Innovation as a mixed gamble in family firms: the moderating effect of inter-organizational cooperation

Plain English Summary How can family firms be on the cutting edge of research and development? Research shows partnering with outside organizations is key to family firm innovation. Our study looks at innovation in South Korean small- and medium-sized family businesses. Innovation helps firms grow and survive, and past research has highlighted the family firm innovation dilemma. Although family firms may be better equipped to pursue innovation, they may be less willing to innovate than their non-family counterparts, subsequently hurting their long-term survival. Our study finds that partnering with noncommercial organizations (i.e., universities, government, etc.) is connected to higher levels of innovation. Partnerships with external organizations lead to successful innovation outcomes for family firms. Policy makers interested in facilitating innovation may incentivize or provide mechanisms that encourage these partnerships to ensure economic growth and long-term survival of family firms. Abstract Despite scholarly attention on family firm innovation, sources of heterogeneity in family firm innovation remain veiled. Drawing upon the mixed gamble perspective, this study introduces and examines a contingency that affects the level of family-owned firms' innovativeness: inter-organizational cooperation. Based on the idea that inter-organizational cooperation affects family-owned firms' mixed gamble on innovation, we hypothesize that inter-organizational cooperation mitigates the negative relationship between family ownership and firm's innovativeness and that the moderating effect varies contingent on the types of cooperative partner and activity. The hypotheses are examined in a sample of 1211 small and medium enterprises in South Korea. The results offer insight into variation in family firm innovation. Our results show that inter-organizational cooperation, especially with non-commercial organizations, is associated with higher levels of innovation. Findings support the idea that family business owners cooperate with external partners as a way to mitigate potential SEW losses often associated with strategic risk. By using a sample of Korean SMEs, we respond to calls in family business research to examine contexts beyond Western countries. Additional contributions, limitations, and future research directions are also discussed.