Exploratory and exploitative innovation in family businesses: the moderating role of the family firm image and family involvement in top management

Drawing on innovation and family business literature, this study examines the largely overlooked family effect in exploratory and exploitative innovation-performance processes via the moderating impact of the family firm image and family involvement in the top management team (TMT). Based on a sample of 91 Spanish small and medium family firms (family SMEs), our results show some interesting findings. First, we find that while family firm image is beneficial to the exploitative innovation-firm performance relationship, it has a negative impact on the exploratory innovation-performance link. Second, we find that different forms of family involvement in the TMT have different effects on the results of exploratory and exploitative innovation processes. A higher proportion of family members in the TMT negatively impacts the positive effect that both exploratory and exploitative innovation have on firm performance. We also find that a higher number of generations involved in the TMT has a positive effect on exploratory innovation-firm performance, but a detrimental effect on exploitative innovation-firm performance. Thus, our study deepens the current understanding of exploratory and exploitative innovation in family SMEs, highlighting previously overlooked effects of family firm image and two forms of family involvement in the TMT on exploration- and exploitation-firm performance relationships. Furthermore, our findings have meaningful managerial implications for the development of an attractive family firm image and an effective TMT composition in order to improve the outcomes of exploratory and exploitative innovation processes.