The Effect Of Family Control On The Firm’s Innovation Investment

It is a valuable theoretical and practical theme that how family control links to the innovation capacity in business world. Family business is a dominant style in private enterprise, which possesses unique non-economic goal, and the goal has special influences on firm’s behavior. Under the circumstance of fiercer globalization competition and deepening market-oriented transformation, Chinese private enterprise faces a severe transformation-and upgrading-challenge, and one of the main disposal way to the challenge is to enhance innovation capacity and take the road of sustainable development through innovation. But the theme received limited intellect(?)l attention, what is worse, their opinions are at odds.R&D is the most powerful factor to impact innovation capacity of business, and the study will explore the effect of family control on the innovation capacity through analyzing the relationship between family control and R&D investment behavior. To understand the relationship in transition economy, we should answer four theoretical questions, the first one is whether family control influences R&D investment; the second one is how family control influences R&D investment; the third one is how family control influences the structure of R&D investment; the last one is what is contingency conditions.Based on social emotional perspective, embracing the four questions aforementioned, the study examines the relationship between family control and R&D investment through comprehensive private enterprises data sample getting from survey organized by All-China Federation of Industry and Commerce and General Administration for Industry and Commerce in2010and2012. There are five main findings illustrated below. Firstly, the willing and ability of family control are all negatively linked to the level of R&D investment, the actual control of key decision-making power fully mediates the relationship between the willing of family control and R&D investment. Secondly, among the multiple capabilities of family control, the ownership control doesn’t significantly influence the willing and scale of R&D investment, the key decision-making control is negatively linked to the willing of R&D investment but not significantly linked to the scale, on the contrary, if the family members hold the key mid-level management position, the scale will be decreased but the willing doesn’t be impacted. Thirdly, family control is negatively linked to the level of production R&D investment and is positively the variation of production R&D investment, but it isn’t significantly connected with the level and variation of process R&D investment; in the R&D investment portfolio of family business, the ratio of process R&D investment is less than production R&D investment, but the difference between the two ratios is not significantly in non-family business. Fourthly, under higher level of marketization, the growing rate of family business R&D investment is less than non-family business; if the owner has political connection, the growing rates don’t have significant difference between family and non-family business; when the educational attainment of the owner is higher, the growing rates are not also significantly different between family and non-family business. Fifthly, in contrast with the reaction pattern of abroad family business, when the p(?)ance is inferior to the average industry level, the growing rate of family business product R&D investment is less than non-family business; when facing passive excess capacity, family business will cut down product R&D investment, but non-family business will not adjust its investment; when the performance is inferior to the history level or deficit, family business doesn’t increase product R&D investment.Finally, according to the findings, the study put forward corresponding practical advices, and states briefly the limitation in the study, and presents some future research questions.