Origin matters: Institutional imprinting and family firm innovation in China

• Published in: Emerging markets review Vol. 55; p. 100990
• Main Authors: Cheng, Chen, Li, Wanrong, Liu, Guanchun, Liu, Yuanyuan
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.06.2023
• Subjects: China; Corporate innovation; Family firm origin; Institutional imprinting; Corporate innovation; D21; China; G34; Institutional imprinting; Family firm origin; M11
• ISSN: 1566-0141; 1873-6173
• DOI: 10.1016/j.ememar.2022.100990

During the early 1990s, a swathe of small state-owned enterprises (SOEs) was privatized as family businesses in China. This paper examines whether and how the origin (i.e., restructured vs. entrepreneurial) of family firms affects corporate innovation. Using the data of Chinese family firms from 2009 to 2018, we find that restructured family firms generate fewer patents generally than entrepreneurial family firms, but create more high-quality patents than their entrepreneurial counterparts. This effect is more pronounced for those family firms which had formerly been SOEs for a more extended period, without generational succession, and previously controlled by governments entirely. Further mechanism tests show that restructured family firms have a higher likelihood of hiring professional managers, are subject to less intervention from family members, and have fewer informal hierarchies, providing direct evidence for the institutional imprinting channel. Our findings suggest that the institutional imprint underlying the origin of family firms can be critical to their innovation decisions. •We examine how the specialized origin of family firms affects corporate innovation.•Restructured firms produce fewer patents with higher quality than entrepreneurial ones.•This effect is stronger for restructured family firms with grater institutional imprinting.•Our mechanism tests support the institutional imprinting channel.•The origin of family firms can be vital to their innovation decisions.