Family Firms In Times Of Digital Innovation: Transferring Knowledge Across Generations

Small and family business (SIMA)

Family Firms In Times Of Digital Innovation: Transferring Knowledge Across Generations

Emanuela Rondi, Leopold Von-Schlenk Bansdorf, Ruth Uberbacher, Alfredo De Massis, Marcel Hulsbeck

Industrial economy is undergoing a radical shift in paradigms due to digital innovation, i.e. the use of digital technology during innovation processes as well as the outcome of innovation (Nambisan et al., 2017), and the rise of the “knowledge economy”. In the industrial age, knowledge and skills were closely linked to the individual’s experience and seniors, equipped with very deep knowledge, gradually transferred it to juniors before being replaced by them (Joshi et al., 2010). Such experience-based knowledge is considered tacit (Nonaka and Toyama, 2007) and can constitute a source of competitive advantage (Nonaka and Takeuchi, 1995). In the digital age, however, this paradigm is radically changing, because organizations increasingly rely on new knowledge (Suh and Chen, 2007). While digital innovation, comprising changes of the nature as well as the structure of new processes, products/services and business models (Iansiti and Lakhani 2014; Porter and Heppelmann, 2014; 2015; Nambisan et al., 2017), is revolutionizing traditional business models and long-established industries (Loebbecke and Picot, 2015; Archibugi, 2017), the knowledge economy leads to an increased emphasis on knowledge as the major resource (Powell and Snellman, 2004; Schot and Kanger, 2018).

Especially, issues in the generational interactions and turnover, i.e. senior generations teach and next generations learn (Joshi et al., 2010; Joshi, Dencker and Franz, 2011), are on the verge of collapse. The (digital) knowledge economy is highly dynamic and requires digital literacy, e.g. in managing digital knowledge for the purpose of (digital) innovation (Porter, 1998; Mihalcea, 2017). In contrast to the senior generation, being embedded with deep tacit knowledge about industrial business models, the (digital savvy) next generation is embedded with the essential digital mind-set and knowledge. As a result, the industrial organizational lifecycle and especially the traditional life-cycle model of the generations including knowledge transfer (Churchill and Hatten, 1997) are doomed to fail in the knowledge economy. However, research has scantly investigated how organizations should manage the interaction of generations in relation to knowledge transfer in current circumstances. In particular, it is still unclear how the next generation could capitalize on the senior generation’s knowledge while at the same time developing and transferring its new (digital) knowledge back to them. This is becoming paramount for firms to foster digital innovation and generate/sustain competitive advantages.

In this study, we investigate knowledge transfer in the context of family firms, considered as extreme to explore intergenerational interaction and knowledge transfer. In family business, the gap between senior and junior generation is larger, because of the broader age distance from one generation to the next (Joshi et al., 2010), and employee turnover is lower compared to non-family firms. Consequently, their traditional model of intergenerational knowledge transfer, which has been working very well in the industrial age, has become outdated. The challenges coming with the digital age increasingly require new (digital) knowledge from various sources. To analyze the unique dynamics of intergenerational knowledge transfer in family business, we conducted a qualitative multiple case study on twenty family business cases in Germany, a geographical context globally considered at the edge of digital innovation, and address the following research question: How does intergenerational knowledge transfer occur to enable digital innovation in family firms?


Theoretical background

We subdivide our theoretical background into three major sections which together lead to the gap in the literature we are addressing in this paper. First, we look at the literature on generational interaction in the knowledge economy, highlighting the tensions between senior versus next generation (Joshi et al., 2010; 2011), tacit versus the explicit knowledge (Polanyi, 1966; Tsoukas, 1996; Nonaka and Konno, 1998) and the generational turnover and transfer of knowledge (Nonaka and Takeuchi, 1995; Nickerson and Zenger, 2004; Svahn et al., 2017; Schot and Kanger, 2018). Secondly, we investigate the intergenerational knowledge transfer in family firms, examine the extreme case of family business (Cabrera-Suárez et al., 2001; 2018; Kammerlander and Holt, 2018) as well as the seminal life-cycle model of generations (Churchill and Hatten, 1997). Given that digitalization is changing traditional industries and their long-established business models (Zott and Amit, 2017), we lastly delve into digital innovation in family firms by looking in particular at the creation and transfer of new digital knowledge and capabilities through generational turnover and knowledge transfer.

#Digital innovation #family business #Intergenerational knowledge transfer