Abstract

     The aspiration to thrive in the long run is among the most distinctive traits of family firms. On the one hand, a long-term view can spur the family firm to plan and secure its human resources (HR), thereby attracting local employees seeking stability, and retaining them for decades. On the other hand, low employee turnover can be a barrier to innovation, which is needed to survive and compete in the long run. Nevertheless, numerous family firms are renowned for being simultaneously excellent employers and outstanding innovators. Therefore, how can a long-term oriented family firm nurture its employees while pursuing innovation? We conducted a longitudinal case study on Carl Schlenk AG, a fourth-generation family firm consistently awarded for both its HR management (HRM) and innovation initiatives. Our investigation led us to identify distinct family firm characteristics of credibility, solidarity, and loyalty which engender a unique virtuous cycle of reciprocal reinforcement between sophisticated HRM and innovation practices, ultimately fostering mutual gains for the family firm and its employees. We offer contributions to HRM and innovation management research in the context of family firms and beyond.

Introduction

One for all, all for one” – that is not just a slogan for us but a living corporate culture (Schlenk Corporate Communications)

     Human resource management (HRM), i.e. “all management decisions and activities that affect the nature of the relationship between the organization and its employees – the human resources” (De Leede & Looise, 2005, p.109), is acknowledged as a critical success factor for family firms to enhance performance, attract new talent, improve employee attitudes and behaviors; hence a source of long-term competitive advantage (Hoon et al., 2019). Strategic HRM research increasingly focuses on understanding the performance effects of systems of HR practices (Boon et al., 2019) and the mutual gains or shared benefits for employees and firms, despite their divergent interests (Cullinane, Bosak, Flood, & Damerouti, 2014). Although research has examined the systems of ability- (A), motivation- (M), and opportunity-enhancing (O) HR practices (AMO model) (Appelbaum et al., 2000), their empirical investigation has mostly focused on ability and motivation, leaving the opportunity-enhancing practices as well as the integration of the three dimensions scantly addressed (Boxall et al., 2016). The family business context stimulates the creation of strong, lasting, and bonding social capital among employees, fostering cohesiveness, coordination, and decision-making effectiveness (Arregle et al., 2007). While mutual gains are likely to emerge for the family firm and its employees, from planning security for the former to job security for the latter, they potentially lead to overinvesting in loyal, stable, and long-term HR (Bassanini et al., 2013), at the expense of an inflow of new knowledge and ideas, ultimately detrimental to innovation.

Conclusion

     Family business long-term orientation influences both HRM and innovation management practices, leading to a tension between low turnover and innovation. Investigating Carl Schlenk AG, a German Mittelstand multigenerational family firm, we built a process model that explains how the family business essence, consisting in family business characteristics that shape a trust-based environment, allows the family firm to engender a virtuous cycle between HRM and innovation practices, ultimately leading to mutual gains for the family firm entity and its employees that can last and accrue over multiple generations. In so doing, we unpacked the family firm HRM framework by examining how the family firm/owning entity, HR systems, and employees interact, shedding light on the influence of family firm characteristics on innovation management, considering its intertwined relationship with HRM.