Are family firms less myopic loss averse towards innovation strategies?

Purpose - This paper aims to address the question of the innovation propensity of family firms relative to non-family firms, within an institutional setting characterized by a high proportion of listed family firms. Design/methodology/approach - Using a sample of family and non-family firms listed on the Milan Stock Exchange over a period of 6 years (2008-2013), we empirically test the two alternative hypotheses of "innovation enhancing" and "innovation stifling" by performing a multiple regression analysis. Following previous research, we use firm-level R&D expenditures to capture the firms' creative and inventive activities. As independent variables, we consider the family involvement in ownership and management. We control our results for a set of control variables that likely affect the firm innovation propensity, namely: firm age; growth opportunities; capital intensity; size; profitability, cash flow, leverage and industry. Originality/value - This study analyzes the innovation strategies of family firms compared with non-family firms, within an institutional setting characterized by a high presence of listed family firms. To the best of our knowledge, this is the first study analyzing the R&D spending behaviour of all Italian listed companies (financial and football firms excluded). Our empirical results are based on a sample of 982 firm-year observations covering the period of 2008-2013. Practical implications - The findings may lead the investment community to reevaluate the effectiveness of management policies adopted by family members running the company. In particular, our results are valuable to investors and other stakeholders, suggesting that in setting characterized by high percentage of listed family firms, the involvement of family members in top management could not be detrimental to the value-maximization of the firm, at least in the long run; thereby favoring not only the future well-being for family members but also for other firm stakeholders.