Family influence and R&D investments in transition economies:reconciling behavioral and institutional views

A debate surrounds the role of family goals in shaping the strategic behavior of family firms. Behavioral theorists view family goals as a major source of strategic differentiation, but this contradicts institutional theory’s prediction that family firms will be subject to remarkably powerful motivations to conform. Unfortunately, the relationships between family influence and strategic behavior have been mainly studied in established market economies and existing models cannot be applied to transition economies where private firms have emerged only recently and are still viewed with suspicion by outside stakeholders. In an effort at reconciliation and generalization, we propose and test a midrange model receiving strong support in analysis of R&D investments of 1,858 private firms in China. Our study shows that family-centered goals mediate the relationship between family influence and R&D investments, but the effect of family goals on R&D investments is contingent on the degree of family members’ legitimacy as exemplified by their social status, political connections and charitable activity. Our work not only addresses the debate on family influence and strategic conformity, it also offers a more general model of sources of distinctiveness of family firm’s strategic behavior