This article examines how intergenerational succession influences innovation in Japanese family-owned businesses (FOBs), where legacy and renewal coexist within a distinctive cultural and institutional framework. Drawing on 20 case studies across sectors, it demonstrates that succession can serve both as a constraint and a catalyst for innovation, depending on the alignment between successor legitimacy, autonomy, and institutional support. The study integrates classical governance theories with contemporary perspectives such as socioemotional wealth and ‘innovation through tradition’, highlighting how cultural mechanisms like *ie*, *wa* and *yōshi-engumi* mediate strategic outcomes. It argues that when succession is framed as continuity through innovation, rather than disruption, Japanese FOBs achieve sustainable renewal and global competitiveness. Policy implications point to the role of state instruments in enabling innovation-oriented succession.
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