appConfigEntityId

bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

hooksArticlePageAdvertisementConfigArticle

liveArticle

appConfig

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

sectionsV2

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

json

Morten Bennedsen

Are Asian family firms innovation leaders? “Family business” often has a reputation for paternalism, risk aversion and being far away from new dynamic innovative industries. And yet, many family firms across the globe have managed to be innovation leaders for decades.
In both East and West, such examples are not far away.
In Japan, Toyota (controlled by the Toyoda family) has been one of the most innovative companies in the world focusing on process innovation for over 50 years.
In Taiwan, the late Wang Yung-chien was a master of developing new organizational structures to secure business sustainability of his Formosa Plastic Group far beyond his own lifetime.
In Germany, innovation has been the key for many old family firms. The founder of Siemens improved telegraphing and with this story in mind Siemens has continued to be a world leader in innovation.
The term “Hidden Champions” is used to characterised privately-held low key family firms where innovation has enabled them to grow as global leaders in their respective market niche.
In a new research project, Professor Juul Foss and myself have found that innovation in family firms is often driven by family assets, that is, the unique contributions families deliver to their firms.
In Hong Kong, Taiwan, Singapore and the rest of Asia, families often have strong values in leading their firms. Valuable networks and powerful legacy are important factors of their business success.
Family assets may be a unique source of innovation. The legacy and reputation may make it easier for family firms to recruit top notch innovators to the company.
For instance, a family firm with a legacy of top research records will be easier to find new researchers. Family networks to knowledge centres such as universities may be transmitted into the family firm’s innovation process.
The Chaebols of South Korea are prime examples of family controlled business groups with very strong business and research networks who have managed to use these networks as a driver of their research and innovation activities.
A second reason why family firms may be strong innovators is that family members are usually more loyal to their own companies. Therefore, if they are less likely to sell or exit their businesses, they are often forced to innovate as a response to the family, market or institutional roadblocks.
The luxury industry is a striking example of a family-dominated industry where dramatic changes in demand and supply over the last decades have forced many families to choose between innovation in ownership and organisation, or exit.
To serve the ever increasing demand for luxury in Asia, companies like Louis Vutton, Hermes and Bulgari had to develop new organizational structures focusing on opening own stores and reaching out to the high growth markets.
Those families that failed to address to the new markets had to exit their businesses, which typically became a part of a bigger business group.
A third advantage family firms have in innovation is the motivational factor. A strong family-orientation, a feeling of coherence and shared value has shown to be an attractive factor for many high level creative innovators when choosing employment.
Thus a family firm with strong values and a long term view on business can be a very attractive place for strong innovators and we often see successful family firms have an easier time finding the right people to sustain a high level of innovation.
We have met many young generation family members who are reluctant to join the parents’ family firms because they feel a dilemma between the safe and boring option of working for their parents and the exiting option of being an entrepreneur on their own.
Our research shows that families with good planning can solve this dilemma by encouraging the next generation to become innovators within the existing family business.
Family governance can help clarify the career path of younger family members´ involvement in the family business. Through communication, family charters and clear family structures, families can identify potential innovators in the next generation and help them develop within the family firm.
This will increase the likelihood that the potential innovators will find it attractive to stay in the family business.
For example, families may set money aside to finance new ideas from the younger family members and provide rewards through increasing ownership shares to young family members who have succeeded as innovators or in starting up new businesses within the family firm.
Old entrepreneurial families are sometimes able to transfer the entrepreneurial spirit through generations by family activities that foster and reward new innovators.
The 380-year-old Wendel family has around 1,000 family members who once owned the biggest steel company in Europe.
Today there are no family members active in management of the investment company, but the family assets of entrepreneurial and innovation spirit, family name and history, and a very powerful family and business network are maintained through active family governance.
This includes a yearly internal entrepreneurial price given out to new business adventures created by family members, business education, and social gathering.


Are Asian family companies leaders in innovation?

Toyota unveils the extra-small model of a high-end Lexus as its founding family worked on being innovative in setting up the world-leading car brand. Photo: Kyodo

Business

Companies