Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 425: Innovation Capabilities and Financing Constraints of Family Firms

Dorothea Schäfer (), Andreas Stephan () and Jenniffer Solórzano Mosquera ()
Additional contact information
Dorothea Schäfer: DIW Berlin and CeFEO at Jönköping International Business School
Andreas Stephan: Jönköping International Business School and CESIS at KTH Stockholm
Jenniffer Solórzano Mosquera: Jönköping International Business School

Abstract: Using the 2007 Mannheim innovation survey, we investigate whether family firms are more financially constrained than other firms and how this affects both innovation input as well as innovation outcomes such as market and firm novelties or process innovations. Based on the CDM framework, estimation of the recursive system of equations shows that family businesses are more likely to be constrained and have, on average, lower innovation input. Surprisingly, however, this does not reduce their innovation outcomes as, on average, family firms have the same level of innovation outcomes as nonfamily firms.

Keywords: Innovation; Capability; Financing Constraints; Family Firms; CDM

JEL-codes: D30; G32; O32

37 pages, December 18, 2015

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