Collaborative Innovation in Family Businesses : Empirical Study on the Influence of Family Involvement in Top Management Teams

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Collaborative Innovation

in Family Businesses

Empirical Study on the Influence of Family Involvement

in Top Management Teams

MASTER THESIS WITHIN: Business Administration NUMBER OF CREDITS: 30

PROGRAMME OF STUDY: Strategic Entrepreneurship AUTHORS: Abdimajid Khayre & Jan Niklas Schmänk JÖNKÖPING May 2021

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Master Thesis in Business Administration

Title: Collaborative Innovation in Family Businesses: Empirical Study on the Influence of Family Involvement in Top Management Teams

Authors: Abdimajid Khayre & Jan Niklas Schmänk Tutor: Tommaso Minola

Date: 2021-05-24

Key terms: Family business, family business heterogeneity, innovation paradox, willingness

dimension, collaborative innovation, top management team, socioemotional wealth, operator firms, supervisor firms, investor firms

Background:

Innovation is widely recognized to be instrumental for the sustained competitiveness of businesses, including family businesses. However, many family firms are unable to achieve innovation on their own, necessitating the shift towards collaborative innovation. Yet, due to the overlap of family and business, innovation in family firms is characterized by the so-called “innovation paradox” where family firms usually possess greater ability to innovate but lack the willingness to do so. Accordingly, considerable attention has been given to the factors that affect the willingness of family firms in an attempt to understand and possibly resolve the innovation paradox.

Purpose:

The purpose of the present study is to explore how the degree of family involvement in the top management team (TMT) influences the family firm’s willingness to engage in collaborative innovation and how that influences the preferred type of collaborative innovation. By exploring the link between the degree of family involvement in TMT and the willingness in the context of collaborative innovation, our study aims to contribute to a deeper understanding of the innovation paradox associated with family businesses, and thereby offer important insights to practitioners, both from the family and non-family perspective.

Method:

Our methods were based on qualitative research with an exploratory research design and a multiple case-study method of eleven family firms. Through semi-structured interviews with both family and non-family TMT members, we gained insights into the role of family influence in family firms. We also used a cross-case analysis to compare the cases and indicate similarities and differences in order to draw our conclusions.

Conclusion:

The results of the study show that the degree of family involvement in the top management teams influences the family firms’ willingness to engage in collaborative innovation. Depending on the degree of family involvement as represented by the respective configurations, five patterns of influence manifestations (IM) are identified.

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Acknowledgement

Throughout the course of our Master thesis, we have received a great deal of support and assistance, which is why we would like to express our profound gratitude with a few words.

First and foremost, we would like to thank all interviewees for taking the time and effort in participating to our research study. We highly appreciate the valuable contents and deep insights that you provided to us. Without your commitment and support, it would have been impossible to write this thesis. Thanks for having us, we enjoyed working with you!

Furthermore, we are very grateful for our supervisor’s insightful guidance and constructive feedback. In that regard, many thanks to Tommaso Minola! Coming from the background as the Director of CYFE (Center for Young and Family Enterprise) in Bergamo, you supported us with your profound knowledge in this research field and helped to steer in the right direction. We felt very comfortable in every stage of the writing process. Unfortunately, we could not meet in person and watch Atalanta win, but we would love to make up for it in the future.

We would also like to offer special thanks to our fellow students from the thesis group who provided helpful recommendations to continuously improve our work and progress during the monthly seminars.

Last but not least, we want to show great appreciation to our families and friends who did not stop cheering us up and have been a truly source of motivation. We can always bank on you.

Thanks for that!

Jönköping, 24th_{May 2021}

___________________ ___________________

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List of abbreviations

Abbreviation Meaning

AC Absorptive Capacity

CBS Creative Business Strategist

CeFEO Centre for Family Entrepreneurship and Ownership

CEO Chief Executive Officer

CFO Chief Financial Officer

CIO Chief Innovation Manager

CMO Chief Marketing Officer

CNC Computer Numeric Control

COI Collaborative Innovation

DFI Degree of Family Involvement

FB Family Business

FF Family Firm

FG Financial Goal

FI Family Involvement

GDPR General Data Protection Regulation

IF Investor Firm

IP Intellectual Property

JIBS Jönköping International Business School

JU Jönköping University

KTH Kungliga Tekniska Högskolan

LTO Long-term Orientation

NDA Non-disclosure Agreement

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OI Open Innovation

P&P Policies and Practices

R&D Research and Development

RBV Resource-Based View

RISE Research Institutes of Sweden

SEW Socioemotional Wealth

SF Supervisor Firm

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1. Introduction

1.1 Background

The rise of globalization and the rapid pace of technological changes have made innovation an important ingredient of attaining a sustainable competitive advantage in today’s dynamic marketplace (Enkel, Gassmann & Chesbrough, 2009; Bigliard & Galati, 2018; Doloreux & Lord-Tarte, 2013). As the world has become more resource-constrained and progressively inter-connected, firms are increasingly investing in innovations and looking for new ways to operate in an attempt to stand out from their competitors (Bigliardi & Galati, 2018; Feranita, Kotlar & De Massis, 2017). Consequently, innovation has received considerable attention from researchers since it is widely recognized as a key differentiating factor that contributes to a company’s superior performance (e.g., Uzkurt, Kumar, Kimzan & Eminoglu, 2013; Löfsten, 2014; Roach, Ryman & Makani, 2016; Kumar & Sundarraj, 2016). However, as the global marketplace has become more complex and prone to fast-paced changes, internal capabilities and resources are often no longer sufficient to establish a lasting competitive advantage (Enkel et al., 2009; Bigliardi, Dormio & Galati, 2012; Doloreux & Lord-Tarte, 2013). Accordingly, there is a growing realization that firms must seek new resources from outside their confined and internal boundaries through the exchange of ideas, knowledge and resources with external players. In other words, innovation is no longer an activity limited within the organization’s boundaries and thus, to achieve superior innovation practices and outcomes, firms must collaborate with external players (Enkel et al., 2009; Bigliardi et al., 2012; Doloreux & Lord-Tarte, 2013). As such, within the realm of innovation, the approach of collaborative innovation (COI) has recently received significant interest from the academics and practitioners. In today’s market, COI is considered to hold significant potential to sustaining a firm’s competitive advantage (Bigliardi & Galati, 2018; Magistretti, Dell’Era, De Massis & Frattini, 2019).

