Abstract

Research suggests that families control the majority of firms in most economies. The number of family firms, the many people they impact, and their differences from other types of firms make them an important economic institution to study. In such a large population of firms there is the potential for variation in behaviors and performance that stymies general theories about “family firms.” Recent reviews of the family business literature suggest the investigation of factors that moderate and mediate the influence of family-control on a firm.

The questions addressed in this study are: Does the human capital of family employees influence organizational innovation in small family firms, and if so, how?

Primary survey data was collected from a single respondent in 94 small family firms on: the number of family employees, their levels of education and years of experience working outside the family firm, their role in identifying and leading the firm’s “most-important” innovation activities (championing innovation), and the level of innovation in the small family firm. The results of this small, exploratory study should be interpreted carefully, but human capital and the championing of innovation do appear to moderate and partially-mediate family employees’ influence on organizational innovation. Significant relationships were found between lower levels of family human capital and less organizational innovation. However, higher levels of family human capital were associated with both less and more organizational innovation, resulting in insignificant relationships. The directions of the relationships are consistent with an alignment of the family human capital resources and levels of organizational innovation and evidence of strong family influence in all firms.

The contributions of this study are to: 1) support the value of pursuing mediators and moderators of family influence; 2) the holistic operationalization and measurement of family influence, in the championing construct, that accounted for all family employees; 3) the measured influence of family human capital on the family firm. In conclusion, more questions about family human capital are raised than answered, but further investigation appears to be warranted by the results of this study.