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Bringing the family business community together

Family Firms Are Innovative

1st May 2018 Paul Andrews

Family business owners are more innovative than owners of non-family businesses but are restricted by limited financial resources according to latest research.

This is according to Dr Roberto Flören, Professor of Family Business at Nyenrode Business Universiteit.  Despite this, 79% of family business owners will forgo dividends in order to boost innovation, compared to 60% of non-family businesses.

The research, carried out in collaboration with global bank ING and NPM Capital, which provides private equity to family businesses, examined 399 private firms, of which 69% were family-run. 

Dr Flören says: “In order to remain competitive in arenas often dominated by much bigger corporations, small businesses have been required to innovate and exercise agility in order to succeed.”

“Historically, bad leadership was a pitfall for family businesses, with managers resisting change and embracing tradition. Now there is an almost completely different story, with over half of current directors stating that it is crucial for the continuity of the family business that the new director is even more innovative than the current one. It is clear that increasing numbers of these organisations are anticipating and preparing for this real threat ahead of time.”

His study found that 62% of all family businesses have brought at least one new product or service to the market in the past three years.

Dr Flören believes his study offers some important lessons for heads of industry to consider. He continues: “The report clearly shows that family business owners are not resting on their laurels, however there are still key threats to innovation which often include dependence on the innovative strength of the founder and a high percentage of the family wealth being tied up in the business, making it unavailable for use on new projects.”

“Yet despite these challenges, 72% of all family businesses have significantly improved or updated their internal business processes over the last three years. It is clear that bigger corporations looking to implement a successful innovation strategy would do well to look to family businesses for inspiration.”

 

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