Family Firms and Institutional Contexts
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Family Firms and Institutional Contexts

Business Models, Innovation and Competitive Advantage

Edited by Giorgia M. D’Allura, Andrea Colli and Sanjay Goel

Featuring in-depth analysis of original research, this innovative book takes an interdisciplinary, cross-national approach to the study of family firms as institutions as well as the relationship between family firms and external institutions. It demonstrates the impact of these interactions both on the firms and institutions themselves and in the wider economic context, and provides important conceptual insights as well as ideas for future research agendas.
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Chapter 10: Innovation advantages of family firms: navigating the trilemma of challenges

Justin B. Craig, G. Thomas Lumpkin and Marc Meyer

Abstract

We argue that four qualities account for strong and sustainable innovation outcomes in family firm settings: 1) a long-term orientation that enables family firms to be patient until investments in innovation pay off, 2) management capabilities that are difficult to imitate because they take time to develop and are socially complex, 3) a stewardship approach to decision making and operations that emphasizes high involvement by employees and cooperation with customers, and 4) prioritizing innovation activities that contribute to the identity, reputation, and enduring legacy of the family firm. These four characteristics are manifest in varying degrees among the three major “actors” that constitute a family firm - the business managers, the family, and the owners. Because these players perform different roles and have different priorities, family firms must effectively coordinate and channel their influence to achieve superior performance. In the case of innovation, the interaction of family, managers, and owners creates a “trilemma” of challenges. A trilemma suggests difficult-to-resolve tensions stemming from three arenas. For family innovators, these revolve around leveraging financial resources appropriately, administering best practices effectively, and engaging qualified personnel impartially.

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