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The importance of innovation also extends to family businesses (FBs). Indeed, innovation in FB continues to be a fascinating research area, catching researchers’ interest because of FBs’ prevalence in today’s economy but also in part due to their innovation peculiarities. FBs are dominant in the world economy since, for instance, more than 70% of all organizations in Europe are family-run, generating around 40% of the total revenue in the private sector (European Family Business - Facts & Figures, 2016). Moreover, because of their unique characteristics, innovation in FBs is often associated with inherent tensions and somewhat conflicting findings (e.g., De Massis, Frattini & Lichtenthaler, 2013; Duran, Kammerlander, Van Essen & Zellweget, 2016 as referenced by Bigliardi & Galati, 2018). In this context, FBs see themselves confronted with the so-called innovation paradox where they tend to have a greater ability to innovate but possess less willingness to initiate innovative procedures in comparison to their non-family counterparts (Duran et al., 2016). In essence, once a family firm (FF) decides to engage in innovation, they tend to have a better output due to their unique characteristics and attributes, often referred to as idiosyncratic behavior. With respect to COI, FBs might be attracted to it due to factors such as sharing of cost and the access to new resources which are associated with this kind of innovation (Bigliardi & Galati 2018). On the other hand, the notion of sharing implies potential loss of control and the possibility of risks (e.g., intellectual, relational problems, asymmetric sharing) which makes FBs less eager to collaborate with external actors in comparison to non-FFs.

1.2 Problem Discussion

While previously most of the studies focused on investigating why and how FFs “can do more with less” compared to non-FFs, there is a growing attention given to the heterogeneity among FFs (Nordqvist, Sharma & Chirico 2014; Chua, Chrisman, Steier & Rau, 2012). With the focus on heterogeneity, researchers aim to get a greater understanding about how and why some FFs behave in a different manner than other FFs when they are involved in COI (Classen, Van Gils, Bammens & Carree, 2012; Chrisman, Chua, De Massis, Frattini & Wright, 2015; Nieto, Santamaria & Fernandez, 2015). More recently, studies have researched the role that COI in FFs can play in reconciling the innovation paradox of low willingness and high ability (Feranita et al., 2017). The FB heterogeneity is believed to influence both the ability and willingness of FFs’ engagement in COI. However, since FFs are widely recognized to possess a superior ability to innovate, we believe a more concerted attention to be placed on the willingness dimension in an attempt to address the innovation paradox linked with

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these firms. Furthermore, the focus on the willingness dimension over the ability dimension is informed by the fact that our study explores the FF’s decision to go with COI rather than the outcome and the performance of COI.

Prior studies have unearthed several factors stemming from FB heterogeneity that influence the willingness of FFs when facing COI. These factors include (1) number of generations, (2) CEO’s education (3) educational level of top management, and (4) level of family involvement (FI) in the top management (Bigliardi & Galati 2018). There have been calls for more studies on these factors since they explain the unique behavior of FFs and in turn their heterogeneity (Chua et al. 2012; De Massis & Kotlar, 2014). Responding to those calls, Pittino and Visintin (2011), as well as Alberti, Ferrario, Papa & Pizzurno (2014) have investigated the relationship of firm age (or number of generations) and the willingness to engage in COI with contrasting findings, thereby underscoring the need for more studies on this relationship. In contrast, there seems to be more consensus among scholars regarding the relationship between the CEO’s level of education and the willingness to engage in COI. According to Classen et al. (2012) FBs with well-educated CEOs might be inclined to have more openness towards COI since they are thought to be better at finding the right trade-off between the socioemotional wealth (SEW) and the financial goals (FGs) of FFs. This conclusion appears to support previous studies which showed that the CEO’s level of education is positively related to rational approaches of managerial decision-making, such as engaging in COI (e.g., Bantel & Jackson, 1989; Papadakis & Barwise, 2002 as referenced in Bigliardi & Galati, 2018).

As for the level of FI in management, there seems to be a consensus that the presence of non-family members in management increases the firm’s willingness to engage in collaborations with external actors even though the explanations as to why this is the case is rather ununiform (Bigliardi & Galati, 2018). However, it mostly comes down to how the presence of non-family members disrupt the balance between competing parts of SEW and financial objectives of FBs. For instance, Gomez-Mejia, Haynes, Núñez-Nickel, Jacobson & Moyano-Fuentes (2007) argue that the substantial presence of family members in the top management team (TMT) tilts the balance in favor of SEW part of the business by for instance, boosting family goals and values (at the expense of FGs). This is relatively aligned to the premise of Classen et al. (2012) who contended that the presence of non-family members increases the orientation towards the financial objective (at the expense of SEW). While the relationship between the presence of non-family members and willingness to engage in collaborative activities seems to be established, the implications of this relationship might need to be explored in

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terms of how this affects decision-making when facing COI. Moreover, the mere presence of non-family members does not necessarily capture the extent of FI. Therefore, we believe further investigations that specifically explore the degree of family involvement (DFI) in TMT and its impact on the willingness to get involved in COI are merited.

1.3 Research Purpose

As previously pointed out, the DFI in TMT is one of many sources of family heterogeneity that contributes to the differences in behaviors observed within FFs. Different FFs may vary in the extent to which the controlling family is responsible for orchestrating and shaping the decision-making process. For instance, prior empirical research demonstrated that differences in family management result in distinct FF behaviors and performances (e.g., Sciascia & Mazzola, 2008; Kraiczy, Hack & Kellermanns, 2014). However, the influence that the DFI in TMT has on the willingness to engage in COI has rarely been studied directly. To our knowledge, previous studies on this topic focused solely on the presence of non-family members in the management of FFs. While this offers a greater insight into the role that family dominance plays in willingness, it remains largely dichotomic (presence or absence in TMT), and hence fails to capture the possible impact of the degree of involvement. In other words, no study has considered the DFI and its influence on the willingness of FFs to engage in COI. As such, we attempt to fill an important gap in current knowledge on how the DFI (rather than the presence or absence of non-family members in TMT) influences the willingness to go with COI. Instead of relying on a dichotomic approach, we will utilize a configuration-based categorization proposed by Nordqvist et al. (2014), to indicate the level of FI in management. These authors propose three FF configurations based on the DFI in management which are: 1) Operator Firms (OFs) 2)

Supervisor Firms (SFs), and 3) Investor Firms (IFs). In addition to going beyond the strict dichotomy of

whether there is presence of non-family members in management, these configurations consider the positions held by family members (rather than only relying on the ratio of family members), thereby better capturing the influence nuances of FI. Even though the configurations suggested by Nordqvist et al. (2014) emphasize the FI in general management, we adopted a narrower view by focusing on the TMT. We believe this focus is justified since TMTs make decisions about strategies of the business including the decision to engage in COI with external actors (Röd, 2019; Li & Daspit, 2016; Pellegrini & Lazzarotti, 2019). Thus, this has direct implications on the willingness. Finally, since the wealth stakes may distinguish among the different types of COI, whether it is horizontal-, vertical-, or

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lateral-5

based, FFs’ preferences to engage in the respective type vary accordingly (Nieto et al., 2015; Pellegrini & Lazzarotti, 2019). For this reason, we are convinced about its relevance and integrated this factor into our research question.

