Socioemotional wealth and the innovativeness of family SMEs in the United Arab Emirates

Figures & data

Table 1. Profile of the smaller family firms in this study.

Firm	Industry	No. of employees	Year founded	Size category	Family-centricity (SEW)	Innovative-ness
1	Shipping	400	1988	Medium	Mod	High
2	Trading & services	300	1970	Medium	Mod	High
3	Footwear	120	1990	Medium	Mod	High
4	Advertising	30	1981	Small	Low	High
5	Children Gym	15	2015	Small	Low	High
6	Food trading	15	1992	Small	Mod	High
7	Perfume	10	2010	Micro	Mod	High
8	Construction	80	1980	Medium	Mod	Mod
9	Fruit trading	46	2005	Small	High	Low
10	Building materials	10	1991	Micro	High	Low
11	Real Estate	9	2000	Micro	High	Low
12	Auto Garage	8	1988	Micro	High	Low
13	Retail	6	1984	Micro	High	Low
14	Real Estate	3	1975	Micro	High	Low

Table 2. Innovation in smaller family firms.

Innovativeness	High	High	Low
Size category	Medium	Small	Micro
Family-centricity	Moderate	Moderate/Low	High
Firms	1,2,3	4,5,6	10,11,12,13,14
Selected extracts:	Firm 1. The largest firm has seen rapid expansion and now has several overseas subsidiaries. The eldest son joined the business upon graduation and spearheaded many new initiatives, setting aside a yearly budget for R&D projects. Main innovation driver: “In shipping we have to always use new technologies to be efficient in the market. Mainly customer needs, observing demand in the market is critical”	Firm 4. They innovate because “Cutting cost and maximize profit is essential.” They innovate by “checking out exhibitions in Dubai and personal friends in foreign countries, benchmarking previous projects. We like to keep in touch with our customers to satisfy their need so their opinion matter sometimes in product and cost wise.”	Firm 10. Owners do not consider themselves innovative. Introduce new products based on customers’ requests, usually as extensions of current lines. Competitive advantage (CA): Location and customer convenience ‘all items under one roof’.
	Firm 3. The family makes all major decisions although they employ outsiders in the business. Main innovation driver: “How to increase sales we can’t survive in this market, so we always have to think of new ideas to increase our sales and reduce our cost at the same time”.	Firm 6. “‘Innovation helps the company stay in market or at least remain competitive. If there is no innovation at all, new companies would overtake the old companies. We always have discussion with senior staffs and salesmen on how to attract more customers. It can be difference in packaging style or introducing new products that can be mixture of number of products.’	Firm 13. Business has no innovation budget and considers itself not innovative and unwilling to take risks. They have introduced new services (home delivery) and products (imported foodstuffs) as responses to customer demand. CA: Customer orientation and responsiveness ‘Giving some specific tailored service to customers.’

Table 3. Firms that do not pattern-match.

Firms	7	8	9
Innovativeness	High	Moderate	Low
Size category	Micro	Medium	Small
Family-centricity	Moderate	Moderate	High
Synopsis:	Aim is to “to increase brand awareness and revenue growth” through innovation. Introduced over 25 new perfume types in last in the last three years: “We rely on customer survey, sales personnel and supplier networks to suggest new ideas. We are a small company and I decided on major stuff, so we can introduce new perfume quickly, to be competitive.” Founded by two brothers and friends. Owners wish to see the family “working together as a team to aim toward international success” but are open to having non-family in management positions.	Adopting new construction industry processes but there is no R&D budget. On innovation: “It’s all needs based. In construction industry lot of developments are taking place particularly in new material, and new products are coming more frequently. We need to keep ourselves up to date with the developments. But we don’t work ourselves on innovation. We work in consultation to our client …the client makes the decision we just expose him to different options. The owner makes most of the decisions, with the help of his two sons. He would prefer them to take control in future but is open to a non-family person managing the business one day.	“We don’t do innovation this kind of thing. It is not important in our business; we just buy and sell the fruits. It’s not necessary for our workers to think of this.” This fruit trader provides many jobs to the owner’s family, with twelve of them in different departments and positions. The business is considered the lifeblood of the family. On appointing non-family managers, the owner said: “No, because they will keep profit as the top priority not the reputation or consider the wellbeing of family members”.

Table 4. Survival strategies in low innovative family firms.

9	Have never introduced a new product but have developed a slightly better local delivery service. Competitive Advantage (CA): Networks ‘build close relationships with customers and suppliers.’
10	Owners do not consider themselves innovative. Introduce new products based on customers’ requests, usually as extensions of current lines. CA: Location and customer convenience ‘all items under one roof’.
11	The only recent innovation was to use social media to communicate with the customer base, but this was copied by competitors. CA: Reputation ‘There is nothing unique about us [but] we have high valued reputation in the market.’
12	Only recent innovation was to computerize the vehicle servicing schedules. CA: Reputation ‘The history and reputation of our garage helps us to keep our customers around.’
13	Business has no innovation budget and considers itself not innovative and unwilling to take risks. They have introduced new services (home delivery) and products (imported foodstuffs) as responses to customer demand. CA: Customer orientation and responsiveness ‘Giving some specific tailored service to customers.’
14	Has not introduced any innovative process or service. CA: Reputation and niche strategy ‘We have a heritage that spans over 50 years [and] focusing on marketing new property development projects for major developers.’

