British Journal of Management, Vol.

00, 1–19 (2019)

DOI: 10.1111/1467-8551.12375

Innovation in Family Firms: An Agency and

Resource-Based Lens on Contingencies of
Generation and Management Diversity
Sebastian Hillebrand , Thorsten Teichert and Jonas Steeger
Chair of Marketing and Innovation, University of Hamburg, Von-Melle-Park 5, 20146, Hamburg, Germany
Corresponding author email: sebastian.hillebrand@whu.edu

Family firms are increasingly recognized as a heterogeneous group of businesses with spe-
cific strengths and weaknesses that make them either superior or inferior to non-family
firms. Recent research has therefore started shifting away from comparisons between fam-
ily firms and non-family firms to comparisons between family firms. This study investi-
gates the influence of two key paramete rs of ‘familiness’ – the generation in control and
the (non-family) management diversity – on family firm innovation. While agency-based
arguments stress the liabilities of these two parameters of family influence, resource-based
arguments highlight their benefits. Conflicting effect hypotheses are derived and tested in
the context of German family firms. The empirical results imply that family firms’ genera-
tional development and higher management diversity influence their innovation positively
and that their benefits outweigh their liabilities in the context of German family firms.

Introduction Traditionally, family firm research compared

Family firms are often portrayed as highly con-
servative businesses focusing on the past and
refraining from seeking new opportunities and
innovation (Kellermanns and Eddleston, 2006).
However, other evidence shows that the ‘German
Mittelstand’ comprises a number of ‘hidden
champions’ (Simon, 1996) that are the innovation
leaders in their business segments (Rammer and
Spielkamp, 2015). Accordingly, the results of
research on family firms’ interface with innova-
tion are ambivalent (Bennedsen and Foss, 2015),
implying that family influence may bring both
liabilities and benefits, which can make a business
either less innovative (Block, 2012; Munari, Oriani
and Sobrero, 2010) or more innovative (Classen
et al., 2012; Llach and Nordqvist, 2010).
The authors thank the Zentrum für Europäische
Wirtschaftsforschung (ZEW) in Mannheim for the
provision of the CIS data and their continuous support.
family firms’ performances with those of non-
family firms, which led to ambivalent findings
(Dyer, 2006). Consequently, family firms are in-
creasingly recognized as a particularly hetero-
geneous group of organizations (Arregle et al.,
2007). Newer research seeks to reduce the pre-
vious findings’ ambivalence by deconstructing
the family’s influence on firm-oriented perfor-
mance (Gedajlovic et al., 2012). Two approaches
investigate the differences in family firm per-
formance: a more descriptive ‘demographic ap-
proach’ and an ‘essence approach’, which tries to
assess family-oriented strategic decision-making
(Basco, 2013). Scholars have also searched for
positive and negative drivers specific to families’
influence on innovation (Chrisman et al., 2015;
De Massis, Frattini and Lichtenthaler, 2013).
However, only a few studies have investigated
whether family firm innovation suffers or benefits
from the two aspects of familiness (e.g. Decker and
Guenther, 2017; Zahra, Neubaum and Larrañeta,
2007).


C 2019 British Academy of Management. Published by John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4
2DQ, UK and 350 Main Street, Malden, MA, 02148, USA.
2 S. Hillebrand, T. Teichert and J. Steeger
This study follows recent research on family
firms’ heterogeneity (Chrisman et al., 2015) and
tests the effects of familiness’s two key constituent
features on innovation as proxies for the essence of
familiness: the family generations as an important
demographic variable and the top management
team (TMT)’s diversity (Duh, 2010). We draw on
agency theory and the resource-based view (RBV)
to highlight the liabilities and benefits of these two
facets of family influence on the firm (Bennedsen
and Foss, 2015). Since both theoretical streams
offer compelling, but conflicting, arguments, we re-
frain from hypothesizing beforehand that the argu-
ments of one of the theories seems to be more ap-
pealing. Instead, we start with a set of conflicting,
but impartial, predictions (Kettenring, Tuschke
and Friedl, 2014). Taking both perspectives into
account, this study extends recent research, which
aims to reconcile the ‘family firm innovation para-
dox’ by disentangling familiness parameters and
their specific influence on family firm innovation.
Our view thus shifts from a comparison between
family and non-family firms towards an in-depth
analysis of family firms’ within-heterogeneity.
This shift helps reconcile previous evidence, which
was mainly gained from dichotomous compar-
isons between family firms and non-family firms.
For example, agency-based scholars identified a
negative family influence on the innovation output
(Chin et al., 2009; Decker and Guenther, 2017),
while resource-based scholars found a positive
influence on the innovation output (Llach and
Nordqvist, 2010; Matzler et al., 2015). We suggest
that these and other discrepancies, for example
between innovation input and output (Duran
et al., 2016), should be reconsidered in the view of
the different underlying facets of familiness.
We develop and empirically test our hypotheses
specifically in respect of German family firms. This
empirical context accentuates both lines of argu-
mentation. A vast 85% of German family firms
have an owner who is also active in its manage-
ment (Federation of German Industries, 2012) – in
the UK, this applies to less than 40% of firms (Lu-
binski, 2011). This finding suggests that German
family firms operate in a distinct agency-related
situation. At the same time, unlike in any other
European country, many ‘German Mittelstand’
family firms develop into ‘innovation leaders’ and
form the engine of the domestic economy (Duran
et al., 2016), thus representing a special resource
capability.
Based on the development of two sets of con-
flicting hypotheses, we exemplify that theoretic
reflections can contribute successfully to solving
the ambivalence observed in the empirical field.
Applying an agency and resource-based lens leads
to opposing predictions of family generations’ and
TMT diversity’s effects on innovation. Empirical
results indicate that their benefits outweigh their li-
abilities in respect of German family firms.
Conceptual framework
Family firm heterogeneity
Given the systematic differences between the
various performance measures of family and
non-family firms, the question arose of how family
firms differ and why this contributes to their suc-
cess. Early research applied group comparisons
to discriminate one-dimensionally between both
the company types, for example according to
their ownership structures and voting rights (e.g.
Decker and Guenther, 2017). More importantly,
empirical studies often led to diverging empirical
findings, causing researchers to mention family
firm paradoxes such as the ‘innovation paradox’
(Haour, 2004).
The recent literature takes a broader, multi-
faceted perspective of ‘familiness’. After review-
ing 80 empirical studies on family firm perfor-
mance, Basco (2013) categorized these into two
approaches to characterize family firms: studies
following a ‘demographic approach’ utilize de-
mographic characteristics such as ‘family owned’,
‘family controlled’ and ‘the generation involved’
to capture the family effects on firm performance
(Mazzi, 2011). A second group of studies (fol-
lowing an ‘essence approach’) emphasize the way
a family firm is actually governed and managed,
which then impacts its performance (Dyer, 2006).
The two viewpoints complement each other: while
studies on family firm demographics recognize that
family resources and behaviour differ across fam-
ily firms, studies using the essence approach stress
the quality of the family involvement as a proxy for
specific firm behaviour.
Basco’s (2013) inventory of empirical studies on
family firm performance presents those variables
that describe the different qualities of familiness. A
total of 28 studies applied the percentage of family
ownership as the demographic indicator of family
firms, followed by family generations in 15 studies

C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms
(double-counting allowed). In terms of the man-
agement setup, 28 studies referred to the configu-
ration of the top management team and the board,
while 13 focused on the CEO’s specific role. Only
a few studies captured the essence of familiness
further by investigating how a firm is specifically
governed and managed. Most of the studies ap-
plied firms’ performance measures as the depen-
dent variable(s), with only a handful explicitly con-
cerned with growth or innovation-related issues.
Filling this gap, we thus focus on family generation
as a key demographic indicator of familiness and
combine it with family-induced TMT diversity as
an indicator of how a firm is actually managed.
Family firms and innovation in Germany
Germany family firms present an empirical envi-
ronment worth investigating, since both the bene-
fits and liabilities of familiness seem very distinct.
In contrast to firms in the USA and UK, where
about 60% of all firms are held by means of dis-
perse ownership, this only applies to 10% of Ger-
man businesses (Bluhm and Martens, 2009; Lubin-
ski, 2011). Owing to their less stringent oversight
and the lower takeover pressures on the capital
markets, owner-managers of German firms tend to
enjoy more discretion in terms of their innovation
investment decisions than UK and US firms (Mu-
nari, Oriani and Sobrero, 2010). The governance
system in German family firms often emphasizes
continuity and conservatism, leading to reluctance
to renew or innovate (Berghoff, 2006). This reluc-
tance became evident, for example, in the 1970s
when an overly strong reliance on family structures
in German family firms caused a strong barrier to
growth and innovation (Lubinski, 2011).
Positive arguments for the innovation effects of
familiness are also specifically related to German
family firms, since those of the ‘German Mittel-
stand’ are a distinctive feature and a strong pillar
of Germany’s economy (Berghoff, 2006; Venohr,
2015). These firms are usually active in profitable
market niches, while their strong insistence on high
quality and customer centricity characterize them
(De Massis et al., 2018). Building on Germany’s
post-Second World War constitution and social
market economy, these firms derive many of their
strengths from the country’s technical and educa-
tional system (Logue et al., 2015; Welter et al.,
2014). The combination of a theoretical school
education and practical training in companies is

