In family businesses, personal and professional relationships overlap, for better or for worse.
‘Social capital’ — the extent to which all the relatives share common goals and trust each another — can boost innovation by helping them co-ordinate their efforts and work together.
Being innovative is a challenge for many businesses, but especially for those that are family operated. In those firms, managers are also relatives. Their personal and professional relationships overlap, for better or for worse.
That complexity is what attracted Professor Dirk De Clercq to this topic. He and his co-author wanted to understand why some family firms are more innovative than others. So they developed a framework describing how three factors can influence that innovation.
The first factor is participation by multiple generations of family members in management. Their different viewpoints and experiences should naturally increase innovation in the firm.
The second factor is the family’s approach to conflict resolution. An emphasis on co-operation to find “win-win” solutions can amplify innovation. By contrast, competitive “win-lose” approaches can dampen it.
The third factor is “social capital” — the extent to which all the relatives share common goals and trust each another. This can boost innovation by helping them co-ordinate their efforts and work together.
Unfortunately, social capital can also cause side effects during conflicts. If co-operating, relatives might settle too quickly on easy compromises, instead of seeking more creative solutions. If competing, they might feel more stress because their relationships are at risk. Either way, innovation can suffer.
De Clercq recommends that family firms involve many generations in management. Furthermore, they should encourage co-operation and close relationships among the relatives. But he also recommends they develop awareness, perhaps through outside coaching, of the potential pitfalls of being too cooperative or too close.
Dirk De Clercq is a Professor of Management. His research interests include entrepreneurship, innovation and social exchange, with a particular interest in how these vary between different countries and cultures. He received the 2015 Departmental Researcher of the Year Award within Organizational Behaviour, Human Resources, Entrepreneurship and Ethics.
Dirk De Clercq and Imanol Belausteguigoitia, 2015. Intergenerational Strategy Involvement and Family Firms’ Innovation Pursuits: The Critical Roles of Conflict Management and Social Capital. Journal of Family Business Strategy 6, 178-189.