How to Balance Exploratory Innovation and Exploitative Innovation in Family Business?Analysis based on Family Governance
In recent years,technological innovation has increasingly become an important means for family busi-nesses to gain competitive advantages.Generally,exploitative innovation can improve the short-term performance level of enterprises,while exploratory innovation can guide enterprises to obtain long-term competitive advantages.However,under the constraints of limited resources,family businesses often cannot effectively balance the two types of innovation activities.Even if they have the ability to do so,family businesses exhibit lower willingness to exploratory innovation due to their relatively conservative attitude.In this context,the balance between short-term survival and long-term survival has increasingly become a major challenge faced by family businesses in the process of technological innovation.The core issue of this research is whether and how family businesses can effectively allocate and balance exploitative in-novation and exploratory innovation by changing and adjusting governing methods,in order to balance short-term and long-term survival goals.Specifically,based on the analysis framework of organizational ambidexterity,this research focuses on three pairs of"issues"in family business's organizational behavior,especially in innovation behavior,and further dis-cusses the differences between family businesses and non family businesses,as well as within family businesses,in ambidex-trous innovation.On this basis,this research systematically analyzes the possible impact and mechanism of different gover-nance models(formal governance and informal governance)within family businesses on ambidextrous innovation from the perspective of"willingness&ability".Finally,this research further explores the situational factors that influence the relation-ship between family business governance and ambidextrous innovation from two aspects:external environmental factors(in-dustry competitiveness)and internal organizational factors(business expectations and cross-generational inheritance).In response to the above problems,this research uses listed family businesses in Shanghai and Shenzhen as the research object,and constructs a panel data sample from 2004 to 2020.The empirical study shows that:(1)Family enter-prises can promote exploratory innovation and guide exploitative innovation activities by using formal governance;(2)The intensified market competition in external industries strengthens the positive effect of formal governance on exploratory innovation,while weakening that of informal governance on exploitative innovation;(3)The gap between operation expectation and reality strengthens the positive effect of formal governance on exploratory innovation,while the surplus of operation expectation enhances the positive effect of informal governance on exploitative innovation;(4)Fami-ly businesses with a willingness to pass on to a skipped generation are more inclined to harness formal governance to pro-mote exploratory innovation.The above research conclusions is still valid after three types of robustness tests:endogeneity problem handling,variable measurement method replacement,and regression analysis method replacement.Based on the above research conclusions,this research proposes that family businesses need to effectively utilize the advantages of formal and informal governance,and achieve the ambidextrous goals of short-term survival and long-term growth through the rational allocation of exploratory innovation and guide exploitative innovation activities.At the same time,when investing in ambidextrous innovation activities,family businesses also need to allocate different governance mechanisms reasonably based on external environmental characteristics and situational factors such as their own resources,goals,and legitimacy foundations.Firstly,when market competition is strong,family businesses can make more use of for-mal governance for exploratory innovation activities;When market competition is weak,exploitative innovation innova-tion with low risk and short-term returns is more feasible.And this time informal governance is an effective means to pro-mote exploitative innovation.Secondly,when the actual performance does not meet the expected level,formal governance can be more utilized to promote exploratory innovation activities;On the contrary,when actual performance exceeds ex-pected levels,informal governance can be used to promote exploitative innovation and consolidate existing performance levels.Thirdly,family businesses with a willingness to pass on to a skipped generation can promote exploratory innova-tion activities by strengthening formal governance;In contrast,for family businesses without a willingness to pass on to a skipped generation,they can rely more on informal governance to promote development innovation activities,so as to ob-tain short-term performance returns as the material guarantee of survival and development.
family businessformal governanceinformal governanceexploratory innovationexploitative innovation
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