Founder Control of Family Firm and Innovation Invest-ment
Family businesses play a significant role in the global economy and are particularly crucial to China's economic growth and the socialist market economy.With the implementation of China's reform and opening-up policies,private enterprises have rapidly developed and become the main force among listed compa-nies.Against the backdrop of innovation-driven strategies and the enhancement of independent innovation capabilities,studying the innovation issues of family businesses is of substantial significance for the high-quality development of the national economy.Family control is a notable characteristic of family businesses and has a profound impact on their management and operations.However,existing research on the impact of family control on corporate in-novation is inconclusive.Some studies suggest that family control-lers possess a long-term orientation and innovative spirit,which positively affects corporate innovation.Other research finds that family businesses may reduce R&D investment due to risk aversion.These controversies may stem from studies that focus more on the differences between family and non-family businesses,or are based solely on the strength of family business control rights,neglecting the varying impacts of different types of control rights.This paper categorizes family businesses into founder-controlled and non-founder-controlled types,exploring the differences in their innovation decision-making behaviors.Founder-controlled family businesses are under the control of the founder,with a clear long-term orientation and a strong desire for family succes-sion;non-founder-controlled family businesses are controlled by non-founders who have obtained control through capital opera-tions,exhibiting a more evident fluidity and profit-seeking nature of capital.This paper aims to answer whether founder control promotes family business innovation investment,how different gov-ernance factors affect this relationship,and how the involvement of the second generation influences the relationship between founder control and innovation investment.This paper selects family-listed companies on the Shanghai and Shenzhen A-share markets from 2007 to 2019 as a sample to examine the impact of founder control on the innovation investment of family firms.The research results show that compared to non-founder-controlled family firms,found-er-controlled family firms have more innovation investment,indi-cating that founder control plays a positive role in the innovation investment of family firms.Heterogeneity analysis indicates that in family firms with higher agency costs(no state capital participation,lower industry competition,and poorer legal environment in the re-gion)and more severe financial constraints(lower social trust in the region,lower financial market development level,and CEOs with-out financial background),the impact of founder control on corpo-rate innovation investment is more significant.Mechanism analysis shows that founder control promotes the increase in innovation investment of family firms by reducing agency costs and alleviating financial constraints.Extended analysis indicates that the involve-ment of the second generation inhibits the positive effect of founder control on the innovation investment of family firms,and founder control can significantly improve the innovation performance of family firms.The contributions of this study are as follows:First,it expands research on the heterogeneity of family businesses.Most existing literature simply compares the differences in innovative behavior between family and non-family businesses or studies from the per-spective of the strength of family business control rights,neglecting the differences in types of family business control rights.This paper divides family businesses into founder-controlled and non-found-er-controlled types,and compares whether there are significant differences in innovation behavior among family businesses with different types of control rights,thus expanding research on the het-erogeneity of family businesses.Second,it enriches the literature on factors affecting corporate innovation.Although a substantial amount of literature has explored the factors affecting corporate innovation from the perspective of internal and external corporate governance,there is little literature that analyzes from the perspec-tive of family business control rights characteristics.This paper ex-amines the impact of family business control rights characteristics on innovation investment from the perspective of founder control,enriching the relevant literature on factors affecting corporate innovation from the perspective of family control and deepening the understanding and recognition of family business innovation activities.Third,it provides insights for the management of family businesses and government functional departments in formulating relevant policies.In the context of China's implementation of inno-vation-driven strategies,how to effectively promote family business innovation is of great significance to private enterprises and the high-quality development of the national economy.The empirical research results of this paper find that founder control ultimately promotes family business innovation investment by affecting cor-porate agency costs and financing constraints.This research out-come provides useful policy insights for the management of family businesses and government departments in building an innovative country.To promote the innovation and development of family businesses,governments and relevant departments need to take the follow-ing measures.Firstly,policies should be established to protect the control rights of founding families or founders.When family busi-nesses go public,the founder's equity is easily diluted,leading to a loss of control rights,there by affecting company performance and future development prospects.Foreign markets,such as those in Europe and America,have adopted systems like dual-class share structures to protect the control rights of founders,while China's mainland capital market mainly practices the one-share-one-vote system and lacks specific protective measures.Given the positive role of founder control in alleviating agency costs and financing constraints in the innovation process,the government should value and improve the property rights protection system.Secondly,the reform of mixed ownership should be deepened to achieve a com-plementary advantage between state-owned and non-state-owned capital.State-owned shareholders can supervise the management of family businesses and alleviate agency problems.The study found that state-owned capital participation can substitute for founder control,playing a positive governance role in non-founder-con-trolled family businesses.,State-owned capital can also promote enterprise innovation and improve investment efficiency;therefore,the government should encourage state-owned capital to participate in family businesses.Lastly,product market competition should be intensified,and the regional legal environment should be optimized.Market competition accelerates the survival of the fittest among enterprises,it improves the quality of information disclosure,and enhances market pricing efficiency.A good legal environment pro-vides protection for market participants.The study found that fierce market competition and a legal environment have a substitutive effect with founder control,playing a positive governance role for non-founder-controlled family businesses.The government should strengthen market competition and legal environment construction to promote the healthy development of family businesses.These measures will enable family businesses to achieve high-quality de-velopment under an innovation-driven strategy.
Family FirmFounder ControlCorporate InnovationAgency CostsFinancial Constraints
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维普
