The Family Business Bulletin

A Quarterly Report from the Center of Family Enterprise Research
Mississippi State University

The Family Business Bulletin provides insights, research findings, and resources tailored to the unique needs of family-owned businesses across Mississippi. It is intended to provide tips and information that will be useful to those who are starting, currently own, or want to acquire a family firm.

Family Firm Innovation

In this issue of The Family Business Bulletin, we present information about innovation in family firms. Here you’ll find global observations as well as practical advice derived from research. This information will provide useful insights into 1) the paradox of family firm willingness and ability to innovate, 2) the types of cooperative partnerships that lead to successful family firm innovation, 3) how leadership style can influence innovation, 4) how MSU’s new entrepreneurship major supports family entrepreneurship and innovation, and 5) open-access resources to bolster family entrepreneurship.

INFORMATION – Ability + Willingness = Family Firm Innovation

The Ability and Willingness Paradox in Family Firm Innovation

by Dr. James J. Chrisman, Julia Bennett Rouse Endowed Professor of Management

Innovation involves exploring and making use of opportunities to commercialize new products, services, processes, or business models. This article touches on the ability and willingness of family firms to innovate – two factors that are thought to cause difference in behavior and performance between family and non-family firms as well as among family firms. We define ability as the family owners’ power to direct the allocation of the firm’s resources. By willingness we mean the family owners’ inclination to use those resources to pursue behaviors that vary from those of non-family firms.

Ability is not always accompanied by willingness. The two can differ considerably from one family firm to the next, particularly when engaging in innovation. Although innovation can lead to competitive advantage and superior performance, it also involves significant risk, resource commitments, and time. Perhaps because success is not assured, family firms have been found to be less willing to innovate than non-family firms.

On the other hand, family firms also are less likely to have to ask permission of other stakeholders when they are ready to commit to innovation. Moreover, because owners often wish to pass the business on to the next generation, they are more likely to consider the adaptions needed to prosper long term.

The greater ability to pursue innovation creates a paradox with business owners’ frequent reluctance to take the necessary risks. It’s a paradox researchers are just beginning to investigate. In most instances, the paradox manifests in family firms innovating less despite their ability to do more. However, ability and willingness vary from one firm to the next, making the outcomes of their interactions dissimilar and difficult to predict.

The overall tendency among family firms to innovate or not depends on the amount of ownership held by the family, who in the family holds that ownership, and their level of involvement in management. It is also partially a function of whether willingness is driven by the importance of their economic goals or their non-economic ones. For example, trade-offs between short- and long-term goal concerns generally seem to lead family firms to pursue innovation less vigorously than non-family firms but more vigorously when performance falls short of expectations. When they do innovate, they are more likely to pursue incremental innovations, except when performance is low. In that case, they are apt to pursue innovations that are exploratory in nature. It has been found that although on average family firms innovate less, variations among the innovations are higher – meaning there are more firms on both the low end and the high end of the innovation distribution curve.

Regarding how innovation activities are conducted, further paradoxes are visible. For instance, family firms appear to adopt new technology later than non-family firms but implement it more rapidly when they do make that decision. Perhaps their inclination toward an all-or-nothing approach, in terms of the level of investment and speed of implementation, explains why family firms that do innovate usually perform better than comparable non-family firms.

This article is adapted from Chrisman, J.J., Chua, J.H., De Massis, A., Frattini, F., & Wright, M. (2015). The ability and willingness paradox in family firm innovation. Journal of Product Innovation Management, 32, 310-318.

INFORMATION – Safer Gambles on Innovation

How Cooperation Can Help Family Firms Innovate

by Dr. Jennifer Sexton, Associate Professor of Management

Family businesses face a tough challenge: they often have the resources, the long-term mindset, and the motivation to innovate, yet they tend to invest in new products, processes, and technologies less than their non-family counterparts. Researchers call this the “family firm innovation dilemma.” It is rooted in something called socioemotional wealth: the deeply personal, non-financial value that family owners have tied up in their businesses – their identity, their legacy, their sense of control, and the traditions they’ve built over generations.

Innovation is risky. It requires outside capital and expertise, which can dilute family control, and it can upend cherished traditions and ways of doing things. For family business owners, these aren’t just financial risks. They can feel like a threat to the entire foundation of the firm. So even when innovation makes good business sense, the emotional cost can feel too high.

A recent study of more than 1,200 small- and medium-sized family businesses in South Korea confirms this pattern and offers a practical solution. The researchers found that the higher the share of family ownership in a business, the less that business tended to invest in research and development – especially in a country like South Korea, where family businesses face even greater cultural pressure to avoid uncertainty than their Western counterparts.

But the study also uncovered something encouraging: family businesses that partnered with external organizations were significantly more willing to innovate. Partnering with others changed the calculus. It reduced risk, spread costs, brought in outside expertise, and limited any loss of family control to just the specific project at hand, rather than threatening the business as a whole.

The type of partner matters, too. Family businesses that partnered with non-commercial organizations, universities, government agencies, and research institutions were significantly more likely to pursue innovation. Partnerships with commercially oriented organizations, such as suppliers, competitors, or foreign companies, showed no significant effect.

