Family control and innovativeness in private firms: the mediating role of board task performance

Although the majority of research explores the direct relationship between family control and innovativeness, the purpose of this paper is to investigate mediators that explain how family control is related to innovativeness. Grounded in agency theory, resource dependence theory, and the resource-based view of the firm, the authors suggest that this relationship operates through board task performance, that is, the level of directors’ involvement in control and service tasks.

To test the hypotheses, structural equation modeling is applied to cross-sectional survey data collected from 329 private firms that are located in Belgium. Family control is defined as 50 percent family ownership in combination with at least one family member being involved in the management or board of directors of the firm.

Four key results emerge from the analysis. First, family control is negatively associated with control task performance but does not affect service task performance. Second, control and service task performance positively influence innovativeness. Third, the negative relationship between family control and innovativeness is partially mediated by control task performance. Fourth, the presence of a family CEO and the percentage of family directors address heterogeneity among family controlled firms (FCFs).

This paper complements and extends existing research on the relationship between family control and innovativeness by adopting a governance perspective. The authors contribute to a deeper understanding of why FCFs are more or less innovative than nonfamily controlled firms and reveal underlying mechanisms previously uncovered.