Understanding the drivers of innovation in family firms is essential for their survival. While previous studies have mainly investigated innovation behaviours in private or public family firms, we focus on their R&D investment in the year following an IPO. Observing family firms in this context is crucial because it allows to analyse their propensity to innovate when financing constraints are relaxed. This work aims to investigate whether a relationship exists between R&D expenditures and family ownership in the setting of Initial Public Offerings (IPOs). Using a sample of IPOs in the period 2013–2018 by 132 French and Italian family and non-family firms, results reveal the existence of a U-shaped relationship in this regard. In addition, the curvilinear relationship is positively influenced by institutional investors. This study contributes to the debate around family firms’ innovation propensity, as well as to the literature on the heterogeneity among family firms.
AcharyaV., & XuZ. (2017). Financial dependence and innovation: The case of public versus private firms. Journal of Financial Economics, 124(2), 223–243.
2.
AndersonR. C., & ReebD. M. (2004). Board composition: Balancing family influence in S&P 500 firms. Administrative Science Quarterly, 49(2), 209–237.
3.
AndresC. (2008). Large shareholders and firm performance—An empirical examination of founding-family ownership. Journal of Corporate Finance, 14(4), 431–445.
4.
ArredondoH., & CruzC. (2019). How do owning families ensure the creation of value across generations? A “dual balance” approach. The Palgrave handbook of heterogeneity among family firms, 791-819.
5.
AyyagariM., BeckT., & Demirguc-KuntA. (2007). Small and medium enterprises across the globe. Small Business Economics, 29, 415–434.
6.
BaysingerB., & HoskissonR. E. (1989). Diversification strategy and R&D intensity in multiproduct firms. Academy of Management Journal, 32(2), 310–332.
7.
BellucciA., GucciardiG., & NepelskiD. (2021). Venture capital in Europe. Evidence-based insights about venture capitalists and venture capital-backed firms. Joint Research Centre, European Commission.
8.
BerroneP., CruzC., & Gomez-MejiaL. R. (2012). Socioemotional wealth in family firms: Theoretical dimensions, assessment approaches, and agenda for future research. Family Business Review, 25(3), 258–279.
9.
Blanco-MazagatosV., De Quevedo-PuenteE., & CastrilloL. A. (2007). The trade-off between financial resources and agency costs in the family business: An exploratory study. Family Business Review, 20, 199–213.
10.
BlockJ. H. (2012). R&D investments in family and founder firms: An agency perspective. Journal of Business Venturing, 27(2), 248–265.
11.
BurgstallerJ., & WagnerE. (2015). How do family ownership and founder management affect capital structure decisions and adjustment of SMEs? Evidence from a bank-based economy. The Journal of Risk Finance, 16(1), 73–101.
12.
BusheeB. J. (1998). The influence of institutional investors on myopic R&D investment behavior. The Accounting Review, 73(3), 305–333.
13.
CalabròA., VecchiariniM., GastJ., CampopianoG., De MassisA., & KrausS. (2019). Innovation in family firms: A systematic literature review and guidance for future research. International Journal of Management Reviews, 21(3), 317–355.
14.
CanepaA., & StonemanP. (2002). Financial constraints on innovation: A European cross-country study. Competition, Monopoly and Corporate Governance, 42, 41.
15.
CaprioL., CrociE., & Del GiudiceA. (2011). Ownership structure, family control, and acquisition decisions. Journal of Corporate Finance, 17(5), 1636–1657.
16.
CarnesC. M., & IrelandR. D. (2013). Familiness and innovation: Resource bundling as the missing link. Entrepreneurship Theory and Practice, 37(6), 1399–1419.
17.
CaselliS., ChiarellaC., GattiS., GiganteG., & CarefinB. (2019). The Italian corporate bond market: What is happening to the capital structure of Italian non-financial companies?Baffi Carefin, Università Bocconi.
18.