By exploring the link between the DFI in TMT and the willingness in the context of COI, our study aims to contribute to a deeper understanding of the innovation paradox associated with FBs. Furthermore, by examining FB heterogeneity, our study responds to the calls to consider the heterogeneity across FFs in studying their idiosyncratic behaviors (Chua et al., 2012; De Massis et al., 2014). This is particularly true when FBs are engaging in COI with external actors (e.g., Casprini, De Massis, Di Minin, Frattini & Piccaluga, 2017; Lambrechts, Voordeckers, Roijakkers & Vanhaverbeke, 2017). Moreover, our research answers the suggestion of future studies to investigate how the willingness dimension varies regarding different forms of collaboration (De Massis, Frattini, Pizzurno & Cassia, 2015; Nieto et al., 2015). Finally, we believe our study has important implications for practitioners and we hope it will offer some insights to both family and non-family members in TMT as well as parties contemplating to form collaborations with FFs.

Hence, our research question follows:

How does the degree of family involvement in top management teams influence the family firm’s willingness to engage in collaborative innovation, as well as the preference towards a specific type of collaborative innovation?

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2. Literature Review

2.1 Collaborative Innovation

2.1.1 From Open to Collaborative Innovation

Open innovation (OI) emerged as a hot topic around 18 years ago, and since then, it has been the subject of serious debate. Firstly introduced by the former Harvard professor Henry William Chesbrough in 2003, the concept has garnered tremendous growth and was discussed by a multitude of different scholars in the subsequent period. Besides the growing attention in academics, OI has also attracted many leading practitioners, underpinning its relevance and calling for explicit implementation strategies in real business life.

Chesbrough, Vanhaverbeke, & West (2006) define OI as “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and to expand the markets for external use of innovation respectively” (Pelligrini & Lazzarotti, 2019, p. 487). In this context, taking up the paradigm shift from a traditional closed process towards an open, more permeable approach (Chesbrough, 2003; Lichtenthaler, 2011), the focus moves from internal research and development (R&D) to the incorporation of external entities at some point of the innovation process (Chesbrough et al., 2006). To put it in a nutshell, companies are increasingly looking for knowledge, information, and technology outside their common scope of business, to foster internal competencies and accelerate the innovation procedure (Beamish & Lupton, 2009). Several factors have triggered this development, such as the rise of the workforce’s mobility, the easier access to capital through venture capital funds and new communication technologies, which all together result in highly facilitated collaboration opportunities and sharing of knowledge across firm boundaries (Chesbrough, 2003).

Regarding knowledge exchange with external parties, there exist two distinct categories arising from the knowledge flows directions, the outside-in process (inbound) and the inside-out (outbound)

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process (Chesbrough, 2003). The latter refers to the practice of exploiting capabilities by employing not only internal but also external ways of commercialization (Lichtenthaler, 2011; Enkel et al., 2009; Burcharth, Knudsen & Søndergaard, 2014). Firms allow unused and underutilized knowledge to flourish and move outside the organization, to be used for other parties. For instance, outbound OI can include out-licensing intellectual property (IP) to external organizations (Bogers & West, 2012), or spin-offs of new ventures based on prior product development (Chesbrough et al., 2006). However, outbound OI is less practiced and less common in recent literature.

In contrast, inbound OI refers to the approach when a firm opens its own innovation funnel to diverse external inputs and contributions, with the overall aim to generate new ideas, products, or services (Chesbrough, 2006). Besides collaborating with other firms (West & Lakhani, 2008), it also entails the engagement with universities (West & Gallagher, 2006), competitors (Faems, Visser, Andries & Van Looy, 2010), customers and end-users (Von Hippel, 2005), or licensing-in IP rights from other organizations (Bogers & West, 2012).

Later, there also emerged discussions about the coupled OI approach which is regarded as a combination of inbound and outbound OI (West, Salter, Vanhaverbeke & Chesbrough, 2014). This concept entails the co-creation with complementary partners through alliances, cooperation and joint ventures (Enkel et al., 2009). As mentioned above, the current literature links the concept of OI to various innovation-related phenomena, and forms, such as innovation communities (West & Lakhani, 2008), knowledge sourcing (Criscuolo, Laursen, Reichstein & Salter, 2018), and working together with networks, groups, or individuals (Von Hippel, 1986). In this context, COI represents one dimension of the inbound mode of OI (Dahlander & Gann, 2010), and is, therefore, more specific and narrower than the umbrella term OI. Very often, the terms OI and COI are used interchangeably. This generates a blurry and vague perception of the whole topic and creates a lot of confusion about how these different concepts relate to each other. Chesbrough (2003) values COI as a crucial element of OI. By definition "COI is the pursuit of innovations across firm boundaries through the sharing of ideas, knowledge, expertise,

and opportunities" (Ketchen, Ireland & Snow, 2007, p. 371), and thereby enables joint value creation

among the partnering entities (Aggarwal & Wu, 2018; Minola, Brumana, Campopiano, Garrett & Cassia, 2016).

In the last decades, the concept of COI has become increasingly popular amongst innovation scholars and managers. Quite similar to the approach above, Miles, Snow & Miles (2007) define COI as a form of inter-firm relationship incorporating the exchange and sharing of resources (e.g., ideas, knowledge,

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and technology) with external parties, to achieve innovation. Pittino and Visintin (2011) adopt a rather broad definition and compare COI to each process by which organizations work together to generate an innovation outcome. COI comes in various kinds and may also be associated with similar terms such as alliances, joint ventures, technology exchange, contractual agreements through licensing, and partnerships or coalitions (Un, Cuervo-Cazurra & Asakawa, 2010; Das & Teng, 2000; Fuller & Porter, 1986; Mariti & Smiley, 1983). Similarly, it incorporates a wide spectrum of external actors, like for instance customers, suppliers, competitors, universities or research institutions (Faems et al., 2010; West & Lakhani, 2008; West & Gallagher, 2006).

In that regard, current literature distinguishes further between different types of COI (De Massis et al., 2015; Nieto et al., 2015). Horizontal-based COI refers to partnering up with direct competitors or rivals, whereas vertical-based COI rather considers actors along the supply chain such as providers, suppliers, and customers. Another form of COI makes up the engagement with public research institutions like universities for instance, which we define as so-called lateral-based COI (Pellegrini & Lazzarotti, 2019). When managed in a proper and efficient manner, COI can lead to significant enhancement of innovation capabilities. Through leveraging and learning, the collaborating partners can both benefit from exploiting already existing resources and thus from sharing risks and lower innovation costs, as well as from applying new information and knowledge to improve a certain product, service, or process (Feranita et al., 2017; Ireland, Covin & Kuratko, 2009; Freytag, 2019; Mercandetti, Larbig, Tuozzo & Steiner, 2017). The positive impact on the financial performance and therefore on the firm’s wealth underpins its importance and strategic relevance (Ferranita et al., 2017; Ketchen et al., 2007; Lambrechts et al., 2017; Minola et al., 2016; Moorhouse, Tom Dieck & Jung, 2018).

