To Support or Not to Support the Innovation? A Preliminary Study on the Effect of Family Ownership in Board on Innovation in Taiwan Family Firms

The uncertainty of outcomes from innovation typically affects related decision-making in family firms. Innovation presents both opportunities for business growth and investment risks, and the relationship between family firms and innovation remains inconclusive. Moreover, the interplay between family firm ownership and control rights may result in agency problems. Ownership by family members can be regarded as a real option for family shareholders. Thus, we combine agency theory and the real option view to argue that ownership structure characteristics among family members in board affect innovation in family firms. Examination of the innovation behaviors of Taiwanese family firms reveals that ownership concentration among family board directors positively influences innovation in family firms. In addition, family board directors without personal ownership in the family firm are more supportive of innovation than those who have such ownership.