Understanding the drivers of entrepreneurship and Innovation in family firms across generations

Family firms can be defined as businesses governed and/or managed with the intention of pursuing the vision of the business held by the members of the controlling family in a way that is sustainable across generations (Chua et al., 1999). Accordingly, it is evident that one of the main goals of family owners and managers consists of ensuring transgenerational control, thus implying that the family firm needs to survive and prosper across generations (Zellweger et al., 2012a). In line with this goal, prior research on family firms has devoted particular attention and considerable efforts to understanding how to ensure continuity and a smooth succession, intended as the process in which the control of the business is transferred from the previous generation to the next one (e.g., Handler, 1994; Le Breton–Miller et al., 2004; Lee et al., 2003). However, scholars have more recently acknowledged that a successful transfer of ownership and/or management from one generation to the next does not generate entrepreneurial value per se and might not be sufficient for entrepreneurial families and their firms to thrive across generations (Habbershon et al., 2010; Jaskiewicz et al., 2015). Indeed, although such transfer is an inevitable process and may be considered a short-term success for the entrepreneurial family, the competitive advantage built by the previous generation will inevitably erode in the long run if the next generation is not able to develop new entrepreneurial initiatives (Nordqvist & Melin, 2010). In other words, entrepreneurial families must continuously pursue new potentially risky business opportunities to keep building value and increase family wealth (Le Breton-Miller and Miller, 2018; Steier et al., 2015). This more recent perspective has also placed entrepreneurial families at the center of the debate rather than the family firms, highlighting that entrepreneurial families might be involved in more entrepreneurial activities simultaneously and over time (De Massis et al., 2021b; Howorth et al., 2010; Rosa et al., 2014), thus requiring researchers to consider their whole entrepreneurial portfolio rather than the single business to assess entrepreneurial success (Discua Cruz et al., 2021; Riar et al., 2022). In addition, the shift in focus from the family business to the entrepreneurial families emphasizes the role of family-related factors in explaining the pursuit of new entrepreneurial activities across generations (Aldrich & Cliff, 2003; Bettinelli et al., 2017; Rosa et al., 2014). Specifically, family-related factors refer to the characteristics, attributes, and behaviors of families and family members, both at the group and the individual level. Finally, what makes entrepreneurial families and family firms particularly interesting to study is their idiosyncratic decision-making process with respect to innovation and entrepreneurial activities (De Massis et al., 2013; Strike et al., 2015), which stems from the fact that they follow not only profit objectives, but also more particularistic family-centered goals (Chrisman et al., 2012). For instance, some scholars contend that family owners are more risk averse (Kraiczy et al., 2015) and less prone to sustain R&D activities (Block, 2012; Chrisman & Patel, 2012), hence hindering innovation. Conversely, other scholars highlight that family owners’ long-term orientation puts family firms in a better position to pursue innovation and entrepreneurial initiatives (Gu et al., 2019; Le Breton-Miller & Miller, 2006). Despite research on the topic is growing, our understanding of what makes some families more entrepreneurial than others and how they are able to nurture entrepreneurship across generations is still limited, thus generating a vibrant debate at the intersection of the family business and entrepreneurship research (Combs et al., 2021; Jaskiewicz et al., 2015). This topic is relevant not only from an academic standpoint, but also from a practical one. Indeed, family firms account for two-thirds of all businesses worldwide, generate approximately 70–90% of annual global GDP, and create 50–80% of jobs in the majority of countries (Family Firm Institute, 2017; De Massis et al., 2018). Given this dominant position and central contribution to any global economy, understanding the drivers of entrepreneurship and innovation in family firms across generations is crucial to help them survive in the competitive landscape so that they keep generating the abovementioned positive consequences for society as a whole. This thesis aims to address these gaps in three main phases. First, by conducting a systematic literature review, this thesis aims to organize and systemize the extant knowledge on the role of family-related factors in shaping potential new entrepreneurial activities, including innovation, that entrepreneurial families decide to pursue across generations. Next, I focus on specific family-related factors and specific entrepreneurial activities. In the second phase, through a quantitative analysis, I seek to explore how different generations