CelikyurtU., SevilirM., & ShivdasaniA. (2010). Going public to acquire? The acquisition motive in IPOs. Journal of Financial Economics, 96(3), 345–363.
19.
ChangS.-C., WuW.-Y., & WongY.-J. (2010). Family control and stock market reactions to innovation announcements, British Journal of Management, 21(1), 152–170.
20.
ChenH. L., & HsuW. T. (2009). Family ownership, board independence, and R&D investment. Family Business Review, 22(4), 347–362.
21.
ChrismanJ. J., & PatelP. C. (2012). Variations in R&D investments of family and nonfamily firms: Behavioural agency and myopic loss aversion perspectives. Academy of Management Journal, 55, 976–997.
22.
CirilloA., MussolinoD., RomanoM., & ViganòR. (2017). A complicated relationship: Family involvement in the top management team and post-IPO survival. Journal of Family Business Strategy, 8(1), 42–56.
23.
CirilloA., OssorioM., & PennacchioL. (2019). Family ownership and R&D investment: The moderating role of banks and private equity. Management Decision, 57(7), 1675–1694.
24.
CraigJ., & DibrellC. (2006). The natural environment, innovation, and firm performance: A comparative study. Family Business Review, 19(4), 275–288.
25.
CroceA., & MartíJ. (2016). Productivity growth in private–equity–backed family firms. Entrepreneurship Theory and Practice, 40(3), 657–683.
26.
CzarnitzkiD., & HottenrottH. (2011). R&D investment and financing constraints of small and medium-sized firms. Small Business Economics, 36, 65–83.
27.
DaspitJ. J., ChrismanJ. J., AshtonT., & EvangelopoulosN. (2021). Family firm heterogeneity: A definition, common themes, scholarly progress, and directions forward. Family Business Review, 34(3), 296–322.
28.
De MassisA., AudretschD., UhlanerL., & KammerlanderN. (2018). Innovation with limited resources: Management lessons from the German Mittelstand. Journal of Product Innovation Management, 35(1), 125–146.
29.
De MassisA., FrattiniF., KotlarJ., PetruzzelliA. M., & WrightM. (2016). Innovation through tradition: Lessons from innovative family businesses and directions for future research. Academy of Management Perspectives, 30(1), 93–116.
30.
De MassisA., FrattiniF., & LichtenthalerU. (2013). Research on technological innovation in family firms: Present debates and future directions. Family Business Review, 26(1), 10–31.
31.
DerrienF., & KecskésA. (2013). The real effects of financial shocks: Evidence from exogenous changes in analyst coverage. The Journal of Finance, 68(4), 1407–1440.
32.
DobrevS. D., & BarnettW. P. (2005). Organizational roles and transition to entrepreneurship. Academy of Management Journal, 48(3), 433–449.
33.
DonckelsR., & FröhlichE. (1991). Are family businesses really different? European experiences from STRATOS. Family Business Review, 4(2), 149–160.
34.
DragoC., GinestiG., PongelliC., & SciasciaS. (2018). Reporting strategies: What makes family firms beat around the bush? Family-related antecedents of annual report readability. Journal of Family Business Strategy, 9(2), 142–150.
35.
FamaE. F. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88(2), 288–307.
36.
FamaE. F., & FrenchK. R. (1997). Industry costs of equity. Journal of Financial Economics, 43(2), 153–193.
37.
FangV. W., TianX., & TiceS. (2014). Does stock liquidity enhance or impede firm innovation?The Journal of Finance, 69(5), 2085–2125.
38.
FernándezZ., & NietoM. J. (2006). Impact of ownership on the international involvement of SMEs. Journal of International Business Studies, 37(3), 340–351.
39.
FerreiraJ. V. (2007). Determinants of performance of closely-held (family) firms after going public: The role of the ownership structure, economy, changes in top management, partial sale, equity concentration after the IPO and shareholders in management. Corporate Ownership and Control, 5(2), 55–67.
40.
