Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 268: Innovation Capabilities and Financing Constraints of Family Firms

Dorotea Schäfer, Andreas Stephan () and Jenniffer Solórzano Mosquera
Additional contact information
Dorotea Schäfer: DIW Berlin, Postal: Mohrenstraße 58, , 10117 Berlin, , Germany
Andreas Stephan: The Ratio institute and Jönköping School of Economics, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Jenniffer Solórzano Mosquera: Jönköping School of Economics, Postal: Jönköping University, Gjuterigatan 5, Box 1026, 551 11 Jönköping, Sweden

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

39 pages, February 22, 2016

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