Family Firms and Innovation: Examining the Role of Management Structure on R&d Investment and Outcomes

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This study investigates the effect of managerial structure—specifically, only-family-managed, mixed-managed (involving family members and external managers), and external-managed—on innovation inputs and outputs in family firms. Based on four years of panel data from the Mannheim Innovation Panel (MIP) and investigates how managerial structures influence innovation inputs, covering total innovation expenditure and R&D expenditure, as well as innovation outputs like revenue from new or improved products and market novelties. Decker and Günther (2017) have conducted research on the relationship between management and innovation in family firms. However, this study extends this work by integrating both Socio-Emotional Wealth (SEW) theory and Agency Theory. Moreover, it provides a comprehensive view of how different governance structures in family firms affect innovation in time.It provides insights into innovation inputs and outputs across multiple sectors, highlighting the role of family dynamics and control in driving these outcomes. Finally, the study contributes to the existing literature by providing both theoretical and empirical evidence on the relationship between governance structures and innovation performance, emphasizing the unique characteristics of family firms.