FiegenerM. K., BrownB. M., PrinceR. A., & FileK. M. (1994). A comparison of successor development in family and nonfamily businesses. Family Business Review, 7(4), 313–329.
41.
FreelM. S. (2007). Are small innovators credit rationed?Small Business Economics, 28(1), 23–35.
42.
FrenchJ. J., FujitaniR., & YasudaY. (2021). Does stock market listing impact investment in Japan?Journal of the Japanese and International Economies, 59(C).
43.
FrootK. A., PeroldA. F., & SteinJ. C. (1992). Shareholder trading practices and corporate investment horizons. Journal of Applied Corporate Finance, 5(2), 42–58.
44.
GalloM. A., & VilasecaA. (1996). Finance in family business. Family Business Review, 9(4), 387–401.
45.
GloverJ. L., & ReayT. (2015). Sustaining the family business with minimal financial rewards: How do family farms continue?Family Business Review, 28(2), 163–177.
46.
Gomez-MejiaL. R., CampbellJ. T., MartinG., HoskissonR. E., MakriM., & SirmonD. G. (2014). Socioemotional wealth as a mixed gamble: Revisiting family firm R&D investments with the behavioral agency model. Entrepreneurship Theory and Practice, 38(6), 1351–1374.
47.
Gómez-Mejía, L. R., HaynesK. T., Núñez-NickelM., JacobsonK. J., & Moyano-FuentesJ. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52(1), 106–137.
48.
Gomez-MejiaL. R., PatelP. C., & ZellwegerT. M. (2018). In the horns of the dilemma: Socioemotional wealth, financial wealth, and acquisitions in family firms. Journal of Management, 44(4), 1369–1397.
49.
GompersP. A. (1995). Optimal investment, monitoring, and the staging of venture capital. The Journal of Finance, 50(5), 1461–1489.
50.
GompersP., & LernerJ. (2001). The venture capital revolution. Journal of Economic Perspectives, 15(2), 145–168.
51.
GravesC., & ThomasI. (2006). Internationalization of Australian family businesses: A managerial capabilities perspective. Family Business Review, 19(3), 207–224.
52.
HallB. H. (2002), The financing of research and development. Oxford Review of Economic Policy, 18(1), 35–51.
53.
HallB. H., & LernerJ. (2010). The financing of R&D and innovation. In Handbook of the economics of innovation (Vol. 1, pp. 609–639). North-Holland.
54.
HansenG. S., & HillC. W. (1991). Are institutional investors myopic? A time-series study of four technology-driven industries. Strategic Management Journal, 12(1), 1–16.
55.
HellmannT., & PuriM. (2000). The interaction between product market and financing strategy: The role of venture capital. The Review of Financial Studies, 13(4), 959–984.
56.
HillC. W., & SnellS. A. (1989). Effects of ownership structure and control on corporate productivity. Academy of Management Journal, 32(1), 25–46.
57.
HuQ., & HughesP. (2022). Family-unique resources, marketing resources, and family owners’ willingness to pursue radical innovation: A model and test. Journal of Business Research, 146, 264–276.
58.
JainB. A., & ShaoY. (2014). Family involvement and post-IPO investment policy. Family Business Review, 27(4), 287–306.
59.
JamesH. S. (1999). Owner as manager, extended horizons and the family firm. International Journal of the Economics of Business, 6(1), 41–55.
60.
JohnsonM. W., ChristensenC. M., & KagermannH. (2008). Reinventing your business model. Harvard Business Review, 86(12), 57–68.
61.
KennedyP. (2008). A guide to econometrics. John Wiley & Sons.
62.
KimW., & WeisbachM. S. (2008). Motivations for public equity offers: An international perspective. Journal of Financial Economics, 87(2), 281–307.
63.
KonigA., KammerlanderN., & EndersA. (2013). The family innovator’s dilemma: How family influence affects the adoption of discontinuous technologies by incumbent firms. Academy of Management Review, 38(3), 418–441.
