Strategic Orientation and Innovation Performance Between Family and Non-Family Firms

A key concern in the family business literature is whether family firms differ from professionally managed firms. Some studies have found that there are no significant differences, whereas others have found that family firms differ from non-family firms in a number of key areas such as strategic posture. As such, this study examines the innovation performance between family and non-family enterprises, and expands our understanding of family firms by examining innovation in relation to strategy, organizational structure, and environmental hostility. Participants involve a random stratified sample of 2,000 small and medium size family and non-family owned businesses in manufacturing and service industry sectors in Australia. Using structural equation modeling (SEM), our findings reveal significant differences between family and non-family owned businesses on process innovation and strategic orientation. Notably, SEM estimates indicate that family firms are less innovative, emphasize industry leadership less, but have a greater prospecting orientation than non-family firms. SEM results demonstrate good fit for the hypothesized model ( 2 = 22.86, df = 6, p < .001; GFI = .969, AGFI= .893), and provide support to the hypothesized relationships between strategic orientation and innovation performance, and between strategic orientation and organizational structure. Findings from this study demonstrate that family and non-family owned firms not only differ in their innovation performance, but they also have different strategic orientations, which provide some support to findings that family businesses put less emphasis on industry leadership. Given that new product and service development is generally considered important for understanding a firm's entrepreneurial activities, this study assists in increasing our understanding of firm-level entrepreneurship and innovation.