Family Firm Innovation Intentions: The Role of TMT Functional Diversity and Open Discussion

Interest in family firm innovation is drastically increased in recent times, generating contrasting findings about family versus nonfamily firms’ innovation. In this paper, we investigate whether family firms differ from nonfamily counterparts with respect to innovation intentions. Drawing on upper echelon theory, we examine the role that TMT characteristics and interaction norms play in this regard. The empirical analyses on survey data from a sample of 437 Italian firms reveal that family firms are less willing to innovate than nonfamily firms, and this result is fully mediated by the functional diversity of their TMT. In other words, family firms develop lower innovation intentions due to their lower TMT functional diversity compared to nonfamily firms. In a second step, we focus on family firms only and find that for family firms the relation between TMT functional diversity and innovation intentions is positively moderated by open discussion in the TMT. Our findings show that TMT functional diversity and TMT open communication are essential to stimulate family firms’ intention to engage in innovation; family firms should indeed mimic nonfamily firms and further develop the functional diversity and open communication of their TMT to the benefit of triggering innovation intentions. We thus contribute to the innovation and entrepreneurship research by highlighting the importance of creating a functionally diverse TMT, while fostering open discussion within it.