Innovation at the helm: Decoding founder-manager influence in Chinese family firms

Using a dataset of Chinese family firms listed on the A-share market from 2007 to 2017, this study sheds light on the distinct influence of founder-managers on the innovation activities within their respective family firms. Our findings reveal a positive association between founder-managers and firm innovation. Notably, the departure of founder-managers significantly impedes innovation, underscoring their indispensable role in driving innovative endeavors. This influence predominantly stems from the founders themselves rather than other family members. Our analysis highlights that the motivating factors for innovation within these firms are primarily rooted in the emotional characteristics of founders, surpassing the impact of extrinsic capital attributes. We also identify a moderating effect of corporate governance on the positive relationship between founder-managers and innovation. These findings carry substantial implications, especially within the context of China's non-state-owned sector, which is experiencing a transition from founders to descendants. They emphasize the critical role that founders play in propelling innovation within family firms and offer valuable insights into the intricate governance dynamics of family-owned firms.