Although I have worked within both family and global corporate organisations over the past 19 years, I have never sat down to reflect which is more innovative, until now!
Considering my time with both, and this research from Harvard Business Review, I agree that family businesses are far more likely to be innovative. Global Corporates invest a lot of money in their innovation process in people, technology and a lot of ideas that never see daylight again. Family firms, that I have worked with, tend to know their specialist markets really well, identify new opportunities and do not mess around analysing whether it should be invested in and instead just get on with it. They are far more agile and although perhaps also more risk averse, they know what their customers want which removes all the feasibility studies that a corporate would go through to justify itself.
I also think that successful family firms take nothing for granted, are certainly rarely complacent and are always alert to new opportunities as they want to stay ahead of their competition and keep the wolf from the door!
However, many family-owned businesses are among the most innovative in their industries. Consider Herr’s Potato Chips and Enterprise Rent-A-Car. There are countless other examples of family firms that have brought innovations to market. We wanted to determine how family firms actually compare to their non family counterparts when it comes to being innovative. Our research, conducted with Patricio Duran and Thomas Zellweger, suggests the answer is not simple. The findings, published in the Academy of Management Journal, show that family firms invest less in innovation than other firms (both public and private) that aren’t family-owned. On average, family firms have a smaller R&D budget than other organizations of similar size, but that does not mean they are less innovative. On the contrary, our study found that family firms are more efficient in their innovation processes.