Family business, innovation and organizational slack in Taiwan

This study examines the effect of family ownership and unabsorbed organizational slack resources on innovation in high-tech firms in Taiwan. In a sample of 278 public Taiwanese firms over a period of seven years (2002-2008) representing a total of 1946 observations, firms with higher levels of family ownership were shown to have significantly lower internal innovation in terms of R&D investment as has been shown in a number of previous studies. Yet the research also identified a key moderating factor. Unabsorbed organizational slack moderated the relationship between family ownership and innovation. Specifically, when firms had high levels of unabsorbed slack, the relationship between family ownership and R&D intensity changed to positive. In addition, the Taiwan data showed an additional moderating relationship of organizational slack; a negative relationship between family ownership and royalty payment intensity emerged for firms with low-level unabsorbed slack. Royalty payments and purchases of technology are often associated with lower innovation in firms, and Taiwan high-tech firms with additional slack did focus more on innovation through higher R&D and lower external technology royalty payments.