How can innovation collaborations between family businesses and start-ups be successfully designed? (Research article)

As part of the innovation research projects of the Institute for Family Enterprises and SMEs at WHU – Otto Beisheim School of Management, Prof. Dr. Nadine Kammerlander, Laura Doriane Baumgärtner, Constantin Ehret and Dr. Jonas Soluk investigated innovation collaborations between family businesses and start-ups. Using an interview-based approach, the research team analyzed the motivations and processes within innovation collaborations, the challenges faced by family businesses and startups, and the role of intermediaries within the collaborations. A total of 106 interviews were conducted with family businesses, start-ups, intermediaries and experts – including Christoph Baier, CEO of Ambivation.

Family businesses are considered the backbone of the German economy and differ from other established companies, among other aspects, in their long-term orientation, pursuit of financial and non-financial goals and their high quality standards. However, due to the increasing uncertainties and complexities of today’s business environment, family businesses face significant and diverse challenges. Collaborations with external organizations (e.g., start-ups) are often seen as a way to better and jointly address these innovation challenges.

However, due to the cultural and structural differences between the companies, frictions and frustrations may arise during the collaboration. How can these innovation collaborations between family businesses and startups be successfully designed? What challenges need to be overcome? What is the role of intermediaries within innovation collaborations between family businesses and start-ups? Evidence from science and practice shows: The innovation process can be supported by intermediaries to reduce or even avoid frictions and frustrations.

With these questions in mind, the study findings can be divided into four major dimensions:

• Motivation for collaborations. Fundamentally, innovation collaborations can be of great benefit to family businesses and startups. On the one hand, family businesses work with startups to close the internal skills gap, accelerate the innovation process, drive culture change within the family business, and attract new and young talent. On the other hand, startups work with family businesses to benefit from the knowledge and dominant market positions of family businesses, facilitate entering a new market, and expand their core technologies and business models.
• Challenges in collaborations. Due to the different approach to processes, manners and innovation in general, family businesses and startups may have a partially different understanding of collaboration. This can lead to stereotypes about the other collaboration partner making it more difficult to initiate and carry out the collaboration. For example, family businesses invest more long-term in innovation, whereas startups need to prove themselves in a short period of time, and thus both parties have a divergent understanding of time. Family businesses have longer and more thoughtful decision-making processes, while startups operate with very low hierarchies and quick decisions. These cultural and structural differences can present relevant challenges in collaboration processes.
• Definition and areas of application of intermediaries. Facilitators are individuals or organizations that build bridges between family businesses and startups during the innovation processes. They support the resolution of typical challenges in a collaboration and develop preventive measures to prevent challenges from arising. Facilitators can be involved in different stages of the collaboration process: Pre-collaboration (e.g. identification of use cases, scouting of start-ups), Collaboration (e.g. coaching, re-focusing of collaboration), Post-collaboration (e.g. codification of learnings, competence building).
• Role and influence of intermediaries in innovation collaborations. Depending on the intensity and engagement phase, intermediaries can influence innovation collaborations on different levels. Among other things, they can increase the willingness of family businesses and startups to collaborate, support the definition of the use case, simplify the collaboration process, accelerate the trust-building process, mitigate challenges, and support the competence-building process. Facilitators can thus help family businesses and startups to translate cultural and structural differences and overcome challenges.

The detailed study findings and practice-oriented recommendations can be found here in the practice report.

More information on the Institute for Family Business and SMEs can be found at www.whu.edu/ifbm.