Digital Transformation Through Exploratory and Exploitative Internet of Things Innovations
René Ceipek, Julia Hautz, Alfredo De Massis, Kurt Matzler and Lorenzo Ardito
Originally published: August 11, 2020 (PDMA JPIM • Vol. 37, Issue 5 • September 2020)
Read time: 42 minutes (full article)
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This study examines the impact of family management on digital transformation with specific regard to the firm’s development of Internet of Things (IoT) innovations. Drawing on the distinctive characteristics of firms with family managers, such as the focus on family‐centered noneconomic goals, long tenure, emotional ties to existing assets, and rigid mental models, it hypothesizes that increasing family involvement in the top management team is negatively related to the development of IoT innovations that are distant from a firm’s existing technology base (i.e., exploratory IoT innovations) compared to exploitative IoT innovations. Further, the study proposes that the firm’s degree of technological diversification, especially in unrelated forms, reinforces this relationship. The longitudinal analysis between 2002 and 2013 on a sample of publicly traded German firms allows us to test our hypotheses from the beginning of the emergence of the IoT concept. Our findings show that due to the particular characteristics of their managers, family‐managed firms do not welcome the risks related to exploratory IoT innovations, and the benefit of risk diversification from technological diversification is lower than the cost of abandoning family‐centered goals. As our results imply that the involvement of family managers constrains the development of exploratory IoT innovation, the top management team composition in firms that intend to be at the forefront of the digital transformation should be accurately designed by avoiding a high proportion of family members.
- The higher the family involvement in the top management team (TMT), the lower the innovative output in terms of exploratory IoT innovations.
- Control/incentive mechanisms that consider and limit the family managers’ aversion toward the development of exploratory IoT innovations should be put in place.
- When firms with high family involvement in the TMT pursue a technological diversification strategy, the development of exploratory IoT innovations is further hindered.
- Especially unrelated forms of technological diversification hamper the development of exploratory IoT innovations.
- The transition toward digital transformation is not straightforward, and technologically diversified family‐managed firms face difficulties in this respect, especially when such transition involves the development of digital innovations distant from their current innovation trajectories.