in control of the business and the presence of a family CEO may impact digital innovation in family firms. In this way, by considering these two well-established sources of heterogeneity among family firms in the literature, this thesis attempts to address the growing calls for acknowledging family firms’ heterogeneity when studying their innovation performance (Chua et al., 2012; Daspit et al., 2021). In the third phase, through a qualitative study, I seek to advance our understanding of how entrepreneurial families are able to stay entrepreneurial across generations, focusing on the role of a particular family-related factor, the knowledge acquired by the next generation family members. By shedding light on this process, this thesis aims to contribute to the transgenerational entrepreneurship literature (Habbershon et al., 2010; Jaskiewicz et al., 2015). The three phases described above also matches the three chapter of this thesis. More specifically, in the first chapter, titled Opening up the black box of Family Entrepreneurship across Generations: A systematic literature review, I conducted a systematic literature review with the aim of gaining a better understanding of the family-related factors that shape the pursuit of new entrepreneurial activities across generations. Following the systematic literature review methodology (Tranfield et al., 2003), I developed a protocol that led me to include in the review 90 journal articles that analyze (quantitatively, qualitatively, or theoretically) the relationships between family-related factors and the pursuit of entrepreneurial activities involving multiple generations. To systemize and organize the findings, I first inductively identified seven main categories of family-related factors, namely (i) generational development, (ii) intergenerational dynamics, (iii) next generation characteristics, (iv) incumbent generation characteristics, (v) family resources, (vi) family values, and (vii) family control. Next, I developed a narrative synthesis of the relationships between these factors and the different types of entrepreneurial activities. Specifically, building on prior literature (Brumana et al., 2017; Prügl and Spitzley, 2021; Riar et al., 2021), findings are presented differentiating entrepreneurial activities according to two dimensions: mode of organizing and degree of relatedness. The mode of organizing reflects the locus of exploitation of the opportunity (Wiklund and Shepherd, 2008), which might be internal or external to the current family businesses. The degree of relatedness reflects whether a new entrepreneurial activity remains within or goes beyond the industry boundaries of the existing family businesses and, in turn, can be related or unrelated (Brumana et al., 2017; Sorrentino and Williams, 1995). In sum, I highlight how each of the seven categories of family-related factors influence the launch of internal vs. external entrepreneurial activities, as well as related vs. unrelated. Overall, this review responds to the call for greater attention to entrepreneurial families than just family businesses (Habbershon et al., 2010; Zellweger et al., 2012b) and provides a unique categorization of family-related factors underlying new entrepreneurial initiatives. Finally, I use the literature review as a springboard to outline opportunities for future research. Next, guided by the gaps identified in the literature review, in the second and the third chapters I focus on specific categories of family-related factors and investigate how these factors influence (digital) innovation and entrepreneurial activities more broadly. Specifically, in the second chapter I considered generational development and family control, while in the third chapter next generation characteristics and family resources. In the second chapter, titled Family Firms and Digital Product Innovation: A Construal Level Perspective, I investigated the topic of digital product innovation (DPI) in family firms. DPI is critical to the survival of firms, especially those operating in traditional industrial-age industries, as it allows them to develop novel value creation and appropriation pathways (Nambisan, 2017; George et al., 2021). Despite its relevance, achieving digital innovation is still one of the biggest and riskiest managerial challenges (Appio et al., 2021; Vial et al., 2019), in which a firm’s digital innovation behavior and performances usually vary depending on its governance and decision-making processes (Svahn et al., 2017; Liu et al., 2023; Li et al., 2018). In this sense, the idiosyncratic governance structure and decision-making processes of family firms provide a relevant context to study the digital transformation phenomenon and its potential outcomes (Liu et al., 2023; Prügl & Spitzley, 2021; Soluk & Kammerlander, 2021), such as DPI. However, we still lack knowledge on how family involvement in ownership and/or management affects DPI as prior studies have focused on family firms’ digital transformation (Soluk & Kammerlander, 2021) and digital business model innovation (Soluk, 2022; Soluk et al., 2021; Xie et al., 2022). Even more importantly, these studies