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Journal ArticleDOI

Family firms in India: family involvement, innovation and agency and stewardship behaviors

TL;DR: This paper studied how different aspects of family involvement influence technological innovation in a firm and found that family involvement in ownership, management and board of directors, and business group affiliation influence R&D investments and patents obtained by the firm.
Abstract: Family firms and business groups play an important role in many emerging economies. In this paper we study how different aspects of family involvement influence technological innovation in a firm. Arguments drawn from agency theory and particularly the principal-principal agency hypothesize a negative influence of family involvement with respect to technological innovation. In contrast, stewardship theory predicts a positive influence of family involvement on technological innovation. Drawing on these theoretical lenses with contrasting directionalities with regard to the impact of family involvement on technological innovation, we study how family involvement in ownership, management and board of directors, and business group affiliation influence R&D investments and patents obtained by the firm. The hypotheses are empirically tested on a seven-year panel of 172 firms from the pharmaceutical industry in India. Our results indicate that family shareholding and family control over both CEO and chairperson positions have a positive and significant influence on the firm’s R&D investments, broadly lending support to stewardship theory. We also find a positive influence of business group affiliation on R&D investments and patents applied by the firm. Our conjecture is that the high technology opportunity environment in the Indian pharmaceutical industry facilitates stewardship behavior which in turn promotes innovation in these firms.
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Journal ArticleDOI
TL;DR: In this paper, a systematic review of 118 peer-reviewed journal articles published between 1961 and 2017 provides an integrative picture of the state of the art of the family firm innovation literature.
Abstract: Through a systematic review of 118 peer-reviewed journal articles published between 1961 and 2017, this article provides an integrative picture of the state of the art of the family firm innovation literature. Our aim is to widen existing understanding of innovation in family firms by building a theoretical bridge with studies in the mainstream innovation literature. Specifically, in identifying the main gaps in the literature and providing future research directions, our critical and dynamic picture of family-specific determinants of innovation is intended to advance the debate on innovation in general, and family firms in particular.

271 citations


Cites background from "Family firms in India: family invol..."

  • ...Resource-based View & Stewardship Theory Eddleston et al. (2008); Spriggs et al. (2013) Innovative Capacity; Family Altruism Strategic Planning; Technological Opportunity; Collaborative Network Orientation; Ownership Dispersion Firm Performance Innovative capacity and altruistic family relationships lead to high firm performance....

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  • ...Stewardship Theory Dibrell and Moeller (2011) Family Involvement Organizational Innovativeness FFs show a stronger service-dominant focus and implement stewardship cultural behaviours more easily in their customer service processes....

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  • ...Borrowing from stewardship theory, Ashwin et al. (2015) show that family shareholding and family control over both the CEO and chairperson positions have a significantly positive effect on R&D investments in FFs....

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  • ...The basic assumption is that family involvement in ownership, management and governance can generate distinct resources that can be leveraged in ways that might positively influence innovation (Ashwin et al. 2015; De Massis et al. 2013)....

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  • ...Capabilitybased View; Resourcebased View; Knowledgebased View; Stewardship Theory; Absorptive Capacity Lichtenthaler and Muethel (2012); Llach and Nordquist (2010); Singh and Kota (2017); Zahra et al. (2004, 2007); Craig and Dibrell (2006); Acosta-Prado et al. (2017); Ahluwalia et al. (2017) Family Involvement in Firm Management and Governance; Family Culture; Firm Age and Size; Family Ownership Innovation Capabilities; Resource Management; R&D Investments Factors that foster innovation capabilities include the FFs’ long-term orientation and the involvement of multiple generations in the firm....