C 2019 British Academy of Management.
3
believed to explain the superior abilities of Ger-
many’s skilled workers (Berghoff, 2006). Since the
family business system ensures generational con-
tinuity, these firms invest permanently in highly
trained employees and long-term customer rela-
tionships (Logue et al., 2015). The unique settings
of familiness allow these firms to stay close to their
customers and to constantly address new markets
and technologies (De Massis et al., 2018), which
builds the basis for their strong position as ‘hidden
champions’ and innovation leaders in their respec-
tive niches (Venohr, 2015).
Agency perspective and resource-based view on
family firms
Two theoretical frameworks serve as the comple-
mentary theoretical underpinnings of the major-
ity of empirical papers on families’ effects on firm
performance (Basco, 2013). Agency theory dom-
inates the demographic approach, which relates
performance to family-related attributes. In con-
trast, resource-based and related views character-
ize many studies investigating how a family firm is
actually governed and managed.
Figure 1 summarizes key opposing arguments
from an agency and resource-based lens regarding
family generations’ and TMT diversity’s influence
on family firm innovation. Building on agency-
based research, we suggest that later generations’
succession and TMT diversity due to non-family
members being appointed in management posi-
tions impede innovation, which is largely due to the
agency problems of moral hazard and adverse se-
lection (Lubatkin et al., 2005; Schulze et al., 2001).
Following resource-based research, we counter-
argue that later generations’ succession and man-
agement diversity may promote innovation by pro-
viding access to complementary knowledge and
capabilities (Cruz and Nordqvist, 2012; Sirmon
and Hitt, 2003).
We thus surmise that a family firm’s generational
development is likely to bring resource-based ad-
vantages, but at agency-based costs. We further as-
sume that the family’s management involvement is
likely to lead to agency-based advantages, but at
the expense of resource-based benefits. Since we do
not dare advocate one of the two perspectives in
advance, we refrain from developing one-sided hy-
potheses, building instead on a set of competing,
but impartial, propositions. We next outline and
substantiate the above arguments.
4 S. Hillebrand, T. Teichert and J. Steeger

Agency perspective Resource perspective

Context Outcome Context Outcome
Nuclear family Limited knowledge
First ge-
neration
Low agency costs Limited resources
Convergent interests Narrow capabilities
Generational
development

High innovation output Low innovation output

‘Controlling owner’ Lack of diversity

Extended family Diverse perspectives

Later ge-
neration

High agency costs Valuable resources

Diverging interests Novel know-how
Low innovation output High innovation output
‘Cousin consortium’ Unique capabilities

Focus on family ties Inferior capabilities

Management diversity

Family

Low agency costs Limited resources

mgt.

Higher goal congruity One-sided know-how

High innovation output Low innovation output
Lower asymmetry level Internal experience
Different competence
Mixed mgt.

Non-family interests
High agency costs External experience Valuable resources
Lack of family ties
Low innovation output Discretion regarding High innovation output
Asymmetric altruism
change

Figure 1. Agency and resource perspectives on selected variables of family firms

Hypotheses Agency problems associated with adverse selec-

Generational development from an agency
perspective
Agency-based research suggests that the assump-
tion that family firms have low or zero agency
costs may specifically apply to the early genera-
tions when a lone founder or sole owner manage-
ment characterizes the firm (Decker and Guenther,
2017). Family firms tend to develop from an own-
ership structure described as a controlling owner
in the first generation to sibling partnerships in the
second and to cousin consortia in later generations
(Gersick et al., 1997). Since the unity of the own-
ership and the management generally character-
izes the controlling owner stage, family firms are
presumed to be mostly exempt from agency costs
at this generational stage (Chrisman et al., 2007).
However, family firms’ ownership and manage-
ment structures are subject to change. With their
transition to sibling partnerships or cousin consor-
tia, other family members become involved in the
ownership and management (Gersick et al., 1997).
This raises the likelihood of agency costs related
to adverse selection or moral hazard (Doll, Feess
and Mohnen, 2017), which correspond to the two
complementary agency models of limited compe-
tence and managerial opportunism in other innova-
tion research (Zona, 2016).
tion costs occur over time, as family firms gener-
ally suffer from a self-selection bias with regard to
the labour market (Schulze et al., 2001; Siebels, zu
Knyphausen-Aufseß and Schweizer, 2017). The re-
luctance to cede ownership shares to non-family
members tends to specifically inhibit family firms’
ability to attract talented employees (Miller et al.,
2015). A controlling owner may therefore pre-
fer kinship to competence when selecting next-
generation owners or managers (Pérez-González,
2006). The stronger the owning family’s influence,
the more family-related goals are prioritized over
company-related goals (Achleitner et al., 2010).
The inherent difficulties of disentangling family
planning from company planning are surmised
to be especially prevalent in the German context
(Hilse and Wimmer, 2001). Owing to parents’ al-
truistic behaviour towards their children, sole own-
ers are presumed to appoint less capable heirs as
successors, who are expected to hire even less capa-
ble heirs as successors (Karra, Tracey and Phillips,
2006).
Evidence that firms led by heirs consistently
underperform compared to their performance
during the previous generation supports the above
presumption (Cucculelli and Micucci, 2008).
Agency costs associated with moral hazard may
also arise in later-generation family firms, in which


C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms
the ownership shares are increasingly dispersed
among extended rather than nuclear family mem-
bers (Schulze, Lubatkin and Dino, 2003b). With
this ownership dispersion, principal–agent and
principal–principal conflicts are likely to worsen in
later-generation family firms (Morck and Yeung,
2003). In contrast to a controlling owner who
unifies the ownership and the management, next-
generation members are usually appointed partial
owners (Dawson, 2011). Based on Germany’s
weak ownership dispersion, these block-holding
shareholders prevail in German family firms to
an extent not exhibited in any other European
country (Bluhm and Martens, 2009). Affective
bonds between family members become weaker
over time, and diverse family interests emerge
(Lubatkin et al., 2005). With the divergence of
the family members’ objectives, the possibilities
of managerial opportunism arise, increasing the
likelihood of family agents who free-ride (i.e.
work too little) and the likelihood of owners who
free-ride on the controlling shareholder’s equity
(Schulze, Lubatkin and Dino, 2003b).
The proliferation of agency costs during later
generations is likely to impede innovation (Decker
and Guenther, 2017), which requires a risk-taking
attitude and long-term horizon (Block, 2012).
Consequently, ownership dispersion and the emer-
gence of agency threats related to adverse selection
in later-generation family firms tends to prevent a
risk-taking attitude and long-term view (Schulze,
Lubatkin and Dino, 2003a). Such an inward and
conservative orientation has been shown to impede
German family firms’ competitiveness and growth
(Berghoff, 2006) by hampering their ability to scan
the environment for new opportunities (Chin et al.,
2009) and develop new products (Kraiczy, Hack
and Kellermanns, 2014). From an agency lens per-
spective, we posit the following hypothesis:
H1a: Generational development influences fam-
ily firm innovation negatively (through in-
creased agency costs).
TMT diversity due to non-family managers: An
agency perspective
Given a mixed TMT comprising family and non-
family agents (i.e. a dominant TMT diversity),
scholars have identified family firms as having
conflict-ridden family managers (Schulze et al.,
2001) and conflict-ridden relationships between

C 2019 British Academy of Management.
5
family and non-family managers (Chua, Chrisman
and Sharma, 2003). With the appointment of non-
family members to the TMT, family firms incur
traditional agency costs due to the discrepancy be-
tween ownership and control (Nordqvist, Sharma
and Chirico, 2014). Agency costs arise because
non-family managers usually lack economic or
emotional stakes in the firm (Blanco-Mazagatos,
Quevedo-Puente and Castrillo, 2007). Family
owners tend to face greater information asymme-
tries, which are related to non-family managers’
abilities, motives, diligence and efforts (Dawson,
2011), which increases the likelihood that they
might engage in self-serving behaviour at the ex-
pense of the family owners. Moral hazard-related
agency costs are likely to proliferate if non-family
managers act opportunistically by shirking or
free-riding (Siebels, zu Knyphausen-Aufseß and
Schweizer, 2017).
Agency-based research points to altruism as
another agency threat specific to family firms
(Schulze, Lubatkin and Dino, 2003b). Non-
reciprocal and asymmetrical altruism in respect of
non-family managers may lead to discriminative
compensation or promotion (Nordqvist, Sharma
and Chirico, 2014) by being more likely to receive
incentive pay, but fewer promotional opportuni-
ties (Block, 2011). Since non-family managers may
harbour feelings of distributive injustice and ex-
clusion from the business and its controlling fam-
ily (Minichilli, Corbetta and MacMillan, 2010), a
combination of family and non-family members
in mixed TMTs is presumed to cause more con-
flict and resentment (Ensley and Pearson, 2005).
In turn, these consequences could increase non-
family members’ inclination to act opportunisti-
cally by shirking or free-riding, subjecting family
firms with mixed TMTs to greater moral hazard
threats than wholly family-managed firms lacking
TMT diversity.
Agency costs related to non-family members’
involvement in the TMT are surmised to affect
family firm innovation negatively (Block, 2012;
Munari, Oriani and Sobrero, 2010). The risk
attitudes or time horizons of non-family execu-
tives are thought to differ from those of family
owners (Blanco-Mazagatos, Quevedo-Puente and
Castrillo, 2007). Since non-family managers may
want to demonstrate their management skills to
the outside market by means of strong short-term
results, they are more likely to refrain from devel-
oping and implementing a promising technology
6 S. Hillebrand, T. Teichert and J. Steeger
(Block, 2011). The highly unpredictable and idio-
syncratic nature of such technological innovation
is likely to make developing incentive contracts
designed to facilitate non-family agents’ inno-
vation efforts especially challenging (Bennedsen
and Foss, 2015). The different incentive schemes
required to balance non-family agents’ strong
short-term orientation with family owners’ long-
term orientation may not effectively mitigate
asymmetry and misalignment in mixed TMTs
(Block, 2011; Dawson, 2011). As mixed-managed
family firms may lack the means to attenuate their
agency threats, agents are likely to neglect these
firms’ value-maximizing strategy (Morck and
Yeung, 2003) and refrain from initiating the risky
development of new products (Kraiczy, Hack
and Kellermanns, 2014). From an agency lens
perspective, we posit the following hypothesis:
H2a: Mixed TMTs influence family firm innova-
tion negatively (through increased agency
costs).
Generational development from a resource
perspective
The RBV proposes that firms can generate a com-
petitive advantage by capitalizing on bundles of
idiosyncratic resources (Barney, 1991). Since a
unique social system characterizes family firms,
their resources are usually regarded as distinct
(Miller and Le Breton-Miller, 2006). Research sug-
gests that the development of family firms’ non-
imitable resources evolves over time, which could
lead to later generations benefitting specifically
from the accumulated contacts, skills and know-
how (Cruz and Nordqvist, 2012).
As a branch of the RBV, the knowledge-based
view perceives the ability to harvest, distribute
and exploit a firm’s knowledge base as the origin
of innovation (Zahra, Neubaum and Larrañeta,
2007). Owner centrality often characterizes
first-generation family firms (Beck et al., 2011);
consequently, the know-how tends to reside with a
single actor at this generational stage (Buyl, Boone
and Hendriks, 2014). With increasing generational
development, family firms may transfer the first
generation’s knowledge and preserve the already
accumulated innovation know-how (Cabrera-
Suárez, De Saá-Pérez and Garcı́a-Almeida, 2001).
Next-generation family managers may contribute
to family firms’ innovation by complementing the
existing know-how and enlarging the prior gen-
erations’ knowledge base (Llach and Nordqvist,
2010). These next-generation family managers’
educational and professional background usually
exposes them to the latest management and tech-
nological ideas and trends (Bennedsen and Foss,
2015). They are, therefore, presumed to contribute
missing competencies and new market information
(Sardeshmukh and Corbett, 2011). Knowledge
exchanges between different generations are also
often richer than mere intra-generational transfer
(Aalbers, Dolfsma and Koppius, 2014). Zahra,
Neubaum and Larrañeta (2007) found that formal
and informal knowledge-sharing increase the
acquisition of technological capabilities if multiple
generations are involved in a family firm, thus
providing evidence of the positive effect of more
fruitful knowledge exchanges on innovation. The
example of the many German family firms that
have retained their dominant market position as
‘innovation leaders’ over generations supports the
previous evidence (Bergfeld and Weber, 2011).
Next-generation family members also tend to
be motivated to move beyond their predeces-
sor’s legacy (Chalus-Sauvannet, Deschamps and
Cisneros, 2016). Incumbents often become fixated
on historically successful strategies (Kellermanns
and Eddleston, 2006), while successors can help
overcome this potential rigidity by fostering
innovative ideas (Kraiczy, Hack and Kellermanns,
2014). Successors are therefore likely to initiate
change and to pursue more proactive strategies,
becoming the driving force behind innovation
(Litz and Kleysen, 2001). Succeeding generations
are presumed to show a greater propensity to
accept risk (Chalus-Sauvannet, Deschamps and
Cisneros, 2016), a more professional management
style (Beck et al., 2011) and a stronger external
orientation (Cruz and Nordqvist, 2012) – key
drivers of innovation (Damanpour, 1991).
Based on the above arguments, we posit the fol-
lowing hypothesis from an RBV:
H1b: Generational development influences family
firm innovation positively (through an im-
proved resource endowment).
TMT diversity due to non-family managers: A
resource perspective
The prevalence of family and non-family managers
in a TMT (i.e. TMT diversity) may yield several

