Title

The New Lyrics of the Old Folks: The Role of Family Ownership in Corporate Innovation

Publication Type

Working Paper

Version

Postprint

Publication Date

8-2014

Abstract

According to conventional wisdom, family ownership, which signals a lack of social capital and trust in an economy, may impede innovation. This argument, however, fails to recognize that modern family firms can benefit from capitalist institutions that promote innovation. Using a comprehensive sample of U.S. family-owned public firms and patents for the period from 2000 to 2010, we show that family ownership promotes innovation and that this positive effect can be attributed to reduced financial constraints, a greater commitment to long-term value, and improved corporate governance. Causality is confirmed by an instrumental variable analysis using the state-level divorce rate and a difference-in-difference analysis based on changes in estate taxes (the Economic Growth and Tax Relief Reconciliation Act of 2001).

Keywords

Family Firms, Innovation, Intangible Investment

Discipline

Accounting | Entrepreneurial and Small Business Operations | Technology and Innovation

Research Areas

Corporate Governance, Auditing and Risk Management

Issue

51

First Page

1

Last Page

72

Publisher

INSEAD

City or Country

Singapore

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.