The impact of family ownership on innovation: evidence from the German machine tool industry

Abstract

There has been much debate concerning the innovative output of family-owned and non-family-owned companies. The purpose of this study was to show that the impact of family ownership differs depending on important governance conditions. Drawing on secondary data from the German machine tool industry from 2000 to 2010, we show that it is not family ownership per se that drives or impedes innovation in terms of the number of patents granted to a firm. Increases in the degree of family ownership and the generation of the family reduce the innovative output, whereas dedicated family business institutions nurture it. We discuss the implications of our findings for research and management.