To put it in a nutshell, COI and OI overlap in the sense that both terms address the opening-up approach and looking across the firm’s boundaries and original scope to foster innovation. Nevertheless, they distinguish in the way that COI constitutes one specific dimension of the overall “OI”-term that rather works as an umbrella. COI focuses more on joint innovation processes and outcomes, whereas the “general” term open innovation refers to open the firm’s lenses towards a more permeable innovation approach overall. The key distinction as well as interrelation, can be seen Figure-1.

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9 2.2 Family Business and Collaborative Innovation 2.2.1 Family Business

Even though the FB literature has long struggled with a definition of FB, there seems to be a general agreement that FFs have three key components: (1) family, (2) business and (3) ownership. Consequently, it is the intersection of those three components that define the essence of FB (Tagiuri & Davis, 1996). Other researchers put the focus on components of FI such as governance, management, and succession to be the defining traits of FFs. Nevertheless, some scholars argue that these components of FI do not necessarily determine whether a firm is a FF but instead, they act as substitute measures of the essence of a FF (Chrisman, Chua & Litz, 2003). Against this backdrop of ambiguity, we adopt the definition proposed by Chua, Chrisman & Sharma (1999), that a FB is “a business governed and/or

managed with the intention to shape and pursue the vision of the business held by a dominant coalition controlled by members of the same family or a small number of families in a manner that is potentially sustainable across generations of the family or families” (p. 25). This definition is adopted because it encompasses ownership and

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management, whilst recognizing the desire for continuity. Thus, it also covers the intentions and goals that originate from family influence.

2.2.2 Unique Characteristics of Family Firms

The unique overlap between family, business and ownership distinguishes FFs from non-FFs. Among other things, these interactions result in unique resources and capabilities which are referred to as ‘familiness’ (Habbershon, Williams & MacMillan, 2003). There are further attributes that are typical for FBs, such as long-term orientation (LTO) (Spriggs, Yu, Deeds & Sorenson, 2013; Gómez-Mejía et al., 2007; Lumpkin & Brigham, 2011), risk aversion (Röd, 2016; Webb, Kistruck, Ireland & Ketchen, 2010) or yearn for control (Röd, 2016; Lambrechts et al., 2017) which will be discussed in relation to COI. An underlying concept that cuts through all these characteristics is the SEW construct associated with FFs. Bigliardi & Galati (2018) describe SEW as a concept that includes aspects of “clan membership,

identity, the opportunity to be altruistic to family members, the ability to exercise personal control, and the perpetuation of the family dynasty” (p. 341). In essence, SEW broadly refers to non-FGs or aspects of the FB.

Recognizing the instrumental role of SEW in FFs, Cennamo, Berrone, Cruz & Gomez-Meija (2012) proposed five dimensions of SEW which are: (1) desire to maintain control and influence over the FF; (2) sense of dynasty that implies LTO; (3) identification with the firm and a concern for its reputation; (4) emotional attachment to the firm; and (5) binding social ties. Some authors emphasize the significance of some dimensions such as LTO and desire for control more than others (Cennamo et al., 2012). Other scholars have argued that there are various degrees of SEW within FFs and consequently, the emphasis placed on the dimensions may be different among FFs. Furthermore, varying degrees of SEW may produce different effects and thereby lead to FFs to choosing a set of different strategies (Cennamo et al., 2012; DeTienne & Chirico, 2013). Regardless, these dimensions point to the notion that FFs are mainly motivated by the protection of SEW in their strategic decision-making (Cennamo et al., 2012). As such, when explaining FF’s unique characteristics and their impact on COI, SEW is often cited.

2.2.2.1 Long-term Orientation

FFs tend to be more long-term oriented largely due to the preservation of SEW (Li & Daspit, 2016). Lichtenthaler and Muethel (2014) assert that LTO of FFs provides an advantage in building enduring

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relationships with external partners, thereby providing access to information. The long-term mindset that dominates FF’s collaboration with external parties is, to a certain extent, explained by their goal to transfer the business onto next generations, a situation that stewardship scholars termed as “continuity” (Miller & Le Breton-Miller, 2008; Stubner, Blarr, Brands & Wulf, 2012; Steeger & Hoffmann, 2016). Because FFs tend to engage in collaborations with long-term perspectives by cultivating enduring relationships, they are thought to possess high levels of social capital (Sirmon & Hitt, 2003; Miller & Le Breton-Miller, 2005; Zahra, 2005). This supports the resource-based view (RBV) argumentations which suggest that COI is partly driven by FFs’ social capital and the need to rely on the contribution of external sources during the innovation process (Bigliardi & Galati, 2018). The stewardship theory argues that LTO should have a positive impact on the FF’s willingness to engage in COI with external actors. This is because the family believes that the continuity of the business partly depends on building long-term relationships and collaborations with external players. For example, this emphasis on long-term goals allows the FF owners and managers to focus their efforts on investing in R&D (Miller & Le Breton-Miller, 2008) and empowering employees to pursue explorative-oriented future opportunities with partners (Kellermanns & Eddleston, 2007). Consequently, one can argue that the LTO as a unique characteristic, could counterbalance the behavioral agency arguments of risk aversion which will be examined in the next section.

2.2.2.2 Risk Aversion

FFs are generally more inclined to be risk-averse when facing strategic decisions such as that of collaborating with external partners on innovation (Bigliardi & Galati, 2018). The fear of losing control often outweighs any economic benefit which may result from collaborative projects with external actors (Gomez-Mejia et al., 2007). This is not entirely unexpected since risky decisions may jeopardize the FF’s SEW and thereby undermine the longevity and the continuity of the FB (Gomez-Mejia et al., 2007; Nieto et al., 2015; Lazzarotti & Pellegrini, 2015). As such, when it comes to COI, FBs tend to exhibit what scholars call a “conservative behavior” in the sense that they avoid decisions that they perceive as risky even if it would lead to higher performance and profitability (Nieto et al., 2015). These perceived risks are not unfounded as collaborations with external actors require some level of sharing information, knowledge and capabilities (Bigliardi & Galati, 2018), which goes against the default behavior of FBs. Consequently, this creates a risk-averse climate where COI projects are not favored (De Massis et al., 2015; Basco & Calabrò, 2016; Röd, 2016).

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FF’s risk aversion can also be related to their desire to maintain control and influence over the business. Since the family identifies itself with the firm, any decision that is believed to negatively affect the longevity of the business will more likely be disregarded (De Massis et al., 2015). Furthermore, the yearn for control in FB is partly a manifestation of the higher levels of emotional attachment that they have with their business (Bigliardi & Galati, 2018). In the context of innovation, this desire to maintain power and influence may lead to a preference of internal innovation over COI (Miller et al., 2015). This also implies that vertical-based COI will be preferred as the SEW stakes are usually lower compared to horizontal-based COI. This may particularly hold true when there are few deterrence policies taken (e.g., patents) to ensure a sense of control (Kotlar, De Massis, Frattini, Bianchi & Fang, 2013).