C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms
advantages (Kraiczy, Hack and Kellermanns,
2014; Minichilli, Corbetta and MacMillan, 2010).
RBV scholars have argued that non-family re-
sources are key for continuous value creation,
because non-family managers can introduce
critical managerial capabilities to promote firm
performance or growth (Sirmon and Hitt, 2003).
Accordingly, family firms that only employ family
managers are likely to lack diverse know-how and
capabilities (Gallo and Sveen, 1991). Non-family
managers, together with family managers with
firm-specific tacit knowledge, may contribute
specifically to family firms in a mixed TMT
(Federation of German Industries, 2012; Kraiczy,
Hack and Kellermanns, 2014). Such a TMT
may capitalize on non-family executives’ comple-
mentary contributions, joining the professional
expertise (Gallo and Sveen, 1991) as well as broad-
range organizational experiences (Dyer, 1989) of
outsiders, while simultaneously retaining family
members’ family social capital and firm-specific
tacit knowledge (Sirmon and Hitt, 2003).
Family firms with non-family managers may be
particularly capable of innovation, since the lat-
ter’s involvement gives such firms access to new
perspectives, novel ideas and diverse managerial
capabilities (Sanchez-Famoso, Maseda and Itur-
ralde, 2017). Non-family executives tend to enlarge
the cognitive diversity of family firms’ TMTs and
reduce family firm managers’ tendency towards
convergent thinking (Classen et al., 2012). Educa-
tional and professional diversity in a mixed TMT
is associated with superior problem-solving and
enhanced absorptive capacity (Kraiczy, Hack and
Kellermanns, 2014). The inclusion of non-family
members’ diverse information and know-how is
associated with a higher level of fruitful idea con-
flicts (Ensley and Pearson, 2005) and the identifi-
cation or pursuit of creative and innovative oppor-
tunities (Sanchez-Famoso, Maseda and Iturralde,
2017).
Non-family managers may also facilitate inno-
vation by capitalizing on the firm’s strong dis-
cretion. Without necessarily representing vested
family interests, non-family executives may play
the role of neutral stewards (Cruz and Nordqvist,
2012), which gives them a strong position from
which to challenge the owning family’s priorities
(Gersick et al., 1997). Based on their lower emo-
tional attachment to the firm, non-family man-
agers tend to improve its decision-making qual-
ity (Sirmon and Hitt, 2003) by making decisions

C 2019 British Academy of Management.
7
based on rational analysis rather than intuition
(Block, 2011). This is in keeping with Laforet’s
(2013) finding that non-family members’ involve-
ment in decision-making has a positive effect on
family firm innovation. We posit the following
summarizing hypothesis from an RBV:
H2b: Mixed TMTs influence family firm inno-
vation positively (through an improved re-
source endowment).
Data and methodology
In keeping with this study’s overall research pur-
pose, the empirical field is German family firms
exhibiting specific agency and resource-based at-
tributes (Berghoff, 2006; Lubinski, 2011). Previ-
ous research studies depended on small-scale sam-
ples operating in very specific industries (Block
and Spiegel, 2011; Decker and Guenther, 2017).
To generalize insights to a representative group
of German family firms, we obtained our data
from the 2015 Mannheim Innovation Panel (MIP)
– the German version of the Community Inno-
vation Survey (CIS). This survey was conducted
by the Centre for European Research (ZEW) un-
der the supervision of the Statistical Office of the
European Commission (Eurostat). In line with
the OECD Oslo Manual (OECD, 2005), the sur-
vey used drew upon a multi-year approach, with
innovation-related questions referring to the pe-
riod 2012–2014 (Astor et al., 2016). Compared to
a single-year approach, this method provides more
effective measures of innovation activities (Janger
et al., 2017) from an especially large set of company
data.
The MIP is designed as a cross-sectional panel
survey stratified by sector, size and region (Behrens
et al., 2017). The stratification by sector is based on
firms’ affiliation to the Nomenclature of Economic
Activities (NACE) codes. The MIP sample shows
a balanced distribution across the industries clas-
sified in NACE codes 1–7. Stratification by size is
based on different size classes. The vast majority of
firms in the MIP are small and medium-sized en-
terprises with fewer than 500 employees. Neverthe-
less, the sample also comprises a small percentage
of large firms with more than 500 employees (10%
of firms). Stratification by region is based on firms’
location in Eastern or Western Germany. Refer to
Behrens et al. (2017) for more detailed information
8 S. Hillebrand, T. Teichert and J. Steeger
on the specific characteristics of the MIP sample
used in this study.
Operationalization of variables
The family business status was retrieved from the
participants’ self-assessment on the questionnaire.
The respondents were asked to indicate that their
firm is a family firm if the business’s ownership
majority resides with a family (i.e. if the family
owns more than 50% of the firm shares). We there-
fore followed prior scholars, who recommended
applying a family firm definition combining a mea-
sure of family involvement (i.e. ownership share)
with the ‘essence approach’ (i.e. a family firm self-
perception) (Classen et al., 2012). This approach
meets this study’s purpose in that the family busi-
ness definition ensures a family’s discretion to de-
termine the company-level innovation output (De
Massis, Frattini and Lichtenthaler, 2013). We sug-
gest that a blockholder position with 20% shares
may not suffice to warrant this discretion and
refrain from this threshold, which other family
firm innovation studies applied (e.g. Decker and
Guenther, 2017).
Dependent variables. This analysis conceptual-
izes innovation as a multi-item construct con-
sisting of five indicators that relate to three
innovation-related activities comprising (1) patent
output, (2) product innovation and (3) process in-
novation (Lee and Walsh, 2016). Hence, we inves-
tigate innovation as a multifaceted construct. In
contrast to measuring innovation based on a sin-
gle indicator, the composite innovation construct is
likely to be more informative and to attenuate the
dependency on a single chosen indicator’s ‘correct-
ness’ (Hagedoorn and Cloodt, 2003). The multi-
item construct also allows for an in-depth analysis
of several single indicators and their interrelation-
ships. This also addresses the issue raised in prior
research that the isolated application of different
innovation indicators may contribute to the am-
bivalence in family firm innovation research (Mat-
zler et al., 2015).
The OECD Oslo Manual (OECD, 2005) views
process innovation as a key indicator of techno-
logical developments (Gunday et al., 2011). Ac-
cordingly, product and process innovation have
often been jointly investigated in family firm re-
search (Craig and Dibrell, 2006). Patent applica-
tion has also been used in family firm research
(Block and Spiegel, 2011; Decker and Guenther,
2017). These indicators jointly facilitate the com-
parison of agency-based and resource-based ar-
guments, since previous findings are particularly
ambivalent regarding these three output variables
(Bennedsen and Foss, 2015). For instance, on the
basis of patents, Decker and Guenther (2017) find
a negative relationship between family ownership
and innovation output in a German sample, while
Block and Spiegel (2011) identify a positive rela-
tionship between the two variables in another Ger-
man study. To complement this output-oriented
analysis, we include a measure on innovation input
as a robustness check.
Product innovation is measured as a continuous
variable assessing the share of sales that new prod-
ucts (i.e. introduced within the last three years)
generate. We analyse a binary measure of whether
new products were introduced to the market dur-
ing this period as a robustness check. Process
innovation is measured as a continuous variable
measuring the percentage decline in the variable
cost that process improvements within the last
three years initiated. Again, we examine a bi-
nary measure as an additional robustness check
if cost-reducing process improvements were intro-
duced during this period. Finally, patent output is
added as a measure of innovation’s newly gener-
ated knowledge (Katila, 2000). A single dichoto-
mous variable is incorporated to capture firms’
patenting activities.
Independent variables. We investigate the influ-
ences of generational development and TMT di-
versity on family firm innovation. Based on the
ownership involvement, the participants assigned
themselves to a specific generation. We use this
information to classify family firms as (1) first-
generation, (2) second-generation and (3) third-or-
later-generation family firms (Sonfield and Lussier,
2004). This three-stage categorization corresponds
to family firms’ progression from controlling owner
to sibling partnership to cousin consortium (Gersick
et al., 1997). Ownership and management respon-
sibilities distributed between family members from
multiple generations usually characterize third-
or-later-generation family firms (Lubatkin et al.,
2005). In terms of TMT diversity, family firms
assigned themselves to the (1) family-managed,
(2) non-family-managed and (3) mixed-managed
groups. Mixed TMTs combine family and non-
family members (i.e. mixed TMTs have at least one

