When is R & D beneficial for family firms? The concurrent roles of CSR and economic conditions

How family firms innovate has captivated scholars for over a decade. However, an investigation into the benefits of research and development (R & D) for family firm value under differing economic conditions has received little attention in the family firm innovation or R & D literature. This study examines the relationship between R & D intensity and firm value among listed family firms during the economic recession period of 2007-2010 and nonrecessionary periods (referred to as normal periods) in the US between 1995 and 2013. Based on behavioral agency theory, we evaluate the moderating effects of investments in inward-looking and outward-looking corporate social responsibility (CSR) initiatives on this relationship. We hypothesize that R & D intensity is negatively related to family firm value during a recession period, but outward-looking CSR positively moderates the relationship between the two. The opposite is hypothesized during normal periods. The results support the assertions that outward-looking CSR can ease the negative impact brought about by R & D intensity on firm value during a recession period, while inward-looking CSR investments surprisingly bear no effects. Important implications for research, family firm leaders, and R & D managers are discussed.