Figure 1. Ability, willingness, and necessity to innovate in family firms.

Table

Quote (1st order)	2^nd order themes	Aggregate dimension
Family involvement
As it has been started with my father, and me being the first son in the family, he expects me to continue it, and I have been taking care of it since more than 5 years now. The family runs on the income of the business, so we need to consider the family’s interest when we run the business. (Firm 10)	Family-centric
My sons will take over the company. We will not take finance from outsiders or appoint non-family people in the top management. (Firm 11)	Family-centric
Why would I let any non-family member take key positions in this business? I prefer to take loan rather than share equity with outsiders. (Firm 12)	Family-centric
Yes, I expect this business continue to be run by family members. I don’t believe in outsiders because they will keep profit as the top priority not the reputation or consider the wellbeing of family members. (Firm 9)	Family-centric
The business was started by family, so it would be natural for family to continue the legacy.	Family to business-centric	Continuum of socioemotional wealth
The outsider would take charge only if we sold the company to him. The reason is simply because this is a family business though we have some managers who are outsiders. (Firm 1)	Family to business-centric
It does not make sense to give an outsider an opportunity or take in charge of the company as the owner already have more than capable sons to take the business forward. But it’s ok to hire someone outside, depends on qualifications, and previous experience. If they satisfy and benefit the company, then it would be okay to hire them. (Firm 6)	Family to business-centric
We have many from outside family already working with us. But we will continue to control the business. (Firm 2)	Business-centric
I am very proud that it’s a family business where it was small company and grew to supply till now. We have one director which is not in our family though we also considered the interest of family when we make any business decision. I don’t expect my son to take over this business in the future. (Firm 4)	Business-centric
We separate the business from the family issues. I don’t mind the business to be managed by someone professional in the future. (Firm 5)	Business-centric
Competitive advantage
Our competitiveness is based on reputation of service and selling premium quality product. I am very proud of my grandfather’s reputation in the industry. (Firm 2)	Reputation & product quality
We are proud of our commitment to keep customers satisfied. (Firm 1)	Customer orientation
The priority in the company is to improve its technology machines and hire as much labor to satisfy customer needs and any time frame for jobs. (Firm 4)	Innovation & customer orientation
Our products are direct response to our customers’ demands. We have launched 25 new products into the market. (Firm 7)	Customer orientation & product innovation
The history and reputation of our garage helps us to keep our customers around. Firm (12)	Reputation	Abilities to innovate
All kinds of materials and sanitary items under one roof (which is not available anywhere else in Dubai). (Firm 10)	Location and customer convenience
We obtained the agency for a brand that didn’t exist in the regional market. (Firm 3)	First mover advantage
As a long run family business, we build close relationships with customers and suppliers. (Firm 9)	Network
We are the only kid’s gym club in Alain that have licenses. We aim to stay the first kids’ club in strategy and innovation (Firm 5)	First mover advantage and innovation
We have a heritage that spans over 50 years [and] focusing on marketing new property development projects for major developers. (Firm 14)	Reputation
First company to import premium frozen fishes and vegetables from Bangladesh, Thailand, Pakistan and started distributing in UAE. (Firm 6)	First mover advantage
There is nothing unique about us [but] we have high valued reputation in the market. (Firm 11)	Reputation
We are giving some specific tailored service to customers. (Firm 13)	Customer orientation
We are much more innovative than our competitors because we always look for new and superior building material products. (Firm 8)	Innovation
Motivations to innovate
We were asked by Dubai Land Department and Dubai Real Estate Regulation Authority to update our system. This also help us to better organize. (firm 14)	Cost efficiency
We supply almost most of the constructional items, as well as we are always open to new products that enters the market and has a good future with a good margin. When customer requests, we source for it. (Firm 10)	Cost efficiency and customer demands	Necessity to innovate
As demanded by customers, we introduced complimentary service of cutting service for frozen foodstuffs (Firm 13)	Customer demands
There are too many players in the real estate industry, we started to offer our products through the social media to compete with others. (Firm 11)	Competition
Recently, our systems upgraded to computerization because of customer response. (firm 12)	Customer demands
Challenges to innovation
We don’t have a set budget on innovation. We don’t deal with banks and loans, it’s against our family interest. So, if a project needs funding it needs to wait until the funding is available within the firm itself. (Firm 1)	Limited budget and family consideration
No, we don’t have any budget because we don’t develop anything. We just sell what’s already been developed. (Firm 10)	Low priority
We don’t have fixed budget for R&D very project is difficult, but mostly is meeting the customers’ requirement, we can’t cut corners to have perfect job. (Firm 4)	Low priority
Innovation is not critical in our business as we can survive by buying and selling in the usual way. (Firm 11)	Low priority	Unwillingness to innovate
No, we only provide services so no budget for any innovation project (Firm 14)	Low priority
We don’t do innovation because we are a trading company. (Firm 9)	Low priority
Innovation in the non-freehold real estate market is rare, thus, it doesn’t pose a major threat to the company’s survival. (Firm 14)	Low priority
Due to early success of the family business without being very innovative, we think innovation is less important than running the business in usual. (firm 13)	Low priority