2.2.3 The Innovation Paradox

Innovation in FFs is thought to be inherently distinctive as the majority of prior research concluded that it differs from innovation in non-FFs (Chrisman et al., 2015). A series of recent studies have indicated that even though FFs tend to invest less in innovation, they show a higher rate of innovation output (e.g., De Massis et al., 2013; Duran et al., 2016), thus pointing out to a paradox. For instance, Duran et al. (2016) and Revilla, Perez-Luno & Nieto (2016) who examined the innovation performance of FFs found that these firms outperformed their non-family counterparts. This is in line with the conclusion of Chrisman and Patel (2012) and Chrisman et al. (2015) who highlighted how the superior capabilities of FFs lead to better innovation performance. Thus, the theoretical and empirical literature is generally consistent in pointing to a negative relationship between FFs and investments in R&D (e.g., Block, 2012; Chen & Hsu, 2009; Munari, Oriani, & Sobrero, 2010). Likewise, most previous studies have also shown that FBs are generally more reluctant to invest in innovation compared to non-FFs. In short, the literature pertaining to FFs and innovation strongly suggests the existence of an innovation paradox where FFs generally exhibit a higher ability but a lower willingness to innovate.

When researching the innovation paradox in FFs, scholars often examine the mismatch between the ability and the willingness dimensions, and how they are influenced by the FFs’ unique characteristics and behaviors (Pellegrini & Lazzarotti, 2019; Röd, 2019). Furthermore, the ability and willingness dimensions are believed to be key drivers of a FF’s governance (Chrisman et al., 2015). Apart from

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being key determinants of governance in FFs, the ability and willingness also cause differences in both behaviors and performances between FFs and non-FFs as well as among FFs (Chrisman et al., 2015; Dieguez-Soto, Manzaneque & Rojo-Ramirez, 2016; Feranita et al., 2017)

2.2.3.1 Ability Dimension

In a broader context, the ability dimension refers to the family owners’ discretion to direct and allocate the firm’s resources (Chrisman et al., 2015). Regarding this, the owners’ discretion stems from their power and legitimacy in selecting the goals of the organization as well as in choosing among a range of feasible strategic choices. FFs possess greater discretion because of personalized control, low levels of formalization, LTO towards investments, patient capital, and goal alignment between owners and managers (Carney, 2005; Schulze, Lubatkin, Dino & Buchholtz, 2001; Sirmon & Hitt, 2003).

In the context of COI, ability refers to the capability to manage innovation and it is often linked with the absorptive capacity (AC) construct (Bigliardi & Galati, 2018; Chrisman et al., 2015; Feranita et al., 2017). AC is defined as the firm’s ability to acquire, assimilate, transform, and exploit new knowledge (Cohen & Levinthal, 1990). Other scholars cite further constructs such as the firm’s ability to orchestrate resources (Sirmon, Hitt, Ireland & GIlbert, 2011) and its organizational flexibility when explaining the FFs’ ability to manage COI. The organizational flexibility refers to a firm’s ability to adapt quickly to new or changing environments as being a key driver of innovation performance (Broekaert, Andries & Debackere, 2016). Also, some authors have suggested that familiness of a firm is a crucial determinant of a firm’s ability to innovate (Lichtenthaler & Muethel, 2014; Matzler, Veider, Hautz & Stadler, 2015). Despite the different approaches taken by scholars when explaining the ability dimension, there is a common understanding that the FFs’ ability to manage innovation is superior to non-FFs (De Massis et al., 2013; Duran et al., 2016). It is worth noting that the outlined constructs (AC, organizational flexibility, resource orchestration and familiness) will not be explored in greater detail, as the focus of this thesis lies on explaining the willingness dimension. Moreover, the ability dimension is closely related to the capability to manage innovation and their outcomes, something that is not the focus of this study.

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14 2.2.3.2 Willingness Dimension

The willingness dimension refers to the inclination of the FF’s owners and managers to engage in idiosyncratic behavior (Chrisman et al., 2015). Following the RBV, the FF’s willingness to engage in COI is driven by strategic factors such as overcoming resource constraints, desire to obtain missing knowledge or to expand the firm’s social network (Pittino & Visintin, 2011). On the other hand, the behavioral theory suggests that willingness is largely driven by underlying factors pertinent to the goals, intentions, and motivations of the family (Kraiczy et al., 2014; Li & Daspit, 2016). These factors influence the FF’s behavior in directions deviating from those of non-FFs which lead to the idiosyncratic behavior of FFs (Li & Daspit, 2016). Consequently, the RBV’s strategic perspective may not fully explain the motivations behind FFs’ decisions to engage in COI. In contrast to RBV, behavioral theory suggests that the willingness to go with complex strategic decisions are subject to behavioral factors (e.g., goals intentions, and motivations) rather than economic factors alone (Chrisman et al., 2015). In other words, the preservation of SEW is a determinant factor for the level of willingness exhibited by FFs, something that broadly differentiates them from non-FFs.

Using the behavioral agency model, Gomez-Mejia et al. (2007) claim that when FFs face the delicate task of choosing between a strategic choice that would lead to economic gains (but a subsequent loss of SEW) and the alternative of preserving SEW (but with some minor economic benefits), they would tend to prefer the latter. Therefore, FFs may turn down financially appealing choices if it means they would lose their SEW, thereby underscoring to what extent the safeguarding of SEW contributes to the low willingness. Nevertheless, the role that the protection of SEW plays in determining the willingness can also vary among FFs, thus contributing to FFs’ heterogeneity (Li & Daspit, 2016). Hence, like other strategic choices that involve significant loss of SEW, FFs are generally less willing to engage in COI (Bigliardi & Galati, 2018; Chrisman et al., 2015; Feranita et al., 2017; Kammerlander, Patzelt, Behrens & Rohm, 2020). That is because while innovation can be a powerful strategic tool to acquire and sustain competitive advantage (Kleinschmidt & Cooper, 1991; Porter, 1990), it also entails significant risk and requires a strong commitment of resources. Owing to these inherent characteristics of innovation, FFs are considered to be less willing to innovate than non-FFs.

In recent times, researchers have become interested in studying how COI as a distinctive form of innovation can be perceived by FFs. COI has certain things in common with traditional innovation (e.g., risk of failure), but also entails differences (e.g., sharing of resources by parties involved). In essence, COI may provide unique incentives including sharing costs, getting valuable external

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knowledge and complementary resources, or increasing a firm’s social network (Pittino & Visintin, 2011; Pellegrini & Lazzarotti, 2019), incentives that traditional, in-house innovations typically lack. Other scholars continue to emphasize how COI entails issues pertinent to SEW like risk-taking propensity, trust, and concerns about managerial skills (Bigliardi & Galati, 2018; McAdam, Reid & Shevlin, 2014), thereby lowering the willingness. Research on innovation input tends to rely on the behavioral agency model when explaining how and why FFs invest less in innovation than non-FFs (Chrisman & Patel, 2012; Wiseman & Gomez-Mejia, 1998) while the studies on innovation output tend to use RBV to shed light on why FFs have higher innovation output than their non-family counterparts (Block, 2012; Sirmon & Hitt, 2003). Since the decision to engage in COI represents innovation input, the behavioral agency perspective together with SEW is considered more pivotal than the RBV in explaining the willingness of FFs to engage in COI (Chrisman et al., 2015; Feranita et al., 2017).