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Journal ArticleDOI
TL;DR: In this paper, the authors investigate whether and how family ownership and management influence firms' internationalization strategies in an emerging economy in which family firms are dominant, and they find that the heterogeneity among family firms in their ownership structures, concentration, and family involvement in management shapes the firm's internationalization strategy.
Abstract: Research Summary: We investigate whether and how family ownership and management influence firms' internationalization strategies in an emerging economy in which family firms are dominant. Anchoring on the willingness and ability framework and drawing on the socioemotional wealth perspective and agency theory, we theorize how the heterogeneity among family firms in their ownership structures, concentration, and family involvement in management shapes the firms' internationalization strategies. We also theorize how certain contingencies, such as the presence of foreign institutional ownership and family management, moderate the relationship between family ownership and internationalization strategy. We test our predictions by using a proprietary, longitudinal panel dataset of 303 leading family firms from India and find support for most of our theoretical predictions.Managerial Summary: Internationalization has emerged as a dominant strategy for firms in a globally interconnected world. We observe that ownership structure and management have significant bearing on internationalization strategies of family firms, as family owners and managers are more averse to internationalization. Family firms' aversion to internationalize is more pronounced when families can exercise greater control on firms' actions through the combined effect of higher family ownership (primarily through strategic control) and family's participation in management (through strategic, administrative, and operational control). However, certain contingencies, such as the higher ownership of foreign institutions and presence of professional managers, help business families improve their understanding of international markets, reduce the fear of the unknown, and better appreciate the benefits of internationalization, thereby aiding greater internationalization of family firms.

109 citations

Journal ArticleDOI
TL;DR: In this paper, a systematic review article analyzed 78 peer-reviewed journal articles on innovation in family businesses and developed a conceptual framework that provides a holistic view of the multi-staged innovation process by incorporating the family system as an influencing context variable.

99 citations

Journal ArticleDOI
TL;DR: This paper surveyed 846 managers and subordinators and found that stewardship theory is often used to explain family business outcomes, but no prior empirical study has used a validated measure of stewardship.
Abstract: While stewardship theory is often used to explain family business outcomes, no prior empirical study has used a validated measure of stewardship. We, therefore, surveyed 846 managers and subordinat...

73 citations

Journal ArticleDOI
TL;DR: The authors argue that scholars need an alternative to the dominance in academic research of the U.S. model of entrepreneurship to reflect better the variety and diversity of entrepreneurial activities in the world.
Abstract: This commentary argues that scholars need an alternative to the dominance in academic research of the U.S. model of entrepreneurship to reflect better the variety and diversity of entrepreneurial a...

71 citations

References
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Journal ArticleDOI
TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.

49,666 citations

Journal ArticleDOI
TL;DR: The authors argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. But they do not consider the role of decision agents in these organizations.
Abstract: ABSENT fiat, the form of organization that survives in an activity is the one that delivers the product demanded by customers at the lowest price while covering costs.1 Our goal is to explain the survival of organizations characterized by separation of "ownership" and "control"-a problem that has bothered students of corporations from Adam Smith to Berle and Means and Jensen and Meckling.2 In more precise language, we are concerned with the survival of organizations in which important decision agents do not bear a substantial share of the wealth effects of their decisions. We argue that the separation of decision and risk-bearing functions observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, and nonprofits. We contend that separation of decision and risk-bearing functions survives in these organizations in part because of the benefits of specialization of

14,045 citations

Posted Content
TL;DR: The authors surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and presents a survey of the literature.
Abstract: This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.

13,489 citations

ReportDOI
TL;DR: In this paper, the authors show that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.
Abstract: Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a nonrival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth.

12,469 citations

Journal ArticleDOI
TL;DR: Corporate Governance as mentioned in this paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and shows that most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance.
Abstract: This article surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world. CORPORATE GOVERNANCE DEALS WITH the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment. How do the suppliers of finance get managers to return some of the profits to them? How do they make sure that managers do not steal the capital they supply or invest it in bad projects? How do suppliers of finance control managers? At first glance, it is not entirely obvious why the suppliers of capital get anything back. After all, they part with their money, and have little to contribute to the enterprise afterward. The professional managers or entrepreneurs who run the firms might as well abscond with the money. Although they sometimes do, usually they do not. Most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance. But this does not imply that they have solved the corporate governance problem perfectly, or that the corporate governance mechanisms cannot be improved. In fact, the subject of corporate governance is of enormous practical impor

10,954 citations