Heir Grassroots Experience And Family Business Innovation

Family business is a vital and influential organizational form in the history of human business.It has outstanding performance in contributing to GDP,promoting economic growth,creating employment opportunities and enhancing social influence.In more than 40 years of reform and opening up,China has continued to encourage and support the development of private enterprises,with the number of private enterprises increasing to 0.47 billion in 2022,four times the number a decade ago,and accounting for 93.3%of the total number of enterprises.In the context of the in-depth implementation of the innovation-driven development strategy,private enterprises give full play to the advantages of their own flexible mechanisms and strong motivation,active in the innovation arena,according to statistics,China’s private enterprises contribute more than 70%of technological innovation,and about 85%of private enterprises belong to the family business.Combining traditional family culture and modern enterprise system,Chinese family enterprises focus on noneconomic goals while pursuing economic goals,and have unique influence in corporate management and decision-making.As the first generation of Chinese entrepreneurs are about to enter the second half of their illustrious lives,many private entrepreneurs in the family business model will be faced with the problem of how to successfully pass on their businesses to the next generation in order to achieve the goal of "longevity".According to PwC’s Global Family Business Survey 2021,the primary consideration for the inheritance of Chinese family businesses is blood ties rather than the ability of the next generation of peer members,and among the many succession methods,"the son inherits the father’s business" is the mainstream choice for family businesses.In the process of inheritance,more family enterprises choose the grassroots training model,allowing the heir to train for many years in the enterprise or external grassroots positions,gaining legitimacy and establishing authority before assuming the core management positions of the family enterprise and successfully taking over the enterprise.The successor is the future leader of the family business and has a pivotal influence on the development and business decisions of the company.Innovation is a booster for family enterprises to maintain long-term competitive advantage and achieve the goal of longevity,and family business succession is an important opportunity for corporate innovation.Based on the higher echelon theory,most existing studies have explored the influence of managers’ personal traits on corporate decision making from the perspectives of demographic characteristics and early experiences,but less attention has been paid to the unique grassroots training pattern in family business succession.Studying the influence of grassroots experiences formed by heirs during early grassroots training on corporate innovation has both theoretical and practical implications.Against this background,this paper conducts a theoretical analysis and proposes a research hypothesis based on domestic and international literature related to family business innovation,intergenerational succession,executive characteristics and family business successor training,and investigates the relationship between the grassroots experience of family business successors and business innovation based on imprinting theory,upper echelons theory and agency theory.First,this paper investigates the relationship between the grassroots experience of the second generation of family firms and corporate innovation and explores the mechanism of their interaction;then,it continues to explore the moderating role of the heterogeneous characteristics of the second generation of family firms at the individual,firm,and market levels;in addition,this paper further classifies the categories of grassroots experience of the second generation of family firms and explores the impact of different categories of grassroots experience on corporate innovation;finally,this paper investigates the economic consequences of the second generation of grassroots experience and innovation.This paper empirically investigates the relationship between the grassroots experience of the second generation and firm innovation,with a sample of Chinese A-share listed family firms from 2007 to 2020.The results of the benchmark study show that,first,firms with heirs with grassroots experience have higher levels of innovation compared to heirs without grassroots experience,and the benchmark findings of this study still hold after robustness testing.The results of the intermediary mechanism study show that the successor’s grassroots experience mainly enhances the firm’s innovation level by reducing the fim’s financing constraints.The results of heterogeneity analysis show that at the individual level,successors with external grassroots experience and overseas background are more willing to innovate;at the firm level,the higher the degree of equity checks and balances and more government subsidies,the more obvious the promotion effect of successor grassroots experience on innovation;at the market level,the higher the industry boom and the degree of industry competition,the more obvious the promotion effect of successor grassroots experience on innovation.Further classifying the successor grassroots experience,among them.R&D and finance-related grassroots experience has a significant promotion effect on innovation,and sales-related grassroots experience is not conducive to enhancing innovation.Finally,using the mediating effect test,this paper finds that heir grassroots experience can enhance the value of a company by promoting corporate innovation.From a theoretical perspective,it is currently a critical period for intergenerational succession in family firms,and succession-related topics are a hot topic of research among scholars.The existing literature on family business succession mainly focuses on the impact of succession mode,succession source,and succession mechanism on business management,with less discussion on succession training model.The research in this paper is conducive to enriching theoretical studies related to family business cultivation model,early experience of successors and corporate innovation.From a practical point of view,the inheritance of family enterprises is not only related to the survival of the enterprise,but also has a great influence on the development of private economy.Through the empirical study of China’s A-share listed family enterprises,we can provide some references for local family enterprises to improve their innovation ability and better achieve inheritance.The findings of this paper can provide some useful insights for the founders and the second generation of family enterprises to better lay out the succession training,complete the effective handover of positions and rights,and the innovative development of enterprises.