2.3 Family Business Heterogeneity

The causes of heterogeneity among FFs stem broadly from (1) goals (Chrisman et al., 2012), (2)

governance structures (Carney, 2005), and (3) resources (Habbershon et al., 2003). For instance, while the

importance of SEW is widely recognized to be a differentiating feature that separates FFs from non-FFs, the degree to which SEW are prioritized at the expense of economic goals is unique to each FF (Pellegrini & Lazzarotti, 2019). Moreover, the relative importance of SEW, as opposed to FGs, might change over time as a result of competitive changes in the environment the FFs are operating in (Gomez-Mejia, Makri, & Kintana, 2010; Westhead & Howorth, 2007). Since the level of preference given to SEW goals is subject to changes and is unique to each FF, it is considered to cause heterogeneity in FFs (Lee, Makri & Scandura, 2019; Veider & Matzler, 2016).

Likewise, resources and governance structures are drivers of FB heterogeneity because they are heavily impacted by the DFI in ownership and management (Astrachan, Klein & Smyrnios, 2002; Klein, Astrachan & Smyrnios, 2005). As such, depending on the DFI, FFs might exhibit differences in their governance as well as in their resources, which in turn leads to a wide variety of outcomes regarding performance and behavior (Lee et al., 2019). For example, scholars have attributed the level of power yielded by family members in the TMT of FFs to the manifestation of particularistic behaviors observed in FFs (Bendig, Foege, Endriss & Brettel, 2020; Dieguez-Soto et al., 2016; Matzler et al., 2015; Nordqvist et al., 2014). Similarly, resource-led heterogeneity arises from, among other factors,

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family-based human assets (Verbeke & Kano, 2012) including the tacit knowledge that accumulates through long tenure and social capital of family and non-family members (Lichtenthaler & Muethel, 2012). In short, the DFI is recognized to be a particularly potent factor in FB heterogeneity because it affects the three main causes of heterogeneity (goals, governance structure and resources) in some way or another (Lee et al., 2019; Li & Daspit, 2016).

2.3.1 Level of Family Involvement in Governance

In studying the governance of FFs, scholars often emphasize two key pillars of governance which are ownership and management (Nordqvist et al., 2014). The reason is that owners and managers represent the ultimate sources and arbiters of governance mechanisms that are needed to make decisions about, amongst others, the set of strategies to be taken as well as the resource allocation in a firm (Carney, 2005; Daily, Dalton & Cannella, 2003). For instance, Nordqvist et al. (2014) argue that it is the DFI in ownership and management which determines the suitable governance structure for reaching the desired goals and performance. Nevertheless, when considering the FFs’ decision to engage in COI, many scholars put more emphasis on the DFI in management as opposed to ownership (Chrisman et al., 2015). This is because the involvement of family members in management is thought to significantly shape the strategic direction of the FF and subsequently its performance (Kellermanns et al., 2012). Some studies go further by indicating that ownership itself does not have much impact on FF profitability and instead, what matters, is the degree to which the family is involved in the management (Sacristán-Navarro, Gómez-Ansón & Cabeza-García, 2011). In line with this is the basic premise of Astrachan et al. (2002) where they highlight how the control executed by a FF’s TMT could indicate the strategic influence of family members. However, having a greater impact on profitability and performance does not necessarily mean that the degree to which the family is involved in management, is indispensable to making strategic decisions such as that of forming COI. Yet, it indicates that factors arising from FI in management such as incentives and authority of family members in the management are likely to be critical in explaining the strategic choices and direction of FBs.

Studies explaining the DFI in management have mostly focused on the presence and absence of non-family members in the top management. For instance, (Kammerlander et al., 2020; Sciascia et al., 2013) have adopted the ratio of family members in TMT to illustrate the level of FI. Likewise, Röd (2019) has also taken a similar approach to highlight the level of FI. However, these approaches rely on the

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mere presence or absence of non-family members in TMT which is dichotomic and may not capture the full DFI (Pellegrini & Lazzarotti, 2019). Moreover, using the proportion or the ratio of family members in top management does not account for the positions that they hold in the top management. In contrast, two main aspects that influence the nature of incentive systems that determine FF governance are whether the CEO of the firm is a family or a non-family member and what proportion of the TMT is family versus non-family members (Ensley and Pearson 2005; Minichilli, Corbetta, & MacMillan 2010). Simply put, the power and influence wielded by the family may not be fully captured by the mere ratio or proportion of family members in the top management.

While examining the DFI in management, Nordqvist et al. (2014) used three FF configurations which are (1) OFs, (2) SFs, and (3) IFs. These categorizations were first proposed by Davis (2008) with the intention to classify the DFI in business. However, Nordqvist et al. (2014) used these configurations for the purpose of indicating the DFI in management as opposed to the business with all its hierarchical tiers. The DFI in management tends to be highest in OFs, followed by SFs whilst IFs tend to have minimal FI in the management (Nordqvist et al., 2014). What is quite appealing about this kind of configuration is that it goes beyond the dichotomy of whether there is presence of non-family members in the top management. Additionally, it considers the positions held by non-family members rather than only relying on the ratio of family members, thereby capturing the power dynamic nuances of FI. However, one can argue that it is open to interpretation in determining the DFI since it does not use any concrete ratios. Nonetheless, this distinction goes beyond the rigid dichotomy where the participation or absence of non-family members in the management is relied on.

2.3.2 Role of Top Management Teams

The TMT refers to the top managers and executives in a firm and it is recognized as having an outsized impact on a firm’s strategic direction as well as its level of performance (Röd, 2019; Sciascia et al., 2013). For instance, the strategic management literature claims that some of the firm’s performance is a reflection of its TMT (Hambrick & Mason, 1984). Similarly, the upper echelon perspective recognizes TMT as being distinctively influential with respect to the firm’s performance since the TMT’s attributes have a strong effect on the strategy and performance (Hambrick & Mason, 1984). In the FB literature, TMT’s significance in the management of FFs has been increasingly recognized. Ensley and Pearson (2005) acknowledged how the DFI within TMT could be an indicator for the level of familiness of a FF. Furthermore, Chrisman et al. (2005) concluded that research on TMTs in

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FFs is a “topic of great potential importance since the decisions of top managers may determine the extent to which a

FB obtains distinctive familiness and superior economic performance” (p. 241). In addition to TMT’s link to

familiness, studies on FF innovation have recognized the leadership team of FFs as being a key driver of innovation (Duran et al., 2016). Other scholars have examined the role that the composition and the diversity of the FF’s TMT play in their innovation behavior and performance. In that regard, they observed differences not only when compared to non-FFs but also within FFs (Smith & Herman, 2016; Ling & Kellermanns 2010; Minichilli et al., 2010). For this reason, our study specifically focuses on TMTs rather than on the general management.