C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms
family manager and at least one non-family man-
ager). A more fine-grained differentiation was nei-
ther needed nor meaningful, because almost 90%
of TMTs in German family firms comprise no
more than four managers (Federation of German
Industries, 2012).
Control variables. To account for the advantages
that large firms enjoy in capital-intensive indus-
tries, we specified assets as a control variable of a
stock of fixed assets scaled by turnover, size (num-
ber of employees in a given year) and assessed
group affiliation by means of a binary dummy vari-
able to control for potential knowledge spillovers
between firms in a group of affiliated companies
(Van den Hooff and De Ridder, 2004). We included
training intensity, measured as the amount of train-
ing costs in relation to the total sales, because
employee training is regarded as a driver of exter-
nal knowledge acquisition (Cohen and Levinthal,
1990). We controlled for export intensity by mea-
suring the sales share generated by exports, since
increased international competition and knowl-
edge pools are presumed to promote innovation
(Fernández and Nieto, 2005). The industry covari-
ate accounted for the varying knowledge intensity
across industries and differences in the production
and services sectors. We classified the control
variable into four clusters on the basis of the re-
search or knowledge intensity and the affiliation to
services or manufacturing (Rammer et al., 2015).
Rather than incorporating R&D intensity as an
indicator of innovation input (Block, 2012), we al-
located the measure to the set of control variables.
We recognized that R&D intensity might serve as
a poor innovation indicator in cross-industry anal-
yses (Wang and Rafiq, 2014), as it tends to neglect
non-R&D inputs in innovation and lacks a strong
connection to innovation’s commercialization
(Evangelista et al., 1998). Nevertheless, we used
R&D intensity as a covariate in our main analysis,
as it may act as a key moderator for innovation
via absorptive capacity (Cohen and Levinthal,
1990).
Descriptive statistics
The overall sample that the German CIS survey
generated included 6,097 observations, of which
3,297 companies account for the subsample of
family firms (Astor et al., 2016). After we had ex-
cluded all the missing and the few non-plausible

C 2019 British Academy of Management.
9
values for the dependent, independent and con-
trol variables, the size of the utilized subsam-
ple amounted to 746 observations. The drop in
the number of observations in our sample is at-
tributable to the comprehensive set of innovation
indicators and covariates used: we guaranteed our
data’s quality and increased our findings’ compa-
rability by building our analyses on one coherent
subsample including all the innovation indicators.
Table 1 shows the family firm descriptive statistics
in this subsample.
Of the observed family firms, 42% are first gen-
eration, 31% second generation and 27% third or
later generation. 67% of the family firms are fully
family managed, 26% are fully non-family man-
aged and 7% have a mixed TMT. 65% of the firms
are in the manufacturing sector, of which 25%
are active in R&D-intensive branches (16% of the
entire sample). 35% of the firms are in the ser-
vices sector, of which 46% are active in knowledge-
intensive services (16% of the entire sample).
Methodology
We conceptualized innovation as a multi-item con-
struct, including (1) patent output, (2) product in-
novation and (3) process innovation. To guarantee
an unambiguous interpretation, we created a uni-
form subsample of all the dependent variables. The
three variables required different treatment due to
the underlying scales that the CIS survey provided.
Since patent output was operationalized as a bi-
nary variable, we applied a hierarchical logistic re-
gression for the dichotomous measure of patent
output. Such a logit model is a common method
for analysing the CIS panel data (Horbach, 2008).
We considered a Tobit regression to be the most
appropriate statistical operation to model the two
continuous innovation measures (Fernández and
Nieto, 2005), which was effective for this analysis
because the continuous variables were limited to
zero and 100%, but contained a significant num-
ber of observations at the lower bound. In line with
Song, Wei and Wang (2015), we applied a Tobit
type I model to avoid inconsistency or bias, which
is more likely to occur in estimates of these variable
types (Tobin, 1958). The results should be inter-
preted with caution, as the estimated coefficients
indicated the influence on a latent construct and
not on an observed variable (Greene, 1999). Post-
estimated marginal effects are a reliable basis for a
practical interpretation (Williams, 2012).
 10 S. Hillebrand, T. Teichert and J. Steeger

Results
(16)
Results of the main analysis

1.00
(15)

We selected several variables to represent the inno-

0.12*
(14)

1.00
vation construct and measure innovation. By us-
ing patents, product innovation and process inno-

0.30*
0.29*
(13)

1.00
vation, we unified three of the most commonly ap-
plied innovation measures in the literature (Katila,

−0.23*

−0.16*
2000). The results highlight that such a multi-item

1.00

−0.01
(12)

approach to innovation provides a more reliable

basis for interpretations than a single-item method

−0.21*

−0.28*
0.27*
1.00

−0.04
(11)

(Janger et al., 2017). The results are summarized

in Table 2. The patent model shows that family
firms’ generational development influences inno-
−0.43*
−0.47*
−0.08*

−0.16*
1.00

0.06
(10)

vation activities significantly (F = 0.72 at p < 0.05).

Further, the product innovation model (F = 0.09 at
−0.43*
−0.19*
−0.21*
0.39*
0.21*
0.11*

p < 0.10) indicates that TMT diversity affects fam-

1.00
(9)

ily firm innovation. In line with the patent model,

the process innovation model (F = 0.06 at p < 0.05)
0.13*

−0.08*

0.23*
0.49*
0.08*
1.00

0.02

−0.07
(8)

reveals that the generational development has a

significant positive influence on innovation. Alto-
gether, the results suggest that the two independent
0.29*
0.37*
0.10*
−0.23*
−0.26*
0.46*
0.40*
1.00

0.04
(7)

variables affect product and process innovation to

a different extent.
0.08*

0.15*
−0.15*
−0.09*
0.13*
0.12*
0.06*
1.00
0.07

0.05

In terms of family firm generation, H1a and H1b

(6)

postulated that they become either more or less in-

novative across generations. The significant posi-
0.11*
0.28*
0.52*
0.17*

−0.12*
0.21*
0.46*
0.13*
1.00

0.01
−0.05
(5)

tive effects on the patent and the process innovation

models support H1b: family firms increase their
0.15*
0.13*
0.19*
0.20*

0.28*
−0.28*
−0.10*

0.36*

innovation output across generations. The cate-

1.00

0.03

0.07

−0.07
(4)

gorical contrasts reveal that the innovation advan-

tage that later-generation family firms have over
c 67% family-managed, 26% non-family-managed, 7% mixed-managed.
0.13*
0.15*
0.07*
0.34*
0.15*
0.30*

−0.10*
−0.16*
0.63*
0.27*
0.22*
1.00

−0.02
Table 1. Descriptive statistics and correlation matrix with all variablesa

first-generation ones emerges after the transition

(3)

first generation, 31% second generation, 27% third generation.

from the second to the third or later generation.

Third-or-later-generation family firms’ signifi-
0.49*

0.19*
0.11*
0.39*
0.12*
0.32*

−0.19*
0.67*
0.20*
0.21*
1.00

0.06

−0.06
−0.04
(2)

cantly higher propensity to use patents indicates

this emergence. Third-or-later-generation family
0.55*
0.43*

firms therefore exhibit significantly greater effec-

0.16*
0.27*
0.12*
0.45*
0.25*
0.39*

0.16 (0.37) −0.13*

0.19 (0.39) −0.18*
0.59*
0.37*
0.17*
1.00

0.49 (0.50) −0.05

(1)

tiveness regarding exploiting process innovation.

In terms of family firms’ management structure,
0.13 (0.34)
0.15 (0.36)
0.19 (0.39)
0.85 (0.82)
0.40 (0.62)
0.36 (1.57)
0.14 (0.23)
0.24 (0.43)
0.16 (0.37)

0.01 (0.05)
−0.06 (0.26)
0.00 (0.03)

we proposed that those with mixed TMTs are ei-

FF μ(σ )

ther more or less prone to innovate than those with

family TMTs (H2a and H2b). Only product inno-
vation indicates that mixed-managed family firms
Services (knowledge)

have a significantly higher innovation output than

Product innovation

Size (standardized)
Process innovation

FF managementc

Group affiliation

those which are entirely family-managed. Family

Industry (R&D)
Export intensity

Industry (other)

Services (other)
FF generationb

R&D intensity
Asset intensity
Patent output

firms led by mixed TMTs generate a significantly

observations.

larger share of sales by introducing new products.