64.
KorY. Y. (2006). Direct and interactive effects of top management team and board compositions on R&D investment strategy. Strategic Management Journal, 27(11), 1081–1099.
65.
KoroppC., GrichnikD., & KellermannsF. (2013). Financial attitudes in family firms: The moderating role of family commitment. Journal of Small Business Management, 51(1), 114–137.
66.
KortumS., & LernerJ. (2000). Assessing the contribution of venture capital to innovation. RAND Journal of Economics, 674–692.
67.
KosmidouV., & HoltD. T. (2022). The relationship between family management and performance: A configurational approach in exploring the role of socioemotional wealth and generational stage. Journal of Family Business Strategy, 13(4), 100500.
68.
KotlarJ., SignoriA., De MassisA., & VismaraS. (2018). Financial wealth, socioemotional wealth, and IPO underpricing in family firms: A two-stage gamble model. Academy of Management Journal, 61(3), 1073–1099.
69.
Le NadantA. L., & PerdreauF. (2014). Ex-post innovation profile of LBO targets: Evidence from CIS data for the Netherlands. Strategic Change, 23(1–2), 93–105.
70.
LeeJ. (2006). Family firm performance: Further evidence. Family Business Review, 19, 89–174.
71.
LeeP. M. (2005). A comparison of ownership structures and innovations of US and Japanese firms. Managerial and Decision Economics, 26, 39–50.
72.
LeeP. M., & O’ NeillH. M. (2003). Ownership structures and R&D investments of U.S. and Japanese firms: Agency and stewardship perspectives. Academy of Management Journal, 46(2), 212–225.
73.
LienY. C., & LiS. (2014). Professionalization of family business and performance effect. Family Business Review, 27(4), 346–364.
74.
LitzR. A. (1995). The family business: Toward definitional clarity. Family Business Review, 8(2), 71–81.
75.
LlachJ., & NordqvistM. (2010). Innovation in family and non-family businesses: A resource perspective. International Journal of Entrepreneurial Venturing, 2(3–4), 381–399.
76.
MartíJ., Menéndez-RequejoS., & RottkeO. M. (2013). The impact of venture capital on family businesses: Evidence from Spain. Journal of World Business, 48(3), 420–430.
77.
MazzolaP., & MarchisioG. (2002). The role of going public in family businesses’ long-lasting growth: A study of Italian IPOs. Family Business Review, 15(2), 133–148.
78.
MichielsA., & MollyV. (2017). Financing decisions in family businesses: A review and suggestions for developing the field. Family Business Review, 30(4), 369–399.
79.
MiroshnychenkoI., BarontiniR., & De MassisA. (2020). Investment opportunities and R&D investments in family and nonfamily firms. R&D Management, 50(4), 447–461.
80.
MishraC. S., & McConaughyD. L. (1999). Founding family control and capital structure: The risk of loss of control and the aversion to debt. Entrepreneurship Theory and Practice, 23(4), 53–64.
81.
MooresK., ParrisD. L., NewbertS. L., & CraigJ. B. (2019). All the same but different: Understanding family enterprise heterogeneity. The Palgrave handbook of heterogeneity among family firms (pp. 557–587).
82.
MorckR., ShleiferA., & VishnyR. (1988). Management ownership and market valuation. Journal of Financial Economics, 20, 293–315.
83.
MunariF., OrianiR., & SobreroM. (2010). The effects of owner identity and external governance systems on R&D investments: A study of Western European firms. Research Policy, 39, 1093–1104.
84.
Muñoz-BullónF., & Sanchez-BuenoM. J. (2011). The impact of family involvement on the R&D intensity of publicly traded firms. Family Business Review, 24(1), 62–70.
85.
NikolovA. N., & WenY. (2018). Does family involvement matter post IPO? Adding value through advertising in family firms. Journal of Family Business Management, 8(3), 218–234.
86.
