The Impact of Family Business Governance on Organizational Innovation: A Field Study at Family Firms Operating in Yemen

Abstract

This study aims to investigate the impact of family business governance (FBG) on organizational innovation (OIN) in family firms operating in Yemen. The study collected data from 219 family firms, and employed PLS-SEM to test the hypotheses and validate the study model. The results provide evidence of the influence of FBG on OIN in family firms, and that the application of FBG practices promotes better results at the organizational level seen as product innovation and process innovation. The results show that there are significant differences in organizational innovation that can be attributed to the size of the firm, while no differences are found to be attributed to the generation in charge. These findings provide a better understanding of the innovativeness in family firms with respect to the different roles of formal and informal governance structures, and may help business families to develop more effective governance structures out of which more active stewards with more innovative ideas can help trigger better organizational innovation. This paper attempts to update the current knowledge concerning inconsistency of findings in prior studies, and so contributes in updating research opportunities with respect to heterogeneity in family firms.