Training

Given that only 7% of our sample consisted of

mixed TMTs (53 companies), we presume support
b 42%

for H2b and a lack of support for H2a. We sub-

a 746
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)

stantiated our interpretation by cross-validating


C 2019 British Academy of Management.
 C

Table 2. Logit and Tobit regressions for categorical comparisons: results of hierarchical regression analyses

First stage: controls only Second stage: generation only Third stage: management only Fourth stage: full model

Patents Product Process Patents Product Process Patents Product Process Patents Product Process
INDEPENDENT
Generations
Second 0.52 0.05 0.04 0.49 0.04 0.04

2019 British Academy of Management.

Third or later 0.72† 0.04 0.06* 0.72* 0.04 0.06*
Management
Non-family 0.52 0.05 0.01 0.54 0.05 0.01
Mixed 0.47 0.10* 0.02 0.46 0.09† 0.01
CONTROL
Asset −0.07 0.00 0.00 −0.06 0.00 0.00 −0.08 0.00 0.00 −0.07 0.00 0.00
Exports 3.60** 0.25** 0.12** 3.57** 0.25** 0.11** 3.54** 0.23** 0.11** 3.51** 0.23** 0.10**
Group 0.47 0.02 0.04 0.40 0.01 0.03 0.26 −0.02 0.03 0.19 −0.02 0.02
R&D 8.04** 1.59** 0.74** 8.73** 1.62** 0.79** 8.25** 1.58** 0.75** 8.94** 1.62** 0.79**
Size 8.01† −0.01 0.01 7.17* −0.01 0.01 7.34* −0.01 0.01 6.51* −0.01 0.01
Training 5.21 0.27 0.23 5.67† 0.30 0.24 5.36 0.29 0.24 5.78† 0.31 0.24
Agency and Resource-Based Lens on Innovation in Family Firms

Industry (other)
Industry (R&D) 0.88** 0.08* 0.06* 1.02** 0.09** 0.07** 0.87** 0.77* 0.06* 0.99** 0.08* 0.07**
Services (knowledge) −1.58† −0.04 −0.06† −1.38 −0.02 −0.04 −1.58† −0.04 −0.07† −1.38 −0.02 −0.04
Services (other) −4.88 −0.27** −0.10** −4.26 −0.26** −0.08* −4.54 −0.26** −0.10** −4.05 −0.25** −0.08*
Constant −2.47** −0.32** −0.19** −3.01* −0.35** −0.23** −2.67** −0.33** −0.19** −3.11** −0.36**
Observations 746 746 746 746 746 746 746 746 746 746 746 746
Pseudo R2 0.39 0.41 0.30 0.41 0.41 0.32 0.40 0.42 0.30 0.41 0.42 0.32

Note: ** p < 0.01; * p < 0.05; † p < 0.1.

11
12 S. Hillebrand, T. Teichert and J. Steeger

Table 3. Supplementary regression results with binary measures and innovation input

Product innovationa Process innovationb R&D investmentsc

INDEPENDENT
Generationd
Second 0.30 (0.32) 0.28 (0.28) −0.01 (0.01)
Third or later 0.32 (0.33) 0.69* (0.27) −0.01 (0.01)
Managemente
Non-family 0.45 (0.30) 0.20 (0.26) 0.00 (0.01)
Mixed 0.96* (0.45) −0.03 (0.40) 0.01 (0.02)
CONTROL
Asset 0.02 (0.05) 0.04 (0.04) 0.00 (0.00)
Exports 2.15** (0.49) 1.39** (0.42) 0.13** (0.02)
Group −0.18 (0.31) 0.18 (0.27) 0.02† (0.01)
R&D 19.12** (6.34) 10.44** (2.70) −
Size 0.29 (0.32) 0.97 (1.32) −0.00 (0.01)
Training 2.73 (2.37) 2.09 (2.00) 0.22 (0.21)
Industry (other)
Industry (R&D) 0.56† (0.30) 0.85** (0.26) 0.15** (0.03)
Services (knowledge) −0.39 (0.41) −0.86† (0.48) 0.12** (0.03)
Services (other) −1.97** (0.75) −0.84* (0.39) −0.08** (0.03)
Constant −2.81** (0.28) −2.28** (0.29) −0.20** (0.03)
Observations 746 746 746
Pseudo R2 0.29 0.19 0.89

Note: ** p < 0.01; * p < 0.05; † p < 0.1.

Coefficients and standard errors in parentheses.
a Binary dependent variable.
b Binary dependent variable.
c Continuous dependent variable (R&D investments divided by sales).
d First-generation family firms as basic reference group.
e Family-managed family firms as basic reference group.

the findings of the original Tobit regression model
in respect of both generation and management,
based on the product innovation and process inno-
vation models’ marginal effects.
Robustness checks
The ZEW (i.e. data provider) conducted a com-
prehensive non-response survey to ensure that a
potential selection or non-response bias did not
distort its data. On the basis of a non-response
survey’s information, weighting techniques were
applied to correct a potential selection bias [see
Behrens et al. (2017) for a detailed review]. The
CIS data used in this study are therefore regarded
as representative of the entire population of
German firms.
We executed several robustness checks, which
are reported in detail in the Appendix. At the level
of the dependent variables, we substituted the con-
tinuous measures of product and process inno-
vation with binary measures. We tested different
variable specifications and executed an additional
regression analysis with R&D intensity as an indi-
cator of the innovation input. Further robustness
checks addressed possible endogeneity biases and
potential issues of reverse causality. Overall, the re-
sults are robust and confirm our previous interpre-
tation. Finally, we investigated the firms’ future-
directed propensity to plan for product and process
innovation in the year following the survey. This
future-oriented analysis also confirmed the results
of our main model.
The findings favour the resource-based lens in
explaining the impact of generation and manage-
ment diversity on innovation. Agency-related vari-
ables might, however, act as moderators. As uncer-
tainty is a main constituent of transaction costs
reasoning, we checked whether effects reverse in
different competitive environments. The question-
naire included a set of items that measured aspects
such as competition intensity, uncertainty about
competitive actions or technology change. We cal-
culated a sum score of seven items (measured
on a four-point Likert scale) and split the data
set into companies acting in low-risk or high-risk


C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms
environments. Table 3 compares the effect models
split into companies operating in either low-risk or
high-risk environments. No sign reversals (signifi-
cant negative effects) can be observed, disfavouring
again the transaction cost-related hypotheses H1a
and H2a. Instead, the positive impact on innova-
tion shifts between the competitive environments:
generational development influences family firm
innovation positively in low-risk environments;
mixed and non-family management exert a signif-
icant positive influence on innovation in high-risk
environments.
Discussion
The findings contribute to research on family
firm heterogeneity and innovation. They show that
family firms are heterogeneous organizations and
that an in-depth reflection of this heterogeneity can
reconcile family firm innovation’s ambivalent re-
search field (Duran et al., 2016). Both family gener-
ation and TMT diversity emerge as key contingen-
cies in the innovation context. Family firms in third
or later generations outperform first-generation
ones (i.e. generational development) and family
firms with a mixed TMT (i.e. with non-family
members in the top management team) outper-
form purely family-managed family firms. We sub-
sequently present theoretical reflections on these
findings and delineate their implications for fam-
ily firm scholars, innovation researchers and man-
agers of family and non-family firms.
Theoretical reflections
By developing conflicting hypotheses, we endeav-
oured to demonstrate that applying both an agency
and a resource-based lens contributes to disentan-
gling the pronounced ambivalence in the family
firm innovation research field, and specifically in
the context of German family firms. Though re-
cent research has recognized family firms’ strong
heterogeneity and differentiated between distinct
family firm types (Nordqvist, Sharma and Chirico,
2014), our two constituent features of family in-
fluence remained ambiguous. In terms of the gen-
eration and management diversity in family firms
in Germany, resource-based arguments reflect the
results better than agency-based predictions (De
Massis et al., 2018).