PrencipeA., Bar-YosefS., & DekkerH. C. (2014). Accounting research in family firms: Theoretical and empirical challenges. European Accounting Review, 23(3), 361–385.
87.
PukallT. J., & CalabròA. (2014). The internationalization of family firms: A critical review and integrative model. Family Business Review, 27(2), 103–125.
88.
RoellA. (1996). The decision to go public: An overview. European Economic Review, 40(3), 1071–1082.
89.
SalancikG. R., & PfefferJ. (1980). The effects of ownership and performance on executive tenure in U.S. corporations. Academy of Management Journal, 23, 653–664.
90.
SchmidtJ., CaccavaioM., CarpinelliL., & MarinelliG. (2018). International spillovers of monetary policy: Evidence from France and Italy. Working papers, Banque de France.
91.
SeamanC., BentR., & SilvaM. (2019). Family values: Influencers in the development of financial and non-financial dynamics in family firms. The Palgrave handbook of heterogeneity among family firms (pp. 507–530).
92.
SirmonD. G., ArregleJ. L., HittM. A., & WebbJ. W. (2008). The role of family influence in firms’ strategic responses to threat of imitation. Entrepreneurship Theory and Practice, 32, 979–998.
93.
SirmonD. G., & HittM. A. (2003). Managing resources: Linking unique resources, management, and wealth creation in family firms. Entrepreneurship Theory and Practice, 27(4), 339–358.
94.
SmithM. P. (1996). Shareholder activism by institutional investors: Evidence from CalPERS. The Journal of Finance, 51(1), 227–252.
95.
SraerD., & ThesmarD. (2007). Performance and behavior of family firms: Evidence from the French stock market. Journal of the European Economic Association, 5(4), 709–751.
96.
SrivastavaA., & BhatiaS. (2022). Influence of family ownership and governance on performance: Evidence from India. Global Business Review, 23(5), 1135–1153.
97.
SteinJ. C. (1988). Takeover threats and managerial myopia. Journal of Political Economy, 96(1), 61–80.
98.
SteinJ. C. (1989). Efficient capital markets, inefficient firms: A model of myopic corporate behavior. Quarterly Journal of Economics, 104, 655–669.
99.
SymeonidisG. (1996). Innovation, firm size and market structure: Schumpeterian hypotheses and some new themes. OECD Economics Department Working Papers, 161OECD Publishing.
100.
ThomsenS., & PedersenT. (2000). Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 21, 689–705.
101.
UedaM. (2004). Banks versus venture capital: Project evaluation, screening, and expropriation. The Journal of Finance, 59(2), 601–621.
102.
UghettoE. (2008). Does internal finance matter for R&D? New evidence from a panel of Italian firms. Cambridge Journal of Economics, 32(6), 907–925.
103.
UghettoE. (2010). Assessing the contribution to innovation of private equity investors: A study on European buyouts. Research Policy, 39(1), 126–140.
104.
UrbinatiA., FranzòS., De MassisA., & FrattiniF. (2017). Innovation in family firms: A review of prior studies and a framework for future research. Revolution of Innovation Management: Volume 2 Internationalization and Business Models, 213–246.
105.
VismaraS. (2014). Patents, R&D investments and post-IPO strategies. Review of Managerial Science, 8, 419–435.
106.
WardJ. L. (1987). Keeping the family business healthy: How to plan for continuing growth, profitability, and family leadership. Jossey-Bass.
107.
WintonA., & YerramilliV. (2008). Entrepreneurial finance: Banks versus venture capital. Journal of Financial Economics, 88(1), 51–79.
108.
YewJ. L. K. (2021). Family firms, enterprise development and tacit knowledge transformation: Small and medium enterprises (SMEs) innovation in Malaysia. Global Business Review, 0(0). https://doi.org/10.1177/09721509211047648
109.
ZahraS. A. (2005). Entrepreneurial risk taking in family firms. Family Business Review, 18, 23–40.
