Do Family Founders’ Cultural Backgrounds Enable or Hamper Corporate Innovation?

Prior studies have documented the influences of the cultural values of collectivism and high power distance on creativity and innovation. However, despite the extensive body of upper echelons literature on how CEOs’ prior experiences affect firm behavior, we know little about how executives’ cultural backgrounds influence corporate innovation. We use the number of clan genealogies in the hometown cities of family firm founders as an exogenous variable to identify executives’ cultural backgrounds. Our empirical analyses reveal that family firms led by founders who were born and raised in areas with strong clan cultures exhibit less corporate innovation than those led by founders with weak clan cultural backgrounds. We theorize two mediating mechanisms and demonstrate how the two mediators, creativity-oriented corporate culture and the proportion of top managers with working experience in technical areas, influence the relationship between clan culture and corporate innovation. Our cross-sectional analysis further shows that the effect of hometown clan culture is moderated by gender identity, surname rarity, CEO identity and ownership structure. We conduct several tests to confirm the robustness of our results. We highlight the importance of founders’ cultural imprinting on family firm innovation and demonstrate the mechanisms underlying the influence of China’s traditional culture on corporate innovative strategy