The influence of the top management on innovation in family firms: The mediating role of formalized risk management systems

Analyzing innovation in family firms remains a controversial topic in the literature. To reconcile conflicting views on this issue, this study proposes to account for both the multifaceted nature of innovation and the heterogeneity within family firms. More specifically, this research explores how family management affects explorative and exploitative innovations, while also considering the adoption of formalized risk management systems as a mediating variable of this relation. Building on a sample of 146 private family firms, results from linear regressions show that family management hampers explorative innovation and fosters exploitative innovation. The study of the mediating effects indicates that this difference is partially explained by the propensity of family managers to adopt formalized risk management systems that impede explorative innovation and enhance exploitative innovation.
JEL Codes: M0, O3, L2