Family businesses are more innovative but less efficient

Each year, the research institute INSCOPE –Research for Innovation of Erasmus University Rotterdam carries out the Competition and Innovation Monitor. The research is headed by <link people henk-volberda _blank>Prof.dr. Henk Volberda. He warns, “the Netherlands needs to get its act together to avoid falling behind other countries technology-wise.” Part of his findings relate to family businesses.

Family-run firms score 4% better on radical innovation than non-family companies. They also perform 2.5% better profit-wise, are more active in co-creation and are also managed more dynamically (+2.7%). However, non-family companies do better on incremental innovation (4.3%) and also invest more in working smarter (3.6%). “Family companies show less interest in their quarterly figure and focus more on the company’s long-term viability,” remarks Prof. Volberda.

“The strength of family businesses particularly comes from management and co-creation. The need to hand over management to the next generation, the involvement of family members in the firm, and their mutual ties contribute to a long term focus and better firm performance. Family firms create a multiform knowledge base and access to fundamental new knowledge through collaboration with research institutes, competitors and other parties. However, family firms can improve their investments in their employees compared to non-family firms. In combination with the findings that family firms use more transactional leadership methods, this could be an indication that innovation is created top-down. Further research on these findings is necessary though,” according to Prof. Volberda.

For more information on the RSM site click here. The full Dutch report can be found on: http://www.rsm.nl/fileadmin/Images_NEW/PDF/ECIM_2013_full_report.pdf.