Research On The Influence Of Non-Family Ownership On The Innovation Of Family Firms

In the era of economic globalization,thriving innovation equals strong competitiveness.The transformation and upgrading of China’s manufacturing industry,and the sustainable development of China’s economy are inseparable from innovation activities.Being the mainstream of China’s private companies and an indispensable component of China’s economic development,family firms are at the center of this activity.Regrettably,family firms have been encountering the issue of insufficient vitality in innovation activities:On the one hand,family firms lay too much stress on non-economic benefits;On the other hand,domestic family firms possess a weak foundation in innovative projects.In recent years,in order to make better use of external resources and improve the professionalism,family firms have initiatively introduced external ownership.Hence,nonfamily shareholders have become a force that can not be disregarded,and their relationship with family firms’ innovation turns to be one of the emerging topics in the academic communityThe literature review reveals that the existing literature primarily draws a comparison between the attitudes of family firms and non-family firms towards innovation based on agency theory,contingency theory,socioemotional wealth theory and resource-based view,and studies the impact of family characteristics on innovation in firms.Nevertheless,the existing studies are fairly elementary:Firstly,the heterogeneity of institutional ownership has been disregarded,resulting in conflicting research results.The promotion view holds that institutional ownership has the attribute of risk preference,which can promote the innovation investment of family fimrs,while the hindrance view regards that institutional ownership prefers short-term economic benefits,which is not conducive to the innovation in family firms;Secondly,it takes a one-sided view of the impact of state-owned ownership on the innovation in family firms,only examining the direct influence of state-owned ownership,and not testing the mechanism of state-owned ownership on the relationship between R&D investment and innovation based on China’s actual institutional environment;Moreover,there is a lack of empirical investigation on the relationship between overseas equity and innovation in family firms in China.Foreign scholars believe that foreign investment can bring unique resources and technology to firms in developing countries.Whether overseas investment can really promote the innovation of family firms in China is worth studying;Furthermore,existing literatiure studies the innovation environment of family firms in isolation,neglecting the institutional background and regional background.China has a vast territory,and hence it is compulsary to study based on institutional background and regional backgroundBased on the above issues,this paper principally contains the following five aspects:a)the influence of institutional ownership heterogeneity on family firms’ innovation.Different institutional ownership types play the opposite role in the innovation of family firms.Both the stability and the duration can reflect institutional investors’ attitude towards long-term and high-risk projects in family firms.Investigating its relationship with innovation can make the research results precise and consistent;b)the indirect impact of state-owned ownership on the innovation of family firms.Studying how state-owned ownership and R&D investment interact to affect the innovative ability of family firms will assist us in the discernment of the relationship between R&D intensity and innovation performance,and then comprehend how internal innovative ability,specific systems and family firms jointly shape the innovation results of Chinese family firms;c)the impact of foreign ownership on the innovation of family firms.Since the reform and opening up,China has insisted on introducing foreign capital to help domestic economic development.Through investigating the relationship between foreign ownership and the innovation of Chinese family firms,we can own a profound understanding of the mechanism of foreign capital on China’s economy;d)the impact of family firms’ characteristics on the relationship between innovation and non-family ownership.Family firms have singular characteristics and socioemotional wealth level,which may affect the relationship between non-family owncrhisp and innovation.The study of the regulatory effect of the characteristics of family firms will help us comprehensively understand the role of nonfamily ownership in innovation activities;e)the influence of institutional environment on the relationship between family firms’ innovation and non-family ownershipFocusing on the above research contents,combined with the innovation reality of China’s family firms,this paper makes an empirical analysis on the relationship between non-family ownership and innovation of China’s A-share listed family firms from 2008 to 2017 by using CSMAR family firms’ database and manually collecting the annual report data of listed companiesMain conclusions are as follows:1.In domestic family firms,there is a significant positive correlation between institutional ownership stability and innovation;2.There is a significant positive correlation between the duration of institutional ownership and the innovation of family firms in China.The longer the duration of institutional ownership,the better the innovation performance in family firms;3.State-owned ownership can significantly and positively regulate the relationship between R&D investment intensity and innovation.Along with the increase of the proportion of state-owned ownership,R&D intensity in boosting the innovation of family firms is increasingly apparent;4.There is a significant positive correlation between foreign ownership and the innovation of Chinese family firms,manifesting that the higher the proportion of foreign ownership in family firms,the better the innovation effect of firms;5.The characteristics of family firms can significantly adjust the relationship between non-family ownership and innovation;6 Regional background and institutional background significantly regulate the impact of non-family ownership on family firms’ innovationBased on the above research conclusions,this paper proposes four advice:Firstly,sensibly schedule the control degree of non-family shareholders over family firms,and actively introduce external investment on the premise of family control;Secondly,clearly secern different types of non-family ownership and make sensible use of the heterogeneity of non-family ownership.Diverse non-family shareholders bear different degrees of risk aversion pressure,therefore identifying different types of non-family ownership is the key to the study of family firms’ innovation;Moreover,appoint people on merit and take note of the role of external professional managers in the management of high-risk investment projects in family firms;Furthermore,initiatively ameliorate the innovation environment of family firms and create favorable conditions for effective communications between family firms and the external environmentThe innovation of this paper is reflected in the following five aspects:a)it systematically investigates the impact of non-family ownership on the innovation of family firms for the first time,and clarifies the relationship betw een the heterogeneity of non-family ownership and the innovation of listed family firms in China;b)it is the first time to testify the role of institutional ownership stability in boosting the innovation of listed family firms in China.Although previous literature presents that the existence of institutional ownership is one of the determinants of firms’ innovation,the empirical results of this paper show that this relationship varies with the types of institutional investors;c)existing studies have focused on the direct effect of state-owned ownership on innovation in emerging market economies,but this paper also probes how state-owned ownership influences innovation performance by adjusting the R&D intensity of family firms.The previous literature has not studied how state-owned ownership and R&D intensity interact to shape the innovation ability of family firms in emerging markets.This research gap limits our understanding of the relationship between state-owned ownership and innovation performance;d)it discusses the impact of foreign ownership on the innovation of listed family firms in China for the first time.Most foreign literatures believe that foreign ownership has a positive effect on the technological innovation performance of firms,but there is no literature to test whether foreign ownership genuinely progress the innovation activities of domestic family firms;e)previous studies in this subject field have disregarded how regional and industrial institutional differences under the concept of state affect the relationship between non-family ownership and innovation.This paper regards that the influence of non-family ownership depends on the environment of specific regions and industries,that is,the innovation level of specific regions and industry-specific policies.