The innovation paradox and survival of family firms in the United Arab Emirates

Abstract

This paper investigates the impact of firm size and family influence on innovation in the context of smaller family firms operating in the United Arab Emirates. The owners of family firms typically want their business to be passed on to future generations. However, they are often unwilling to invest in innovation even though governance structures based on close family relations may help them pursue innovation. We explore deductively and inductively in a case study of 14 family firms. The aim of the analysis is two-fold: we investigate why only some family firms seem able to effectively pursue innovation, while some others manage to survive in a dynamic environment without achieving significant innovation. Our results show that large firm size and negligible family influence are associated with more innovation in family firms. Firms that do not invest in innovation resort to alternative sources of competitive advantages, such as reputation and customer orientation, and are regularly involved in customer-focused activities or business improvement processes. Competitive pressures often drive reluctant innovators to overcome their unwillingness to innovate. However, innovations driven by customer and supplier pressures are often minimal and involve low risk.