When Family Ties Shape Innovation: The Roles of Market Focus and Legacy Goals

What is it about?

This study examines how social ties—the personal and professional relationships that connect family members, employees, and stakeholders—affect innovation in family firms. Drawing on insights from social capital and embeddedness theories, the authors argue that while close relationships can help family firms exchange knowledge and build trust, excessive dependence on them can stifle novelty and adaptation. The key question is whether stronger social ties produce greater innovation, or whether, beyond a point, they instead create insularity that limits access to new ideas and opportunities. Using survey data from 150 family firms in the United Arab Emirates, the study finds an inverted U-shaped link between social ties and firm innovation. Moderate connectedness promotes collaboration and knowledge sharing, but excessive ties hinder openness and adaptability. Two firm traits—market orientation and transgenerational intent (commitment to long-term continuity)—help balance this effect. Market orientation keeps firms responsive to customers, while transgenerational intent encourages new networks and fresh ideas. Practically, the study highlights that while relational closeness is a defining strength of family firms, it must be balanced with openness and renewal. Leaders can foster innovation by complementing trust-based relationships with external scanning and intergenerational knowledge exchange. In culturally collectivist contexts like the UAE, where family and community ties are deeply valued, this balance is essential for maintaining both continuity and creativity in an evolving business landscape.

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Photo by 86 media on Unsplash

Photo by 86 media on Unsplash

Why is it important?

This research is unique in resolving the long-standing debate about whether social ties enhance or inhibit innovation in family firms. By identifying an inverted U-shaped effect and uncovering the moderating roles of market orientation and transgenerational intent, it offers a nuanced explanation for how relational capital can both enable and constrain innovation. It also expands family business theory by demonstrating how future-oriented strategies can offset the rigidity of long-standing networks. The study is particularly timely as family businesses in the UAE and across similar economies undergo generational transitions amid rapid market change. These findings provide clear guidance for sustaining innovation within tradition-bound firms: promote market responsiveness and empower successors to broaden social networks. In doing so, family enterprises can transform deep-rooted relationships into springboards for enduring innovation and growth.