Firm-level innovation by Japanese family firms: Empirical analysis using multidimensional innovation measures

This study investigates whether innovation activities conducted by family firms in Japan can be distinguished from those carried out by non-family firms. For this purpose, we choose a sample of listed family firms and investigate four firm-level innovation measures, namely R&D intensity, the number of patents, the quality of patents, and innovation efficiency, over a sample period of 2003 to 2012. We find that innovation output by family firms in Japan is lower than that of non-family firms, although innovation input is higher in family firms. The innovation of Japanese family firms, overall, is inefficient compared with non-family firms. Our cross-sectional regression analysis shows that family shareholding is positively associated with the innovation measures after controlling for several of the characteristics of firms. On the contrary, founder CEOs enhance R&D investment, although their presence is detrimental to both the number of patents and their quality. Descendant CEOs tend to adopt low-input/low-output innovation strategies. In sum, the innovative activities of Japanese family firms continually change to accomplish their sustainable growth.