1a. Please read this paragraph carefully and answer the questions.

Innovation is a key factor in the success of a company, especially since innovative companies tend to make more profits and grow faster (Geroski et al., 1993; Hatak et al., 2016; Kraiczy, 2013). Family firms (FF) play a central role in this regard because of their position as “hidden champions” in many industries. As a result of their leading role as innovators they are frequently competitive in niche markets (Simon, 2009). In this paper, FF are defined as companies that are 100 percent family owned (at least in the second generation) and in which the business family is involved in top management (for the components of this definition see e.g. Zellweger, 2018). However, when it comes to innovation, being an FF can be both advantageous and disadvantageous: on the one hand, FF are often portrayed as conservative forms of enterprise because of their strong, regional roots, their stable relationships with stakeholders and their long-term vision based on traditions. As such, they are often seen as reluctant to implement innovative projects (Duran et al., 2016; Economist, 2009). On the other hand, they frequently show concentrated structures of property and control (Lee, 2006) that allow them to reach and implement decisions more quickly. In addition, many FF display a great deal of self-sacrifice to secure the continued existence of the company (Glover and Reay, 2015) by predominately financing investment plans with their own assets (Blanco-Mazagatos et al., 2007). Hence, FF demonstrate the necessary prerequisites for the development of innovation.

Reference:

Frank, H., Kessler, A., Bachner, C., Fuetsch, E. and Suess-Reyes, J. (2019), “Principles for innovation management in family firms: An analysis of long-term successful good practices with a practitioner validation of the principles”, Journal of Family Business Management, Vol. 9 No. 3, pp. 319-348. https://doi.org/10.1108/JFBM-09-2018-0049