Tuesday, January 26, 2016

Family Stories, Innovativeness and Generational Transition

The Family Business Review article “The Impact of Shared Stories on Family Firm Innovation: A Multicase Study” is a fascinating study on the relationship between family stories, generational transition and innovation in family firms. This article would be particularly relevant to advisors who are interested in family storytelling, intergenerational communication and the elements which can influence a family firm’s innovativeness (or ability to innovate).

Researchers Nadine Kammerlander, Cinzia Dessi, Miriam Bird, Michela Floris and Alessandra Murru studied 41 family-owned wineries on an island off the coast of Italy. While perhaps seemingly narrowly focused on these firms, the specificity of the firm types and industry allowed them to examine variables, such as what they call “founder-focused” firms as opposed to “family-focused” firms, and how these qualities influenced their likelihood and abilities to innovate.

Knowing that innovation is important for the long-term survival of family enterprises, and that long-term survival increases the likelihood of flourishing through multiple generations, there has not been sufficient research done on “what binds family firms to (or frees them from) the past and thus makes them resistant (or susceptible) to innovation.”

As a result of this, the researchers sought to identify how stories shared within a family are associated with innovation; how these stories influence their organizational paths; and then how these stories, depending on their specific content, serve the purposes of a) providing a source of legitimacy; b) influencing the authority structure, and c) providing value judgements on how the families collaborate, subsequently influencing their innovativeness.

Researchers screened the families’ shared stories into two groups: those in which the content centered mostly on the founder (his/her person, values, beliefs, activities, and merits), and those which focused mainly on the family, its values and emotions. Their findings revealed that in firms focused on the founder, innovation was low, along with a negative attitude towards innovation: “(e.g. `Innovation is not a good thing … so we do not change our way of doing business.’ Male owner-manager, third generation, Firm 11.)” In contrast, the firms with a strong focus on the family and its history, values and stories were found to introduce “innovations early in comparison to competitors and even launched radically new innovations.”

The researchers pursue the evidence even further, and in so doing examine the role of distribution of decision-making power and conflicts between family members. It is the examples and anecdotes of these different scenarios which family enterprise advisors may find most interesting, and perhaps particularly insightful, because they could be applied to different families in vastly different sectors. Simultaneously, one of the most interesting facets of this study is its inside look at family-owned wineries specifically, which are facing a unique combination of industry challenges with competition, internationalization and advancements in technology.

The study also provides detailed snapshots of founders and their intergenerational influence, showing the potential advantage or disadvantage to their respective firms, and how some family firms are able to use the founder’s strengths to their benefit, versus those who don’t: “the ‘founder’s shadow’ is strongly present in family firms, leading to a strong linkage between past experiences and current firm decisions.”

Ultimately, this highly readable, insightful and interesting research paper would be relevant for any professional advisor seeking to learn more about the relationship between generational transition, innovation and family stories, or anyone particularly interested in the nuances of succession.

Article citation:
The Impact of Shared Stories on Family Firm Innovation: A Multicase Study Family Business Review December 2015 28: 332-354, first published on September 18, 2015 doi:10.1177/0894486515607777


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