Firm ownership and management are essential drivers of firm innovation. Yet micro-firms, where ownership and control are closely related, are often overlooked in empirical studies. Using an innovation production function approach and survey data from 2,658 UK and Irish micro-firms, we investigate the influence of firm ownership and management on innovation success, i.e., converting new innovations into sales. Drawing on agency theory, we differentiate micro-firms by ownership (family-owned vs. nonfamily-owned) and family firms by management (family-managed vs. nonfamily-managed). Our Tobit regression analysis reveals that ownership of micro-firms matters for innovation, with family-owned innovator firms experiencing less innovation success than nonfamily firms. When family firms hire a manager from outside the family, they achieve innovation success similar to that of nonfamily firms. However, outcome equivalence does not imply mechanism equivalence, as our moderation analysis reveals that nonfamily managers do not derive the same incremental benefits from internal R&D.
Lenihan et al. (Tue,) studied this question.