have treated family firms as a monolithic group. As a result, we especially lack a deeper understanding of the differences between family firms with regard to DPI. I address these research gaps in two steps. First, by drawing on family firm product innovation research (De Massis et al., 2015; Duran et al., 2016) and extending the conjectures on the digital business model innovation of family firms (Soluk et al., 2021; Xie et al., 2022), I develop a baseline hypothesis arguing that family firms will (also) outperform their non-family counterparts in DPI. Second, focusing only on family firms, I explore their heterogeneity by drawing on construal level theory (Trope & Liberman, 2010), and considering family firms controlled by different generations and with the presence, or not, of a family CEO. In line with the prediction of construal level theory, I contend that the presence of later family generations in control fosters DPI in family firms, whereas the presence of a family CEO negatively affects DPI. Finally, we examine the potential moderating role of top management team (TMT) size in the above relationships. Indeed, TMT members play a key role in strategic decision-making, such as engaging in DPI. Specifically, we argue that the greater diversity of perspectives in a larger TMT (Certo et al., 2006) will attenuate both the direct effects of later generations and a family CEO on DPI by negatively moderating the positive effect of later generations, and positively moderating the negative effect of a family CEO. To test these hypotheses, I collected data to build a unique longitudinal dataset of 364 family and non-family firms from the automotive and industrial engineering sectors, observed over the period 2013–2020. Starting from the NRG Metrics database, from which I collected the family-related variables, I then collected patents from Questel Orbit Intelligence FamPat database to measure DPI and, finally, I collected financial data from Orbis (Bureau van Dijk) that served as control variables. The regression analysis supports all the hypotheses, except for the positive moderating effect of TMT size on the relationship between family CEO and DPI. In the third chapter, titled A Knowledge-based Perspective on Transgenerational Entrepreneurship: Unveiling Knowledge Dynamics across Generations in Family Firms, I studied the role of knowledge in transgenerational entrepreneurship, which has been defined as the processes through which a family uses and develops entrepreneurial mindsets, family influenced capabilities, and resources to create new streams of entrepreneurial, financial, and social value across generations (Habbershon et al., 2010). Prior studies have investigated different facets of transgenerational entrepreneurship such as family entrepreneurial orientations (Zellweger et al., 2012b), innovation motives (Diaz-Moriana et al., 2020), venturing motives (Riar et al., 2022) and practices (Ramírez‐Pasillas et al., 2021), business model evolution (Clinton et al., 2018), and cultural contexts (Basco et al., 2019; Eze et al., 2021). However, prior research has devoted little attention to the role that knowledge, as a resource, can play in transgenerational entrepreneurship, namely what knowledge is required within the entrepreneurial family across generations and how it is acquired to sustain business development and spur new entrepreneurial activities. In particular, scholars mainly focused on knowledge sharing (e.g., Botero et al., 2021) and the few studies that have investigated knowledge acquisition have focused on knowledge sources external to the entrepreneurial family (Randolph et al., 2019), such as employees or other firms (Casprini et al., 2017), hence overlooking the role of next generations, who may acquire different knowledge and contribute to new entrepreneurial activities (Ge & Campopiano, 2021; Woodfield & Husted, 2017). Therefore, to address these research gaps, I conducted an in-depth case study on an Italian family business, namely Rivera SpA, operating in the wine industry. The entrepreneurial family who controls Rivera SpA remained entrepreneurial and kept growing their business across generations. Through an inductive analysis of primary and secondary data, I found that the acquisition of different types of knowledge is needed to support new entrepreneurial activities during the earlier generations. Specifically, it is important that the second generation acquires technical knowledge related to the industry in which the entrepreneurial family operates, such as raw materials, products, processes, and technologies that are industry-specific (enological knowledge in this case). Conversely, the third generation needs to acquire broader business knowledge, that is more independent from the industry context, such as management or marketing skills and experience. Nevertheless, not everything needs to change across generations. Indeed, I also found two common contingency factors during both succession processes, i.e., trust among generations and role separation. These factors enabled the next generations to exploit the knowledge acquired to pursue new entrepreneurial opportunities.