WHU Study: Innovation in Family Businesses

Family businesses and SMEs are often accused of lacking innovation and digitization capabilities.

The reality is different: Many traditional German companies have already set up innovation centers and units, which specifically develop new products and business models. This reveals fundamental differences to start-ups as well as to corporations. A study by WHU - Otto Beisheim School of Management and the consulting firm ANDERSCH provides quantitative and qualitative insights for the first time.

"In recent years, corporations and start-ups have dominated the public debate on innovation in Germany because investment hubs and incubators have been intensively advertised in the press as relevant advances in corporate development," says Professor Dr. Nadine Kammerlander, head of the Chair of Family Business at WHU, who accompanied the study in terms of content. "German family-owned companies are much quieter in this respect, according to their nature. They do not always make the big bell about their advances. That is why we are very happy that we have been given intensive insight here."

The study shows that only eight percent of all companies surveyed have their management participate in the newly created innovation units as partners. Besides, 'innovation hubs' are closely tied to the company and only in around a quarter of the cases was an independent company spun off. The study also found that solidity overrides creativity; opportunities were consistently seized, but radically new ideas less often found their way into the company.

Compared to start-ups and corporations, family businesses are more cautious about developing and implementing ideas and avoid risk. In terms of financing, too, entrepreneurial families are not as flexible as start-ups, which often secure their liquidity with financing rounds. Family businesses, on the other hand, usually invest their assets and make less risky decisions.

In the survey, 37 companies were interviewed in person. The study was conducted at the Chair of Family Business at WHU under the direction of Professor Dr. Nadine Kammerlander and with the support of the consulting firm ANDERSCH.