Business Daily Media

The Times Real Estate

.

Smaller family companies are the unexpected innovation powerhouses in many countries in the world

  • Written by Vitaliy Skorodziyevskiy, Assistant Professor of Management and Entrepreneurship, University of Louisville

Close your eyes and imagine a world where the most innovative companies aren’t big tech giants but family-run businesses. Now open your eyes, because you don’t have to imagine it: It’s reality.

That’s what our[1] team[2] of business[3] experts[4] found in a recent global analysis[5] of research into family-owned and family-run firms.

When we reviewed 193 studies published from 1996 through 2022 about the strategies, including innovation, that these businesses pursue, we saw that smaller family companies lead the charge[6] in innovation – with a caveat.

Specifically, we found that small and medium-sized family companies in legal environments with strong property rights are the most innovative in the world. They surpassed large family businesses and non-family-run business of all sizes.

To determine which countries have stronger property rights protections, we used the most comprehensive ranking available, the International Property Rights Index[7].

The index takes several issues into account, including political stability, judicial independence, corruption, ease of access to loans, and copyright and patent protection.

The three countries with the strongest legal environments are Finland, Switzerland and Australia. The U.S. came in 12th place.

Why it matters

When business professors talk about “innovation[8],” we’re typically referring to investments in research and development, business process improvements, new product creation and other activities associated with product-related strategic change.

Previous research has suggested that family businesses are more or less innovative based on two things: how large they are[9] and whether they’re in a country that protects property rights[10]. When property rights aren’t protected, people have less incentive to innovate – because their ideas are liable to be stolen.

We’ve personally seen how this affects business owners. Some members of our team come from countries where property rights aren’t strongly protected – namely, Kazakhstan and China – and we’d heard from family-business owners about their struggles to innovate.

Our work illustrates the importance of property-rights protections to business growth. And while such legal protections enable growth for everyone, small and medium-sized family-run businesses stand to gain the most from them.

This isn’t entirely surprising. Large companies often have more robust systems in place to protect against risks such as theft and fraud. And they have less need to innovate thanks to their size and established market presence. In contrast, smaller companies must innovate continuously to compete and grow.

Family companies also care about passing firms to future generations, which gives them an extra incentive to innovate: If they don’t, they may cease to exist. This seems to be more relevant to smaller, less established family companies.

What still isn’t known

Our findings are qualitative rather than quantitative, which means that more research is needed to confirm them. We also don’t yet know what kind of innovations make smaller family companies stand out, or whether these innovations should be incremental[11] or radical[12].

Our team wants to learn more about the legal environments in which family companies operate and how they affect behavior and performance. We plan to conduct more research on various strategies that family companies pursue, such as innovation, internationalization and mergers or acquisitions.

Ultimately, we hope to find best practices that will help family companies prosper everywhere in the world – not just in certain countries.

The Research Brief[13] is a short take on interesting academic work.

References

  1. ^ our (business.louisville.edu)
  2. ^ team (www.business.msstate.edu)
  3. ^ business (www.business.msstate.edu)
  4. ^ experts (business.olemiss.edu)
  5. ^ recent global analysis (doi.org)
  6. ^ lead the charge (doi.org)
  7. ^ International Property Rights Index (atr-ipri2017.s3.amazonaws.com)
  8. ^ innovation (www.forbes.com)
  9. ^ large they are (www.forbes.com)
  10. ^ protects property rights (www.wipo.int)
  11. ^ incremental (www.forbes.com)
  12. ^ radical (www.tonyrobbins.com)
  13. ^ Research Brief (theconversation.com)

Read more https://theconversation.com/smaller-family-companies-are-the-unexpected-innovation-powerhouses-in-many-countries-in-the-world-232655

UNSW startup accelerator offers $200K to the next generation of Australian deeptech unicorns

UNSW Founders, Australia’s most recommended startup accelerator, has partnered with fund manager Luminary Partners to invest $200,000 each into 18...

The Future Is Now: AI Modernization Is Reshaping How Business Gets Done

The present business environment imposes stronger requirements on Australian organizations to match the fast-paced digital-first economy requireme...

Businesses losing an average of $493k from data integrity flaws

Managing data responsibly and effectively for the AI age can give organisations a strong competitive advantage, but many are failing to harness th...

AI shopping disruptor Zyft raises $7.5M to lead the next gen of retail tech

Zyft appoints new CEO, Richard Stevens, to lead the latest Waller Group success story, valued at $30 million SYDNEY, 28 April 2025: Zyft, the lea...

Little known law offers savvy Kiwis the opportunity to supercharge their retirement savings

A little-known legal amendment is being leveraged by savvy New Zealanders and expat Brits to supercharge their retirement savings. Not many peop...

Cutting edge AI technology designed for doctors to reduce patient wait times launched in NZ

New Zealand specialist doctors now have access to Artificial Intelligence technology to help reduce patient wait times and experts say it could be...

Sell by LayBy