, rather than allowing customers to walk in. This means customers must add an element of planning to their experience, making the customer experience more complexity and potentially reducing the appeal of the experience. However, for the business digitisation allows these alterations.

… Software enables interaction with staff to process their receipts. It also allows to sell tickets online and keep a database of anyone who buys tickets online which allows the business to communicate what offers are on (PA3).

Another digitalisation innovation was the creation of a new process and generating new access channels for customers. One example of this is the “click and collect” service offered by family farms. This involved family farms creating online stores and then arranging the purchased products to be collected from the farm or offering a delivery service.

Digitalisation of product

The pandemic encouraged farmers to digitalise their products, however this occurred less than the digitalisation of interactions with customers. Many diversifiers began online blogging to sell the image of the family farm and generating connections with potential customers and retain ties with their existing customers. Secondly, other digital products/services involved transforming the physical attraction into a cyber-attraction. We identified examples such as an online zoom session with pets, an adopt an animal campaign and an online escape room, which replaced the physical farm as an attraction into a cyber-attraction. These activities require continuous effort from the farmer on top of all their other farming activity.

Digitalisation avoidance strategy

A selection of farms did not digitalise and instead closed parts, or all, of the farming attraction business during the pandemic. Perhaps this was because they did not have the skill or finances required to invest in digitalising activities. In addition, because they usually own their land they may not need to digitalise as the CAP subsidy would have provided them with some a subsistence level of income, reinforcing the “land rich-asset poor” reputation of some family farms.

Contributions to practice

This study is significant for practice in responding to the assumption that digitalisation is a solution to the current geo-political and environmental problems. Digitalisation is often posed as a solution to a firm's problems without consideration of it being unsuccessful. We recommend that practitioners should tread with caution and instead first consider the strategy of the farm. Since digitalisation is an investment, cash-poor family farms should not pursue digitalisation if it does not make sense strategically; meaning it is not always a solution. We should not assume all family firms want to digitalise all their activities that could potentially be digitalised. We found that family farm diversifiers preferred to keep their products natural, and this is often dichotomised with digitalisation, which may explain why some family firms are not planning on engaging in the digital transformation.

In contrast, family farms that want to digitalise to achieve their aim to scale can use our model as a tool to help them identify what is currently (not) digitalised, what needs to be done and to help them ideate solutions. This can help them to become more competitive and this may make them less dependent on the economic subsidies.

Contributions to policy

The UK is dependent on exports from other countries, which accumulates food miles, contributes to sustainability problems and heightens the consequences of geo-political tensions on our cost of living. To reduce this problem, digitalisation can help scalers increase their yields. Thus, future UK policy can help farms invest in digital technologies, for example by providing finance and knowledge through innovation centres to attempt to design new equipment that can further the digitalisation of farming, like initiatives in the EU (EIP-AGRI, 2023). In addition, to use this technology family farms should receive money for training family and non-family management in digitalisation planning and implementing along commercial farming activities. This can help accelerate diffusion in rural areas which may not be aware of the latest digitalisation processes.

Future work and limitations

Naturally, the limitations of explorative qualitative work arise from the purposeful sampling and subjective approach resulting in an inability to universally apply our findings beyond the local context. Indeed, a boundary of such a sample is the inability to generalise beyond our sample due to firm and local context heterogeneity. Future research can address the limitations of generalisability through the adoption of another method, specifically a deductive quantitative approach through surveys. A survey that could capture a large enough sample of the farming population would help to further objectify our findings and this would provide policy makers with stronger more robust evidence.

Furthermore, future work can address the generalisability by exploring whether the factors identified within Figure 1 and the resultant strategies are occurring in different contexts, particular mainland Europe. Mainland Europe is different geographically; it has much better growing conditions and much more farming land available, and they also have much more co-operatives, which may syndicate finances to invest in technology, such as the olive industry in Sicily and Puglia (southern Italy). On the other hand, farm shops (as a selected strategy by some respondents) are not so common throughout Europe. For instance, few are found in Italy due to their food culture and close-knit communities, who are loyal customers to the local grocery stores. Policy also calls for recognition of these nuances across EU member states to be explained at national and regional level (European Union, 2023). Therefore, a study of farms in these different contexts would be interesting to compare not only their digital capabilities but their business capabilities simultaneously. It would be interesting to find out whether family farms have a structured approach to digitalisation and innovation and whether they are managing to implement digital technologies into different processes. It should also be noted our use of secondary data from publicly available sources may not fully capture the extent of all digitalisation activities happening on the farm if this information is not publicly disclosed.