C 2019 British Academy of Management.
13
In line with the resource-based predictions, our
results indicate that German family firms be-
come more innovative across generations. This
is likely to be due to the next-generation fam-
ily members’ contributions. These managers of-
ten add new ideas and fresh momentum (Litz
and Kleysen, 2001), while retaining prior gen-
erations’ knowledge and skills sets and enlarg-
ing the firm’s repertoire of competencies to fa-
cilitate innovation (Cabrera-Suárez, De Saá-Pérez
and Garcı́a-Almeida, 2001). In line with the RBV,
we also found strong support for the proposi-
tion that family firms with mixed TMTs demon-
strate stronger innovation than those without.
The results suggest that non-family involvement
in mixed TMTs can contribute external experience
and professional expertise, thus fostering innova-
tion (Buettner et al., 2013; Cruz and Nordqvist,
2012). Mixed TMT’s observed superior perfor-
mance supports the inverted U-shaped hypothesis
on the effects of non-family management involve-
ment and innovation (Kraiczy, Hack and Keller-
manns, 2014). The latter hypothesis stresses the
ability of a family firm with a mixed TMT to retain
family managers’ company-specific tacit know-
how and to capitalize on new information from
non-family managers (Sirmon and Hitt, 2003), a
phenomenon that German family firms’ owners
often report (Federation of German Industries,
2012).
The empirical findings of our study on German
family firms support agency theory’s previously
recognized limits for studying innovation (Mu-
nari, Oriani and Sobrero, 2010). Agency models
of limited competence and managerial opportunism
(surmised to become increasingly evident in
later-generation family firms with mixed TMTs)
received no support in this study (Zona, 2016).
Although agency problems may become apparent
during later generations and in mixed TMTs,
the results imply that resource-based assets out-
weigh agency-based liabilities associated with
generational development and TMT diversity. Ac-
cordingly, we suggest that next-generation family
managers and non-family managers should be
understood as resource contributors rather than
as agents in the family firm innovation context
(Miller, Le Breton-Miller and Scholnick, 2008).
Findings of the sample split also support RBV
reasoning, as next-generation family managers
(contributing internal competencies) contribute to
innovation in more stable environments, whereas
14
non-family managers (contributing external orien-
tation) support innovation in dynamic, high-risk
environments.
Next-generation family managers’ and TMT di-
versity’s positive influence should be viewed in
the empirical context of family firms in Germany.
Earlier cross-national studies showed that differ-
ent national systems (the UK and GE) influence
even multinational companies’ strategic responses
to market developments (Lane and Probert, 2005).
Recent research has similarly emphasized Ger-
man family firms’ special setting and developed a
‘resource-based model of German Mittelstand in-
novation’ (De Massis et al., 2018), stressing the
unique resource configurations of the German
Mittelstand, which may explain their innovation
success. The authors of these studies argue that
German family firms’ strong and sustained inno-
vation performance does not stem from single re-
sources, but rather from the sociocultural context
that supports innovation. It may thus well be that
the underlying societal orientation towards inter-
nationalization and global competitiveness specif-
ically supported the positive generational aspects
identified in this study (Gupta et al., 2011).
Implications for family firm research
This study identifies a family firm’s generation and
management diversity as two separate key con-
tingencies in family firm innovation. This paper
therefore extends those studies that analysed the
effects of management diversity on family firm
performance (Minichilli, Corbetta and MacMil-
lan, 2010). By explicitly testing mixed TMTs’ role,
this study builds on research on TMT diversity
due to non-family managers in the family firm
innovation context (Kraiczy, Hack and Keller-
manns, 2014). Since non-family management in-
volvement led to ambiguous results in prior in-
novation and entrepreneurship studies (Cruz and
Nordqvist, 2012; Salvato, 2004; Zahra, 2003), the
use of mixed TMTs helps clarify how non-family
managers contribute to innovation in family firms.
Thus, in our view, mixed TMTs deserve further
attention in future family firm research (Kraiczy,
Hack and Kellermanns, 2015).
This analysis also extends earlier research that
examined the different effects that the generation
in control had on family firm innovation output.
Our results agree with those of Block and Spiegel
(2011) but are contrary to those of Decker and
S. Hillebrand, T. Teichert and J. Steeger
Guenther (2017) – two studies that tested the rela-
tionship between family ownership and the num-
ber of patents granted in Germany. The latter
studies differ largely in their setup, leading to dif-
ferent views on family firm heterogeneity. Most im-
portantly, instead of drawing upon generational in-
volvement conceptualized as the number of genera-
tions involved in management (Kellermanns et al.,
2008; Zahra, Neubaum and Larrañeta, 2007), our
study investigates the relevant generation’s effect on
innovation regardless of the family’s management
involvement. We thereby avoid the two variables’
effects being confounded. We argue that this dif-
ferentiation of effects dispels the previous studies’
ambiguity.
Specific implications for innovation research
The findings point to the various advantages of the
composite innovation construct that we utilized in
this analysis. The findings provide evidence of a
complementarity between product innovation and
process innovation (Hullova, Trott and Simms,
2016). Nevertheless, the results indicate that the
interrelationship between the two may be special
in the family firm context. The findings reveal the
generational development and TMT diversity’s in-
dependent effects on product and process inno-
vation. Unexpected findings are that the genera-
tional development only affects process innovation
and that TMT diversity only drives product in-
novation. Since next-generation family managers
largely draw upon firm-specific experiences, they
are usually strongly engaged in the family firm’s
internal practices (Dyer, 1989). Such company-
specific expertise may mean that next-generation
managers are in a particularly strong position to
pursue process innovation.
We found that TMT diversity only fosters prod-
uct innovation. Similarly, a supplementary model,
which includes R&D human resources as a control
variable, shows that a non-family TMT also exerts
a more positive impact on product innovation than
a pure family TMT. The differences in non-family
and next-generation family managers’ professional
experience and career incentives may explain the
previous difference. While non-family managers
tend to contribute industry expertise, managers
from succeeding generations tend to add family-
firm-specific knowledge (Block, 2011). Thus, non-
family managers’ market expertise may facil-
itate innovation’s identification and realization

C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms
(Dawson, 2011). In addition, non-family managers
are usually more interested in their reputation
on the labour market than family managers are.
Consequently, non-family managers may view
product innovation as a more effective means
of signalling strong performance to the external
labour market (Block, 2011). Whatever the case,
the findings indicate that it is worth distinguish-
ing between product innovation and process in-
novation when exploring generational stage and
TMT diversity’s impacts on innovation. Future re-
search should substantiate these findings and val-
idate whether the complementarity between prod-
uct and process innovation is unique to family
firms (Hullova, Trott and Simms, 2016).
Limitations and suggestions for further
research
The findings of our effect models favour the
resource-based view over the agency perspective
in explaining the effects of generation and man-
agement diversity on family firm innovation. This
does not imply that there are no agency effects
present. Detrimental effects of agency costs might
have been compensated by RBV benefits. Further-
more, agency-related variables might moderate
the revealed relationships. For example, different
governance modes, CEO duality or the presence
of independent directors might cause different
effects on innovation across different family firms’
settings. While we were unable to include such
highly specific moderators as covariates in our
secondary data analysis, future surveys should
add them to further assess the robustness of the
obtained findings.
The generalizability of our findings might also
be limited due to our sample comprising just Ger-
man family firms, which have been shown to have
a special form of corporate governance (Berghoff,
2006; Logue et al., 2015), or unique agency and
resource-based considerations. The innovation ad-
vantage of later-generation family firms or those
with TMT diversity due to non-family managers
may therefore not be observable in other coun-
tries. Other particularities, such as a strong focus
on and benefits from exporting, may also bias the
results. Further work is needed to verify if family
firm heterogeneity is as pronounced in other coun-
tries. However, our findings demonstrate that both
aspects can work in favour of family firms if they

C 2019 British Academy of Management.
15
are supported by national policies and sociocul-
tural setting (De Massis et al., 2018).
Although we deployed several robustness checks
to alleviate the threat of endogeneity bias, the re-
sults should be interpreted in light of a poten-
tial endogeneity bias. Family firms’ strong fail-
ure rate over generations (Schulze, Lubatkin and
Dino, 2003a) suggests that they compete in very
challenging markets. Those that manage to reach
the second, third or even later generations have
successfully resisted intense competitive pressures
and proven to be highly competitive. The endo-
geneity bias suggests reverse causality (i.e. the abil-
ity to pursue innovation strategies may have al-
lowed family firms to survive to later generational
stages).
Our empirical analysis is bound to the survey
data limitations. For instance, examining succeed-
ing generations or non-family managers’ personal
background could help identify the specific re-
sources that come into play in the family firm inno-
vation context (Buyl, Boone and Hendriks, 2014).
Similarly, the data only allowed for a categorical
indicator of family firms’ management composi-
tion and not a continuous measure of TMT diver-
sity due to non-family managers (Kraiczy, Hack
and Kellermanns, 2014). Owing to the commu-
nity innovation survey’s anonymous data, we can
neither identify single companies nor investigate
TMT members’ background with the data sets. Fu-
ture research might complement the analyses with
such additional background variables.
Future studies could also undertake a detailed
investigation of the ways in which generational de-
velopment and TMT interact to influence innova-
tion. Given that diversity and generational devel-
opments tend to add complexity to family firms’
management, a mixed TMT’s positive effects might
decrease in later generations. While we had reason-
able support for positing hypotheses for the main
effects, we omitted investigations of interaction ef-
fects, which would have been questionable due to
the sample limitations since, for example, only 7%
of the sample firms had mixed TMTs.
Socio-economic wealth (SEW) theory (Gómez-
Mejı́a et al., 2007) assumes that family firm own-
ers and managers tend to prefer non-economic
goals and affective needs (e.g. preservation of
control and influence) to financial rationales. Al-
though this study focused on agency theory and
the RBV – since SEW theory seems to be rooted
in the behavioural agency model (Chrisman and
16
Patel, 2012) – SEW theory may offer another av-
enue for disentangling the strong ambivalence in
family firm innovation research (see e.g. Ahlers
et al., 2017; Hauck and Prügl, 2015).
References
Aalbers, R., W. Dolfsma and O. Koppius (2014). ‘Rich ties and
innovative knowledge transfer within a firm’, British Journal
of Management, 25, pp. 833–848.
Achleitner, A., C. Bock, R. Braun, S. Schraml and J. Welter
(2010). ‘Zielstrukturen in Familienunternehmen: empirische
Hinweise auf die Beziehung zwischen Unternehmens- und
Familienzielen’, Zeitschrift für KMU und Entrepreneurship, 58,
pp. 227–258.
Ahlers, O., A. Hack, K. Madison, M. Wright and F. W. Keller-
manns (2017). ‘Is it all about money? Affective commit-
ment and the difference between family and non-family sell-
ers in buyouts’, British Journal of Management, 28, pp. 159–
179.
Arregle, J. L., M. Hitt, D. Sirmon and P. Very (2007). ‘The de-
velopment of organizational social capital: attributes of family
firms’, Journal of Management Studies, 44, pp. 73–95.
Astor, M., C. Rammer, C. Klaus and G. Klose (2016). ‘End-
bericht: Innovativer Mittelstand 2015-Herausforderungen,
Trends und Handlungsempfehlungen für Wirtschaft und Poli-
tik’, ZEW-Gutachten und Forschungsberichte.
Barney, J. (1991). ‘Firm resources and sustained competitive ad-
vantage’, Journal of Management, 17, pp. 99–120.
Basco, R. (2013). ‘The family’s effect on family firm performance:
a model testing the demographic and essence approaches’,
Journal of Family Business Strategy, 4, pp. 42–66.
Beck, L., W. Janssens, M. Debruyne and T. Lommelen (2011).
‘Study of the relations between generation, market orientation,
and innovation in family firms’, Family Business Review, 24,
pp. 252–272.
Behrens, V., M. Berger, M. Hud, P. Hünermund, Y. Iferd, B. Pe-
ters and T. Schubert (2017). ‘Innovation activities of firms in
Germany – results of the German CIS 2012 and 2014: back-
ground report on the surveys of the Mannheim Innovation
Panel conducted in the years 2013 to 2016’ (N17-04). ZEW-
Dokumentation.
Bennedsen, M. and N. Foss (2015). ‘Family assets and liabilities
in the innovation process’, California Management Review, 58,
pp. 65–81.
Bergfeld, M. M. H. and F. M. Weber (2011). ‘Dynasties of inno-
vation: highly performing German family firms and the own-
ers’ role for innovation’, International Journal of Entrepreneur-
ship and Innovation Management, 13(1), pp. 80–94.
Berghoff, H. (2006). ‘The end of family business? The Mittel-
stand and German capitalism in transition, 1949–2000’, Busi-
ness History Review, 80, pp. 263–295.
Blanco-Mazagatos, V., D. Quevedo-Puente and L. A. Castrillo
(2007). ‘The trade-off between financial resources and agency
costs in the family business: an exploratory study’, Family
Business Review, 20, pp. 199–213.
Block, J. H. (2011). ‘How to pay nonfamily managers in large
family firms: a principal–agent model’, Family Business Re-
view, 24, pp. 9–27.
S. Hillebrand, T. Teichert and J. Steeger
Block, J. H. (2012). ‘R&D investments in family and founder
firms: an agency perspective’, Journal of Business Venturing,
27, pp. 248–265.
Block, J. and F. Spiegel (2011). ‘Family firms and regional in-
novation activity: evidence from the German Mittelstand’,
MPRA Paper 28604.
Bluhm, K. and B. Martens (2009). ‘Recomposed institutions:
smaller firms’ strategies, shareholder-value orientation and
bank relationships in Germany’, Socio-Economic Review, 7,
pp. 585–604.
Buettner, V., U. Schaeffer, E. Strauß and K. Zander (2013). ‘A
role-specific perspective on managerial succession: the case of
new CFO origin’, Schmalenbach Business Review, 65, pp. 378–
408.
Buyl, T., C. Boone and W. Hendriks (2014). ‘Top management
team members’ decision influence and cooperative behaviour:
an empirical study in the information technology industry’,
British Journal of Management, 25, pp. 285–304.
Cabrera-Suárez, K., P. De Saá-Pérez and D. Garcı́a-Almeida
(2001). ‘The succession process from a resource- and
knowledge-based view of the family firm’, Family Business
Review, 14, pp. 37–46.
Chalus-Sauvannet, M., B. Deschamps and L. Cisneros (2016).
‘Unexpected succession: when children return to take over the
family firm’, Journal of Small Business Management, 54, pp.
714–731.
Chin, C. L., Y. J. Chen, G. Kleinman and P. Lee (2009). ‘Corpo-
rate ownership structure and innovation: evidence from Tai-
wan’s electronics industry’, Journal of Accounting, Auditing and
Finance, 24, pp. 145–175.
Chrisman, J. J. and P. C. Patel (2012). ‘Variations in R&D invest-
ments of family and nonfamily firms: behavioural agency and
myopic loss aversion perspectives’, Academy of Management
Journal, 55, pp. 976–997.
Chrisman, J. J., J. H. Chua, F. W. Kellermanns and E. Chang
(2007). ‘Are family managers agents or stewards? An ex-
ploratory study in privately held family firms’, Journal of Busi-
ness Research, 60, pp. 1030–1038.
Chrisman, J. J., J. Chua, A. De Massis, F. Frattini and M. Wright
(2015). ‘The ability and willingness paradox in family firm
innovation’, Journal of Product Innovation Management, 32,
pp. 310–318.
Chua, J. H., J. J. Chrisman and P. Sharma (2003). ‘Succession
and nonsuccession concerns of family firms and agency rela-
tionship with nonfamily managers’, Family Business Review,
16, pp. 89–107.
Classen, N., A. Van Gils, Y. Bammens and M. Carree (2012).
‘Accessing resources from innovation partners: search breadth
of family SMEs’, Journal of Small Business Management, 50,
pp. 191–215.
Cohen, W. M. and D. A. Levinthal (1990). ‘Absorptive capacity:
a new perspective on learning and innovation’, Administrative
Science Quarterly, pp. 128–152.
Craig, J. and C. Dibrell (2006). ‘The natural environment, inno-
vation, and firm performance: a comparative study’, Family
Business Review, 19, pp. 275–288.
Cruz, C. and M. Nordqvist (2012). ‘Entrepreneurial orientation
in family firms: a generational perspective’, Small Business
Economics, 38, pp. 33–49.
Cucculelli, M. and G. Micucci (2008). ‘Family succession and
firm performance: evidence from Italian family firms’, Journal
of Corporate Finance, 14, pp. 17–31.

