When less is more: resource constraints and radical innovation in family firms and non-family firms

Abstract

While radical innovation is crucial for long-term organizational success, resource constraints often challenge endeavors toward novel ideas, products, and services. Although there is increasing evidence of the positive impact of resource constraints on radical innovation performance, much still needs to be uncovered regarding the conditions that facilitate this positive impact. Drawing on the recombinative innovation perspective, we explicate the positive impact of knowledge and financial constraints on radical innovation. Moreover, we identify firm type-specifically the distinction between family and non-family firms-as a crucial organizational contingency that sheds more light on the focal relationship. Using data from a broad sample of Belgian firms, we find support for our hypothesis that financial constraints can spur a higher likelihood of introducing radical innovation. Moreover, family firms can better transform knowledge constraints into radical innovation, whereas non-family firms are better at generating radical innovation from financial constraints. By considering the impact of organizational characteristics on firms' ability to innovate from specific constraints radically, we deliver more detailed results on the link between resource constraints and radical innovation.