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 non-recessionary 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.