C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms
Damanpour, F. (1991). ‘Organizational innovation: a meta-
analysis of effects of determinants and moderators’, Academy
of Management Journal, 34, pp. 555–590.
Dawson, A. (2011). ‘Private equity investment decisions in family
firms: the role of human resources and agency costs’, Journal
of Business Venturing, 26, pp. 189–199.
De Massis, A., F. Frattini and U. Lichtenthaler (2013). ‘Research
on technological innovation in family firms: present debates
and future directions’, Family Business Review, 26, pp. 10–31.
De Massis, A., D. Audretsch, L. Uhlaner and N. Kammerlan-
der (2018). ‘Innovation with limited resources: management
lessons from the German Mittelstand’, Journal of Product In-
novation Management, 35, pp. 125–146.
Decker, C. and C. Guenther (2017). ‘The impact of family own-
ership on innovation: evidence from the German machine tool
industry’, Small Business Economics, 48, pp. 199–212.
Doll, D., E. Feess and A. Mohnen (2017). ‘Ability, team com-
position, and moral hazard: evidence from the laboratory’,
Schmalenbach Business Review, 18, pp. 49–70.
Duh, M. (2010). ‘Applying agency theory and the resource-based
view in explaining performance differences between family and
non-family businesses’, Nase Gospodarstvo, 56, pp. 45–52.
Duran, P., N. Kammerlander, M. Van Essen and T. Zellweger
(2016). ‘Doing more with less: innovation input and output in
family firms’, Academy of Management Journal, 59, pp. 1224–
1264.
Dyer, W. (1989). ‘Integrating professional management into a
family owned business’, Family Business Review, 2, pp. 221–
235.
Dyer, W. (2006). ‘Examining the family effect on firm perfor-
mance’, Family Business Review, 19, pp. 253–273.
Ensley, M. D. and A. W. Pearson (2005). ‘An exploratory com-
parison of the behavioural dynamics of top management teams
in family and nonfamily new ventures: cohesion, conflict, po-
tency, and consensus’, Entrepreneurship Theory and Practice,
29, pp. 267–284.
Evangelista, R., T. Sandven, G. Sirilli and K. Smith (1998). ‘Mea-
suring innovation in European industry’, International Journal
of the Economics of Business, 5, pp. 311–333.
Federation of German Industries (2012). ‘Major family busi-
nesses in Germany: facts, figures, potential’. Available at
http://www.aidaf.it/wp-content/uploads/2014/09/Major+
family+businesses+in+Germany.pdf, retrieved July 17th
2019.
Fernández, Z. and M. J. Nieto (2005). ‘Internationalization strat-
egy of small and medium-sized family businesses: some influ-
ential factors’, Family Business Review, 18, pp. 77–89.
Gallo, M. A. and J. Sveen (1991). ‘Internationalizing the family
business: facilitating and restraining factors’, Family Business
Review, 4, pp. 181–190.
Gedajlovic, E., M. Carney, J. J. Chrisman and F. W. Keller-
manns (2012). ‘The adolescence of family firm research: taking
stock and planning for the future’, Journal of Management, 38,
pp. 1010–1037.
Gersick, K. E., J. A. Davis, M. M. Hampton and I. Lansberg
(1997). Generation to Generation: Life Cycles of the Family
Business. Boston, MA: Harvard Business School Press.
Gómez-Mejı́a, L. R., K. T. Haynes, M. Núñez-Nickel, K. J.
Jacobson and J. Moyano-Fuentes (2007). ‘Socioemotional
wealth and business risks in family-controlled firms: evidence
from Spanish olive oil mills’, Administrative Science Quarterly,
52, pp. 106–137.

