How Does Successor's Power Affect Innovation Investment in Chinese Family Firms? (Journal of East European Management Studies)

Summary

• The study uses a sample of Chinese listed family firms from 2009 to 2020.p.1
• Both formal and informal power of successors promote technological innovation investment, and the effect of informal power is stronger.p.1
• The interaction of formal and informal power is significantly positive (β = 0.097, p < 0.05), indicating a synergistic effect.p.8

Key insights

1. Informal power has a larger coefficient than formal power (0.366 versus 0.152), so it promotes innovation investment more strongly.p.10
2. A competitive market environment strengthens the positive effect of successor power on innovation investment, and more so for informal power.p.16
3. Innovation investment is measured as R&D investment intensity, the ratio of R&D investment to operating income.p.7
4. Principal component analysis is used to derive composite measures of formal and informal power.p.7
5. Results are robust to a one-period lag of the dependent variable.p.11
6. Firms should support successors with strong informal power as innovation leaders.p.17