Innovation and family firms: ability and willingness and German SMEs

Research disputes whether family businesses are more or less innovative than their nonfamily counterparts. So far, no consistent results have been achieved. The recently introduced willingness and ability framework suggest that idiosyncratic behavior is only to be expected if both sufficiency conditions – willingness and ability – are fulfilled. The purpose of this paper is to test this hypothesis empirically.

A large cross-sectional sample of German small- and medium-sized enterprises is used. The sample offers – alongside numerous moderators commonly used in innovation research – several family firm definitions. Given the censored nature of the endogenous variable chosen, a Tobit model is used.

Drawing upon agency theory and the ability and willingness paradox in family firm innovation, it finds family firms to be less innovative only if both willingness and ability conditions are fulfilled.

To the best of the knowledge, the study provides the first attempt to test the willingness and ability theorem. Therefore, the commonly used family firm-specific measures (self-assessment-, ownership-, and management criterion) are operationalized to better understand what drives innovativeness in family firms. The findings thus add to the ongoing discussion on what really drives family impact on firm-level decisions.