Why the difference? Non-commercial partners operate under different rules and incentives. They are less likely to engage in opportunistic behavior, less likely to misuse proprietary knowledge, and are often restricted by law in how they can use shared information. For family businesses that are particularly protective of their accumulated know-how and trade secrets, this matters greatly. Partnering with a university or government research body simply feels less threatening to the family legacy than partnering with a commercial competitor.

If your family business has been hesitant to invest in innovation, this research points to a safer path forward: seek out non-commercial partners. The bottom line is that innovation doesn’t have to mean betting the family legacy. The right partnership can make it a much safer and smarter gamble.

This article is adapted and summarized from Kim, T., Sexton, J.C., and Marler, L.E. (2023) Innovation as a mixed gamble in family firms: The moderating effect of inter-organizational cooperation. Small Business Economics, 60, 1389-1408.

INFORMATION & TIPS – Leadership Style and Innovation

How Authoritarian Leadership in Family Firms Can Fuel Innovation

by Chelsea Sherlock, Assistant Professor of Management

In a recent study published in the Journal of Small Business Management, my colleagues and I tackled a leadership-innovation “paradox” that many advisors see in the field: authoritarian leadership (a leader who keeps tight control over decisions and expects compliance) is usually assumed to reduce creativity, yet some family firms with these very directive leaders are highly innovative. In family firms, this authority often comes not only from a role title, but also from the leader’s family position (e.g., founder/parent), and that context can change how employees interpret directive behavior. Therefore, the study asks the question: when can a strict, top-down leadership style actually help family-firm innovativeness?

Using data from the Successful Transgenerational Entrepreneurship Project, the authors analyzed 1,267 family firms with fewer than 500 employees across 56 countries, comparing patterns across emerging versus advanced economies. Findings indicated that authoritarian leadership can be associated with more innovativeness in family firms under the right conditions. First, when emotional attachment is high, family members are more likely to interpret strict leadership as protective and mission-driven, rather than controlling. That shared commitment reduces resistance and helps the firm move quickly on innovation priorities. Second, authoritarian leadership was more beneficial for innovation in the context of emerging economies where institutional support is weaker. Here, centralized leadership can help family firms navigate uncertainty.

From this research we recommend:

Don’t “copy and paste” leadership styles. An authoritarian leadership approach is most likely to support innovation when the leader is widely seen as a steward of the family legacy and when the family system is aligned around the firm’s future.
It is important to build the family’s emotional infrastructure. Family members should work actively to reinforce their shared purpose (why the business matters). They should invest in next-generation engagement and in clarifying what the family wants to preserve and what it is willing to change.
Put guardrails around authority. Even if centralized control speeds decisions, innovation still needs information flow. High-performing family firms often succeed because the leaders set clear strategic boundaries, then ensure resources (time, capital, talent) are mobilized toward implementation.

Sherlock, C., Marshall, D. R., Dibrell, C., & Clinton, E. (2025). The bright side of authoritarian leadership in family firms: An emotional attachment perspective on innovativeness. Journal of Small Business Management, 1-35.

INFORMATION – Developing Entrepreneurs

Launch. Lead. Innovate. The MSU Entrepreneurship Major

Dr. Erik Markin, Associate Professor of Management

In the world of family business, staying ahead means staying innovative. The MSU entrepreneurship major is designed to bridge the gap between classroom theory and real-world execution, ensuring students are ready to lead from the moment they graduate. It has been developed for entrepreneurs by entrepreneurs and offers hands-on experience from day one. Included in this major are:

Innovation challenges that foster mastery in the art of the pitch and solve real-world business problems in a competitive environment
Courses like Experiential Innovation and Entrepreneurship that are complemented by the MSU E-Center’s VentureCatalyst^© Program to help students navigate the complex path from raw ideas to an “investor-ready” ventures
The Entrepreneurship Living Learning Community (LLC) at MSU in which students live and study alongside a cohort of driven, like-minded innovators, fostering a 24/7 culture of creativity
Global reach & competition providing travel funding for students to represent MSU at prestigious external business plan competitions across the country

Whether the goal is to launch a new venture, lead a multi-generational family firm, or champion innovation in an existing venture, the entrepreneurship major at MSU provides the grit, tools, and network to make it happen.

For more information, contact Entrepreneurship Coordinator Dr. Erik Markin at [email protected] or explore our WEBSITE.

RESOURCES

Open Resources for Family Firms

Family businesses do not have to navigate complex challenges alone. High quality, open-access resources offer guidance on topics ranging from succession to governance, growth, and even exits.

Familybusiness.org offers open access to articles written to help family businesses succeed. Research-based insights are shared with practitioners in mind.
Entrepreneur & Innovation Exchange contains open-access articles, interviews, and videos based on applied entrepreneurship research written for founders and business leaders.
SCORE provides free mentoring and education programs for small businesses through a large volunteer network of experienced executives.
The Mississippi Small Business Development Center Network provides free business counseling, training, and resources to help entrepreneurs start, grow, and strengthen their small businesses.

The U.S. Small Business Administration offers free courses, guides, and training through the SBA Learning Center.
Family Business/Business Family Podcast is hosted by Zack Needles, editor-in-chief of familybusinessmagazine.com. Each episode features conversations with owners, advisors, and other family business professionals on all the things that make being part of a family enterprise so challenging – and so rewarding!