2.4 Family Involvement in Top Management Teams

Studies on the role that TMT plays in contributing to the heterogeneity of FB innovation have examined the FI in TMT and among other things, the age of TMT members and the number of generations in TMT (Bigliardi & Galati, 2018). As previously highlighted, most studies adopt the dichotomy of presence or absence of non-family members to indicate the DFI in TMT and its impact on the willingness to engage in COI. Others put the focus on whether the CEO is a family member (Matzler et al., 2015; Sciascia et al., 2013). Nonetheless, most of the scholars point out a negative relationship between the presence of family members and the willingness to engage in COI (Feranita et al., 2017; Nieto et al., 2015). For instance, Gómez-Mejía, et al. (2007) contends that the more family members in the firm’s TMT, the higher the focus on family goals and values in business decisions, to protect the SEW. Likewise, Pellegrini and Lazzarotti (2019) have found that a non-family CEO in the TMT is positively related to the willingness to engage in COI. This appears to be in line with the findings of Classen, et al. (2012) who suggested that there is a negative association between a TMT with only family members and the search breadth for innovation resources.

Heavy FI in the TMT translates to a higher focus on SEW at the expense of FGs and, as a result, the TMT dominated by family will likely be less willing to take actions such as COI which are often perceived to be risky (Bigliardi & Galati, 2018; Magistretti et al., 2019; Pellegrini & Lazzarotti, 2019). A high family ratio in TMTs tends to boost the focus on family goals, leading to a pursuit of SEW at the cost of the business (Sciascia et al., 2013), and thus resulting in an avoidance of risky, explorative ventures (Gomez-Mejia et al., 2007). This may particularly apply to horizontal-based COI which is thought to be riskier than other forms of innovation as the wealth stakes are higher for the family (De Massis et al., 2013). For example, Pellegrini and Lazzarotti (2019) assert that when FFs engage in COI,

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it is more likely to be vertical-based not only because it is less prone to risks in terms of SEW but also FFs value informal relations, something that is more common in vertical-based collaborations. Thus, FFs may run at risk of overreliance on SEW in decision-making and may miss out on lucrative opportunities (Miller, et al., 2008). Other researchers examine FI and TMT composition through the lens of FF professionalization. It is generally recognized that a greater level of professionalization indicates a greater mix of family and non-family members in the TMT (Sciascia et al., 2013). Since a higher level of professionalization promotes change and innovation (Cruz & Nordqvist, 2012), it tends to lessen the importance of SEW considerations, particularly by lowering the risk aversion (Li & Daspit, 2016). As a result, a higher level of professionalization increases the likelihood that the firm will engage in COI.

2.5 Configurations: Operator, Supervisor and Investor Firms

As asserted earlier, one way to determine the DFI in management and subsequently in TMT is through the configuration of OFs, SFs and IFs. The TMT composition of these configurations will be explored in this section.

In OFs, the TMT is expected to be heavily dominated by family members to the extent that such a body exists (Nordqvist et al., 2014). Depending on the generational stage of the firm, the management might be consolidated by the founder, siblings, or a few powerful family members. If the firm is managed by the founder, it is likely to be dominated by the wishes of that owning manager and there might be no need for a formal management body. In contrast, OFs that are run by siblings or multiple managers will likely require some form of management structure such as a TMT to deal with the competing priorities among family members. Still, informality will be favored, and family members are expected to hold the key management positions in TMT. Thus, there is little professionalization in the TMT and as a result, willingness to engage in COI will tend to be low as strategic decisions are strongly subject to the family’s desires and their preoccupation with SEW (Feranita et al., 2017; Sciascia et al., 2013). This aligns with much of the prior research which has found a high ratio of family managers in the TMT to be associated with less innovation input (Matzler et al., 2015).

With respect to SFs, a mix of family and non-family members will make up the TMT (Nordqvist et al., 2014). Because non-family members have higher participation in the TMT and hold some prominent roles in the TMT including the CEO, the DFI will likely be lower than in OFs. In addition

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to the increased diversity, TMT composition will reflect a higher level of formality and professionalization so that it can accommodate the concerns of both family and non-family TMT members. In general, TMT will be more or less evenly split between family and non-family members in terms of participation ratio as well as authority of the positions within the TMT. Compared to OFs, SFs will generally show a higher willingness to engage in COI as there is less focus on SEW due to non-family members’ inclusion in TMT.

As for the IF, family members tend to have little or no participation in TMT while the key positions such as the CEO will be occupied by non-family managers (Nordqvist et al., 2014). Therefore, the management style of IF will closely resemble that of non-FFs. In that regard, formality and professional style of management is the standard and the power within the TMT heavily tilts to the non-family members. Still, the non-family-led TMT will be accountable to the family owners even as the family has little involvement and influence in the TMT.

Considering the number of family members in the TMT as well as the number of family members holding key positions within the TMT, we broadly categorized FFs into OF, SF and IF firms as shown in Figure-2. It is based on these three configurations that we categorized our sample of case companies. This will be discussed in detail in the next chapter.

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3. Methodology

Our method is primarily based on a two-sided approach that combines the four-ring model introduced by Easterby-Smith, Thorpe & Jackson (2015), and the so-called research onion by Saunders, Lewis and Thornhill (2012). Figure-3 perfectly illustrates the different components and describes our applied methodology on the research about the influence of FI in TMT towards engaging in COI.

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22 3.1 Research Philosophy

The philosophy of the present study provides a deeper understanding about how we, as the researchers, perceive the nature of reality and knowledge (Bryman, 2016), as well as the way we view the world and environment with regard to the respective research field (Saunders et al., 2012). Additionally, it contributes to come up with an adequate definition of the research design and employ the most suitable approaches. As a consequence, the research philosophy significantly impacts the research methodology and its outcome (Saunders et al., 2012; Easterby-Smith et al., 2015).

In general, research distinguishes between ontology and epistemology, portraying the core of the research process and thereby the behavior of people in a social world. Ontology considers our perspective on the nature of reality and existence, combined with a focus on the theory of social bodies (Walliman, 2006), as well as the manner the world runs (Saunders et al., 2012). It comprises the four dimensions (1) realism, (2) internal realism, (3) relativism and (4) nominalism, which have been introduced by Easterby-Smith et al. (2015). The present study applies the philosophy of relativism, since we considered a high variety of FFs and thereby included several perspectives and individual experiences. Consequently, there exist various truths and facts depending on the perceptions as well as the viewpoints of the respective participants. In the course of interacting, we figured out that some conclusions and findings might be valid for specific organizations while the opposite is true for others due to the individuality of the considered variables.