C 2019 British Academy of Management.
17
Greene, W. (1999). ‘Marginal effects in censored regression mod-
els’, Economics Letters, 64, pp. 43–49.
Gunday, G., G. Ulusoy, K. Kilic and L. Alpkan (2011). ‘Effects
of innovation types on firm performance’, International Jour-
nal of Production Economics, 133, pp. 662–676.
Gupta, V., N. M. Levenburg, L. Moore, J. Motwani and
T. Schwarz (2011). ‘The spirit of family business: a com-
parative analysis of Anglo, Germanic and Nordic nations’,
International Journal of Cross-Cultural Management, 11,
pp. 133–151.
Hagedoorn, J. and M. Cloodt (2003). ‘Measuring innovative per-
formance: is there an advantage in using multiple indicators?’,
Research Policy, 32, pp. 1365–1379.
Haour, G. (2004). Resolving the Innovation Paradox: Enhancing
Growth in Technology Companies. London: Palgrave Macmil-
lan.
Hauck, J. and R. Prügl (2015). ‘Innovation activities during intra-
family leadership succession in family firms: an empirical study
from a SEW perspective’, Journal of Family Business Strategy,
6, pp. 104–118.
Hilse, H. and R. Wimmer (2001). ‘Fuehrung in Familienun-
ternehmen’, Zeitschrift für Führung und Organisation, 1, pp.
20–28.
Horbach, J. (2008). ‘Determinants of environmental innovation –
new evidence from German panel data sources’, Research Pol-
icy, 37, pp. 163–173.
Hullova, D., P. Trott and C. D. Simms (2016). ‘Uncovering the
reciprocal complementarity between product and process in-
novation’, Research Policy, 45, pp. 929–940.
Janger, J., T. Schubert, P. Andries, C. Rammer and M. Hoskens
(2017). ‘The EU 2020 innovation indicator: step forward in
measuring innovation outputs and outcomes?’, Research Pol-
icy, 46, pp. 30–42.
Karra, N., P. Tracey and N. Phillips (2006). ‘Altruism and agency
in the family firm: exploring the role of family, kinship, and
ethnicity’, Entrepreneurship Theory and Practice, 30, pp. 861–
877.
Katila, R. (2000). ‘Using patent data to measure innovation
performance’, International Journal of Business Performance
Management, 2, pp. 180–193.
Kellermanns, F. W. and K. A. Eddleston (2006). ‘Corporate
entrepreneurship in family firms: a family perspective’, En-
trepreneurship Theory and Practice, 30, pp. 809–830.
Kettenring, T., A. Tuschke and G. Friedl (2014). ‘Tournaments,
top management team compensation, and the impact of com-
plexity’, Schmalenbach Business Review, 66, pp. 106–131.
Kraiczy, N. D., A. Hack and F. W. Kellermanns (2014). ‘New
product portfolio performance in family firms’, Journal of
Business Research, 67, pp. 1065–1073.
Kraiczy, N. D., A. Hack and F. W. Kellermanns (2015). ‘What
makes a family firm innovative? CEO risk-taking propensity
and the organizational context of family firms’, Journal of
Product Innovation Management, 32, pp. 334–348.
Laforet, S. (2013). ‘Innovation characteristics of young and old
family-owned businesses’, Journal of Small Business and Enter-
prise Development, 20, pp. 204–224.
Lane, C. and J. Probert (2004). ‘Between the Global and the Lo-
cal: A Comparison of the German and UK Clothing Industry’,
Competition and Change, 8, pp. 243–266.
Lee, Y. N. and J. P. Walsh (2016). ‘Inventing while you work:
knowledge, non-R&D learning and innovation’, Research Pol-
icy, 45, pp. 345–359.
18
Litz, R. A. and R. F. Kleysen (2001). ‘Your old men shall dream
dreams, your young men shall see visions: toward a theory of
family firm innovation with help from the Brubeck family’,
Family Business Review, 14, pp. 335–352.
Llach, J. and M. Nordqvist (2010). ‘Innovation in family and
non-family businesses: a resource perspective’, International
Journal of Entrepreneurial Venturing, 2, pp. 381–399.
Logue, D. M., W. P. Jarvis, S. Clegg and A. Hermens (2015).
‘Translating models of organization: can the Mittelstand move
from Bavaria to Geelong?’, Journal of Management and Orga-
nization, 21, pp. 17–36.
Lubatkin, M. H., W. S. Schulze, Y. Ling and R. N. Dino (2005).
‘The effects of parental altruism on the governance of family-
managed firms’, Journal of Organizational Behaviour, 26, pp.
313–330.
Lubinski, C. (2011). ‘Path dependency and governance in Ger-
man family firms’, Business History Review, 85(4), pp. 699–
724.
Matzler, K., V. Veider, J. Hautz and C. Stadler (2015). ‘The im-
pact of family ownership, management, and governance on in-
novation’, Journal of Product Innovation Management, 32, pp.
319–333.
Mazzi, C. (2011). ‘Family business and financial performance:
current state of knowledge and future research challenges’,
Journal of Family Business Strategy, 2, pp. 166–181.
Miller, D. and I. Le Breton-Miller (2006). ‘Family governance
and firm performance: agency, stewardship, and capabilities’,
Family Business Review, 19, pp. 73–87.
Miller, D., I. Le Breton-Miller and B. Scholnick (2008). ‘Steward-
ship vs. stagnation: an empirical comparison of small family
and non-family businesses’, Journal of Management Studies,
45, pp. 51–78.
Miller, D., M. Wright, I. Le Breton-Miller and L. Scholes (2015).
‘Resources and innovation in family businesses’, California
Management Review, 58, pp. 20–40.
Minichilli, A., G. Corbetta and I. C. MacMillan (2010). ‘Top
management teams in family-controlled companies: ‘famili-
ness’, ‘faultlines’, and their impact on financial performance’,
Journal of Management Studies, 47, pp. 205–222.
Morck, R. and B. Yeung (2003). ‘Agency problems in large family
business groups’, Entrepreneurship Theory and Practice, 27, pp.
367–382.
Munari, F., R. Oriani and M. Sobrero (2010). ‘Effects of owner
identity and external governance systems on R&D invest-
ments: a study of Western European firms’, Research Policy,
39, pp. 1093–1104.
Nordqvist, M., P. Sharma and F. Chirico (2014). ‘Family firm
heterogeneity and governance: a configuration approach’,
Journal of Small Business Management, 52, pp. 192–209.
OECD (2005). Oslo Manual: Guidelines for Collecting and Inter-
preting Innovation Data, 3rd edn. Paris: OECD.
Pérez-González, F. (2006). ‘Inherited control and firm perfor-
mance’, American Economic Review, 96, pp. 1559–1588.
Rammer, C. and A. Spielkamp (2015). ‘Hidden champions
– driven by innovation: Empirische Befunde auf Basis des
Mannheimer Innovationspanels’. ZEW-Dokumentation.
Rammer, C., D. Crass, T. Doherr, M. Hud, P. Hühnermund,
Y. Iferd, et al. (2015). ‘Innovationsverhalten der deutschen
Wirtschaft’. Indikatorenbericht zur Innovationserhebung 2014.
Salvato, C. (2004). ‘Predictors of entrepreneurship in family
firms’, Journal of Private Equity, 7, pp. 68–76.
S. Hillebrand, T. Teichert and J. Steeger
Sanchez-Famoso, V., A. Maseda and T. Iturralde (2017). ‘Fam-
ily involvement in top management team: impact on relation-
ships between internal social capital and innovation’, Journal
of Management and Organization, 23, pp. 136–162.
Sardeshmukh, S. R. and A. C. Corbett (2011). ‘The duality
of internal and external development of successors: opportu-
nity recognition in family firms’, Family Business Review, 24,
pp. 111–125.
Schulze, W. S., M. H. Lubatkin, R. N. Dino and A. K. Buch-
holtz (2001). ‘Agency relationships in family firms: theory and
evidence’, Organization Science, 12, pp. 99–116.
Schulze, W., M. Lubatkin and R. Dino (2003a). ‘Toward a the-
ory of agency and altruism in family firms’, Journal of Business
Venturing, 18, pp. 473–490.
Schulze, W., M. Lubatkin and R. Dino (2003b). ‘Exploring the
agency consequences of ownership dispersion among the di-
rectors of private family firms’, Academy of Management Jour-
nal, 46, pp. 179–195.
Siebels, J. F., D. zu Knyphausen-Aufseß and L. Schweizer
(2017). ‘Explaining conflicts between active and non-active
shareholders in family firms’, Schmalenbach Business Review,
18, pp. 305–341.
Simon, H. (1996). Hidden Champions: Lessons from 500 of the
World’s Best Unknown Companies. Cambridge, MA: Harvard
Business Press.
Sirmon, D. and M. Hitt (2003). ‘Managing resources: link-
ing unique resources, management and wealth creation in
family firms’, Entrepreneurship Theory and Practice, 27,
pp. 339–358.
Sonfield, M. C. and R. N. Lussier (2004). ‘First-, second-, and
third-generation family firms: A comparison’, Family Business
Review, 17, pp. 189–201.
Song, J., Y. S. Wei and R. Wang (2015). ‘Market orientation and
innovation performance: the moderating roles of firm owner-
ship structures’, International Journal of Research in Market-
ing, 32, pp. 319–331.
Tobin, J. (1958). ‘Estimation of relationships for limited depen-
dent variables’, Econometrica: Journal of the Econometric So-
ciety, pp. 24–36.
Van den Hooff, B. and J. A. De Ridder (2004). ‘Knowledge
sharing in context: the influence of organizational commit-
ment, communication climate and CMC use on knowledge
sharing’, Journal of Knowledge Management, 8, pp. 117–
130.
Venohr, B. (2015). Das Erfolgsmodell der deutschen Welt-
marktführer. In F. Langenscheidt and B. Venohr (eds),
Lexikon der deutschen Weltmarktführer. Cologne: Deutsche
Standards.
Wang, C. L. and M. Rafiq (2014). ‘Ambidextrous organizational
culture, contextual ambidexterity and new product innova-
tion: a comparative study of UK and Chinese high-tech firms’,
British Journal of Management, 25, pp. 58–76.
Welter, F., E. May-Strobl, H.-J. Wolter and B. Günterberg (2014).
Mittelstand im Wandel. IfM-Materialien No. 232. Bonn: Insti-
tut für Mittelstandsforschung.
Williams, R. (2012). ‘Using the margins command to estimate
and interpret adjusted predictions and marginal effects’, Stata
Journal, 12, pp. 308–330.
Zahra, S. A. (2003). ‘International expansion of U.S. manufac-
turing family businesses: the effect of ownership and involve-
ment’, Journal of Business Venturing, 19, pp. 495–512.

C 2019 British Academy of Management.
Agency and Resource-Based Lens on Innovation in Family Firms 19

Zahra, S. A., D. Neubaum and B. Larrañeta (2007). ‘Knowl- Zona, F. (2016). ‘Agency models in different stages of CEO
edge sharing and technological capabilities: the moderating tenure: the effects of stock options and board indepen-
role of family involvement’, Journal of Business Research, 60, dence on R&D investment’, Research Policy, 45, pp. 560–
pp. 1070–1079. 575.

Sebastian Hillebrand has been active as a postdoctoral student at the Chair of Marketing and Inno-
vation at the University of Hamburg since January 2016. Before that he completed his BSc and MSc
studies in International Business Administration at the WHU – Otto Beisheim School of Management
in Vallendar, Germany. His primary research interests comprise the fields of innovation, entrepreneur-
ship and family business management.

Thorsten Teichert holds the Chair of Marketing and Innovation at the University of Hamburg. After
finishing his Diploma in Engineering at the Technical University of Berlin and receiving an MBA from
Union College, New York, he completed his PhD at the Christian-Albrechts-University of Kiel and
his habilitation at the WHU. His international research visits include Duke University, ESC Rennes,
the University of Stellenbosch and a visiting professorship at the University of Sydney.

Jonas Steeger has been active as a postdoctoral student at the Chair of Marketing and Innovation at
the University of Hamburg. After finishing his BSc studies in Agricultural Sciences at the University of
Hohenheim, Stuttgart, he passed through an MSc programme in General Management at the Stock-
holm School of Economics. His practical experience includes working as an associate consultant at
KMPG in restructuring and as a business entrepreneur in professional B2B services.

Supporting Information
Additional supporting information may be found online in the Supporting Information section at the end
of the article.

Appendix I. Post-estimated marginal effects of the Tobit regression model

Appendix II. Logit and Tobit regression results for alternative variable specifications
Appendix III. Regression Results with Innovation-Related Human Resource Slack
Appendix IV. Descriptive statistics on innovation planned for generation and management


C 2019 British Academy of Management.