Innovativeness and Firm Performance in Apparel Firms in Sri Lanka: The Moderating Role of Family Continuity

Abstract

Purpose: Empirical evidence relating to the link between innovativeness and performance is largely unequivocal with innovativeness significantly influencing firm performance. However, the influence of the family dynamic on this relationship is not well established and few studies have been carried out that explores the influence of family context on the innovativeness –performance relationship. The objective of this article is to examine the influence of  family continuity and its relationship with innovativeness and firm performance in an under-examined industry and country context using the resource based view.

Method: The study methodology was survey based and took place in the apparel sector in Sri Lanka. The sample frame was 234 registered apparel firms with the Export Development Board (EDB) of Sri Lanka.

Findings: Family continuity is moderating the relationship between innovation and firm performance when the moderator is strong as well as weak. In situations that family continuity is low, the influence of innovation on performance is greater and significant compared to high family continuity’ circumstances. Higher family continuity weakens the impact of innovation on firm performance. Family continuity has a large effect on the endogenous variable firm performance and contributes in a very significant way to the endogenous construct, firm performance. Therefore, there is a large negative moderation effect in the model as family continuity weakens the relationship between innovation and performance

Research Limitations: The generalizability of the findings are limited by the focus on a single country setting. The study is also confined to the apparel sector and applicability of the findings to other sectors is not easily generalizable due to differences in organizational practices.

Novelty – Whilst the relationship between innovativeness and firm performance has been assessed, this is among the first theoretically sensitized studies linking resource based view, family continuity, innovativeness and firm performance in a developing country context. Prior family business empirical research has focused on Western European or US contexts and studies from developing family business country contexts are limited.