Furthermore, the concept of relativism puts emphasis on social and cultural practices (Mathison, 2011), which in our case stresses the interaction between the influence of FI in TMT and the engagement in COI. As discussed in the theoretical framework, COI entails a holistic approach affecting all organizational tiers both of the external partner and the focal company itself in an interactive network. Cooper (2011) draws a definition of relativism that makes a perfect alignment:”[…] relativism makes us see human action as an interactive network of events rather than the actions of

singular social terms such ‘individual’ or ‘group’.“ (p. 187).

As a next step, epistemology refers to the manner of how we create our theory of knowledge (Walliman, 2006), what is regarded as acceptable knowledge in social science (Saunders et al., 2012), and in what way we justify the knowledge (Dawson, 2002; Jackson, 2017). In that regard, Easterby-Smith (2015) distinguish between the dimensions of positivism, and social constructionism that can further be modified into respectively strong positivism and strong constructionism. The differentiation is

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primarily resulting from the research goals, initial steps, and design, which overall incorporate the various ways of elaborating the world of social science, as in this case the phenomenon of COI in the context of FFs and the TMT. As suggested by the citation “how we know what we know” by Easterby-Smith et al. (2015, p. 51), it is crucial to gather as much in-depth and profound information as possible to adequately analyze the chosen field of research. In our study, we decided to take the perspective of constructionism which allows us to be flexible in the interpretation of the empirical findings (Habermas, 1978). Constructionism intends to develop a theory that is based on qualitative questions, the findings’ comparison, as well as their triangulation. The observers interact with their environment aiming for convergence and receiving a more profound understanding about what TMT members think and feel in the phenomenon of COI (Easterby-Smith et al., 2015). We want to contribute to the theory incorporating a combination of various perspectives – more precisely through a small number of cases – and thereby build knowledge rather than solely disclose it (De Massis & Kotlar, 2014). Moreover, constructionism tries to shed light on the reality and make sense of it (Slater, 2017). Coming from that angle, we identified and understood the complexity behind COI in FFs and would like to draw deductions and examine the topic more in detail – to say illustrate the reality. On top of that, the influence of FI in TMT to engage in COI is heavily dependent on the circumstances within the FF, such as its background or the current situation. Consequently, there is no single truth or a one-solution-fits-all approach, however there are convergent findings allowing us to establish a consistent theory for meeting our research purpose.

The above-mentioned research philosophy provides both strengths and weaknesses. With reference to our research question, we are aware of the necessity to include a high variety of perspectives if we would like to come up with reasonable and valid outcomes. In that regard, constructionism is a helpful approach since it allows us to build on findings from multiple data sources and generalize the chosen sample (Easterby-Smith et al., 2015). Due to the complex nature of FFs and its unique characteristics (Nordqvist, Hall & Melin, 2009), a solid number of cases and profound information about the overall subject is needed to establish adequate conclusions.

3.2 Research Design

The research philosophy is followed by an adequate research design providing the outline to answer the research question. According to DeForge (2012), it entails a logical structure for the completion

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of the research to establish a theory. A clash between the two parts can lead to significant difficulties for further analysis and constitutes one of the key reasons of being rejected for journal submission (Bono & McNamara, 2011). Hence, it is crucial to take into account the applied qualitative research design, the research approach, as well as the research purpose.

3.2.1 Qualitative Research Design

In our study we applied a qualitative research design to receive primary data and gain the required in-depth information to comprehend the influence of FI in the context of COI. Saunders et al. (2012) derive the key differentiation between qualitative and quantitative research from the distinct focus on either numeric data (figures, numbers) or numeric data (words, images). By generating non-numeric data, we aim to explore the diversity of the FF’s TMT regarding the DFI, and its connection towards engaging in COI.

3.2.2 Research Approach

The approach of the research deals with the use of theory and can either be deductive, inductive, or abductive (Saunders et al., 2012). A deductive approach intends to test a theory from assumptions and hypotheses, and is primarily connected to quantitative, positivist research studies due to the recognition of an exclusive reality that is described via theory. On the other hand, an inductive approach has the aim to build theory based on gathered empirical data. It enables subjective perception and reality, which is why it is mostly associated with qualitative studies. Last but not least, the abductive approach addresses the reasoning weaknesses of the two approaches introduced previously. The research process begins by observing a specific phenomenon that cannot be clarified by existing literature or theory. As a consequence, the goal is to come up with suitable explanations and choose the one that fits best the respective case (Aliseda, 2007; Awuzie & McDermott, 2017).

As we identified in Chapter 2, there is a gap in reference to the study field, how the DFI in TMT influences the engagement towards COI. Due to this, we collected empirical data regarding this phenomenon to draw conclusions and build managerial implications (Eisenhardt & Graebner, 2007; Saunders et al., 2012). Subsequently, it becomes clear that we follow the inductive approach to develop new concepts for managerial practices and contribute to the FF theory in the context of COI, true to the slogan that “theory will emerge through the collection and analysis of data” (McLaren, 2012, p. 458). Innovation, and more precisely COI, in FFs has been discussed in literature quite extensively.

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Nevertheless, the DFI in TMT and its influence on engaging in COI has not been examined in detail. Given the wide spectrum of FFs and their resource scarcity, it is vital to understand the push and pull determinants of this phenomenon and handle the triggers adequately to benefit and take advantage from COI. Finally, the nature of our research question, starting with the interrogative “how”, is a further characteristic leading to the inductive research approach (De Massis & Kotlar, 2014; McLaren, 2012).

3.2.2 Research Purpose

According to Saunders et al. (2012), the nature of the research design can take three distinct dimensions: descriptive, exploratory or explanatory nature. The decision upon one of these is heavily dependent on the overall objective and purpose of the study, meaning that the researchers need to identify and understand what they would like to get out of the research. On top of that, it indicates what research strategy and method is most suitable for gaining satisfactory results and finally answering the research question. A descriptive study gives an accurate image of a situation, an organization, a group or event of people, whereas an exploratory study develops new insights, or provides a remodification or reinterpretation of an existing and given phenomenon. Thirdly, an explanatory study intends to construe the interconnection and relationship between different variables, mostly conducted via quantitative studies (Robson, 2002; Easterby-Smith, 2015).

As identified previously in the introduction, our overall objective is to examine how the DFI in TMT influences the willingness towards engaging in COI. Due to the limitation of literature in that respective field, as well as the preliminary stage of the subject (Babbie, 2013), we decided to apply an exploratory study. This is also aligned to our “how”-stated research question and coherent with generating valuable data to understand the core of the problem. An exploratory design can be implemented in three different ways (Saunders et al., 2012): (1) by collecting data through research of relevant literature, (2) by interviewing focus groups, or individuals, or (3) by interviewing experts of a specific area. In our study, we combined existing literature with interviews of individuals, which gives us the opportunity to generate profound set of data. Finally, the exploratory approach allows us to adapt to possible changes during our research (Saunders et al., 2012).

Collaborative Innovation in Family Businesses : Empirical Study on the Influence of Family Involvement in Top Management Teams