Feb. 14, 2017

The idea of “keeping business in the family” isn’t always perceived as a positive or innovative one, but Darla Moore School of Business professor Marc van Essen found that, overall, family firms are actually more innovative than non-family firms. Innovation is measured as the likelihood of a company to take a risk and invest, resulting in more patents or new products, and although family firms invest less, they get more out of what they do invest.

This counterintuitive finding was of particular interest to the editors of Harvard Business Review, who reached out to van Essen in hopes of having his research published in the magazine. Harvard Business Review accepts less than 1 percent of articles for online.

“I was honored to have them reach out to us,” van Essen said. “There was no guarantee we would have our article published, but after a couple of rewrites, it was approved.”

The research, which was originally published in Academy of Management Journal, explains that, although it is often assumed that family firms are “conservative and less willing to take risks,” they actually do better with what they invest. Van Essen posits this is likely because the owners have more incentive to monitor the invested money since it is theirs and they are likely to have better relationships with their employees, leading them to have better relationships with their stakeholders.

“Because owners are related to some of their employees, they have better relationships overall, leading to greater trust and better long-term relationships, which in turn improves stakeholder relations,” van Essen said.

This research is a summary of all published family firm data available, making it an analysis of over one million findings. Van Essen was surprised to see that the general finding that family firms are more innovative than non-family firms held true all over the world. He expected it to be the case primarily in European businesses.

Van Essen is excited to have his work published in HBR because it raises awareness about the efficiencies of family firms outside of the academic community. He hopes and expects that HBR will pick up more Moore School research in the future.

By Madeleine Vath