Family Firms and Research and Development Investment: The Moderator Effect of the Board Composition

Guadalupe del Carmen Briano-Turrent; Karen Watkins-Fassler; Lázaro Rodríguez-Ariza; Carolina Reyes-Bastidas

doi:10.24310/ejfbejfb.v13i1.16065

Authors

Guadalupe del Carmen Briano-Turrent Universidad Autónoma de San Luis Potosí Mexico https://orcid.org/0000-0001-8241-0385
Karen Watkins-Fassler Instituto Tecnológico Superior de Misantla, Mexico / Universidad Internacional de La Rioja, Spain Mexico https://orcid.org/0000-0002-2715-9420
Lázaro Rodríguez-Ariza University of Granada, Spain Spain https://orcid.org/0000-0002-5650-7703
Carolina Reyes-Bastidas Universidad Mariana, Colombia Colombia https://orcid.org/0000-0002-3903-8597

DOI:

https://doi.org/10.24310/ejfbejfb.v13i1.16065

Keywords:

Agency theory, Family firms, Latin America, Research and development, Socioemotional wealth

Agencies: Grant Research on Latin American Family Business University of Monterrey Mexico

Abstract

From the perspective of agency and socio-emotional theories, the family firm’s innovation behavior differs from non-family companies. We investigate the relationship between the family element and Research and Development (R&D) investment, and how the moderating effect of the board composition affects this relationship. Using a panel data composed by 1,284 observations-year during the period 2004-2014 from Argentina, Brazil, Chile and Mexico, empirical results show that family firms increase R&D investment when the moderating effect of the board composition is included. For instance, larger boards, the independence of the board, the COB-CEO duality and female directors motivates to a higher R&D and capital expenditures. These results confirm that board composition constitutes a monitoring mechanism of family members' actions, which leads to an increase of innovation strategies and suggest that family firms promote a long-term orientation with the purpose of preserving the wealth for next generations. This research contributes to the international literature analyzing a region not explored before and characterized by a weak institutional framework and lower rates on R&D investment compared to other emerging countries.

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