The Impact of Peer Firms on the Innovation Investment of Family Firms: To Reduce Risks or to Increase Returns

Abstract

Abstract: The Chinese style modernization is inseparable from the high-quality development of private economy. Being an important part of the private economy, family enterprises are faced with the problem of long-term insufficient innovation input. Under the background of innovation-driven development in China, it is of great significance to improve the innovation level of family firms. The existing studies usually treat family firms as individuals that make independent decisions,ignoring the influence from other firms. Based on the theories of social psychology and socioemotional wealth, this article discusses the influence of peer firms on the innovation investment of family firms, which can provide a new perspective to solve the problem of insufficient innovation investment of family enterprises. The results show that peer firms have a significant promoting effect on the innovation investments of family firms, and that the information acquisition imitation is the main internal mechanism. While the competitive imitation has no significant effect,which indicates that the essence of that peer effect is to reduce risk rather than increase returns. Both the firms and environment characteristics have heterogeneous influence on the above effects. When the equity restriction degree inside of the companies is weaker, or the company is in recession, or the economic policy uncertainty outside of the company is greater, or the company is located in the eastern region, the peer effect of innovation investment of family firms is more remarkable.

Key words: family involvement, innovation investment, peer effect, information acquisition, imitation

WU Fang. The Impact of Peer Firms on the Innovation Investment of Family Firms: To Reduce Risks or to Increase Returns[J]. JOURNAL OF CONTEMPORARY FINANCE AND ECONOMICS, 2023, 0(2): 97-109.

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