Embeddedness as an opportunity for organizational innovation in family firms

Abstract

When and how can a family firm successfully change the way work is organized? We will address this question from a relational embeddedness perspective. Our starting point is the idea that when the firm is highly embedded in the family, this will influence several organizational outcomes, like organizational innovation. Drawing on an inductive theory building approach based on interview data of 18 CEOs of family firms, we will argue that family firms draw on their embeddedness to achieve four concrete micro-processes that forward the innovation process. Making use of their long shared experience, deep knowledge of the firm and close relationships, family firms are particularly capable of (1) trial-and-error learning, (2) framing the change initiative, (3) providing necessary structure, and (4) fast decision-making. This answers our how-question. As an answer to our when-question, we will argue that, while embeddedness forms the basis for accomplishing these micro-processes, this will only be the case when, at the same time, the firm keeps open to the outside environment.