Responding to Digital Transformation by External Corporate Venturing: An Enterprising Family Identity and Communication Patterns Perspective

• DOI: http://doi.org/10.1111/joms.12578
• Published date: 01 January 2021
• Author: Dinah Isabel Spitzley,Reinhard Prügl
• Date: 01 January 2021

© 2020 The Authors. Journal of Management Studies published by Society for the Advancement of Management Studies

and John Wiley & Sons Ltd

Responding to Digital Transformation by External

Corporate Venturing: An Enterprising Family Identity

and Communication Patterns Perspective

Reinhard Prügl and Dinah Isabel Spitzley

FIF@Zeppelin University

ABSTRACT Digital transformation increasingly requires activities located outside firm bounda-

ries, for example via alliances with start-up companies. Despite this, German Mittelstand firms,

primarily owned and managed by enterprising families and seen as role models of innovation,

appear reluctant to place strategic emphasis on venturing outside the firm’s boundaries when

it comes to digital transformation. Drawing on the concepts of identity and communication

patterns, we theorize on the mechanisms behind this behaviour. Applying structural equa-

tion modelling to a sample of 254 members of the next generation in enterprising families

from Germany, we find that family communication patterns impact the strategic priority for or

against external corporate venturing via identity-related considerations.

Keywords: digital transformation, enterprising families, external corporate venturing, identity,

family communication patterns

INTRODUCTION

One of the most critical challenges for established companies is making sense of and re-

sponding to disruptive innovations (e.g., Ansari et al., 2016; Kammerlander et al., 2018;

Klenner et al., 2013; Yu and Hang, 2010). A current challenge here is digital transfor-

mation, which is at the heart a corporate entrepreneurship activity because it involves

fundamental transformation in firms’ value creation (Keil, 2004; Matt et al., 2015; Sia

et al., 2016; Weill and Woerner, 2015). Corporate entrepreneurship includes corporate

venturing activities (CV) which are defined as ‘entrepreneurial efforts that lead to the

Journal of Man agement Studi es 58:1 Januar y 2021

doi:10. 1111/j om s.1 257 8

Address for reprints: Reinhard Prügl, Chair of Innovation, Technology, and Entrepreneurship, FIF@Zeppelin

University, Am Seemooser Horn 20, 88045 Friedrichshafen (reinhard.pruegl@zu.de).

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-

NoDerivs License, which permits use and distribution in any medium, provided the original work is prop-

erly cited, the use is non-commercial and no modifications or adaptations are made.

136 R. Prügl and D. I. Spitzley

© 2020 The Authors. Journal of Management Studies published by Society for the Advancement of Management Studies

and John Wiley & Sons Ltd

creation of new business organizations within the corporate organization’ (Sharma and

Chrisman, 1999, p. 19).

Since breakthroughs tend to originate with new entrants (Cooper and Schendel, 1976;

Tushman and Anderson, 1986), alliances with newly created companies are a valuable

means through which established firms engage in entrepreneurial activity (Benson and

Ziedonis, 2009; Stuart et al., 1999; Wadhwa and Kotha, 2006). Accordingly, and es-

pecially true for the digital age, transformation means an increasing focus on activities

outside firm boundaries, i.e., external corporate venturing (ECV). ECV is a corporate

venturing activity which involves the creation of new business organizations that are lo-

cated outside the existing organizational domain (Sharma and Chrisman, 1999).

ECV is generally viewed as positive and beneficial to firm success because it enables or-

ganizational learning (e.g., Ireland and Webb, 2007; Keil, 2000, 2004; Keil et al., 2008).

In spite of this, it remains unclear why some firms tend to avoid ECV. German Mittelstand

firms for example comprise a subset of primarily family companies who are seen as global

innovation role models (De Massis et al., 2018), even though they paradoxically lag be-

hind in digital transformation (e.g., Bertelsmann 2017; Federal Ministry for Economic

Affairs and Energy, 2017, 2018; Schröder et al., 2015). In an attempt to understand the

mechanisms behind this paradox, we shift attention in the following to the family side of

entrepreneurship, combining family theory and organizational behaviour theory. We take

these specific steps because we have knowledge indicating that family communication is

linked to firm outcomes; organizational identification is related to these as well (Cabrera-

Suárez et al., 2014; Jenkins and Delbridge, 2014; Matherne et al., 2017; Sciascia et al.,

2013). Doing this allows us to understand how the defining stakeholder group of the

family business, i.e., the family, is related to the business, enhancing our knowledge of

how identity concerns influence firm level outcomes (Frank et al., 2019; Zellweger et al.,

2010). This is particularly relevant in the context of digital transfor mation because it

scrutinizes essential assumptions about identity perceptions (Ashforth and Mael, 1996;

Corley and Gioia, 2004; Elsbach and Kramer, 1996; Kammerlander et al., 2018). This

can be particularly well observed in enterprising families due to the pronounced role of

identity found within them and the strong influence of the family (and thus their com-

munication) on the business (Berrone et al., 2012; Zellweger et al., 2011). Organizational

identity and family communication patterns represent promising concepts to help better

understand how family firms strategically deal with digital transformation (Altman and

Tripsas, 2015; Kammerlander et al., 2018; Tripsas, 2009). In this article, we focus on the

influence of the enterprising family on strategic priorities in the business through family

identification with the firm, generating the following research question: How are family

communication patterns related to the strategic priority of ECV, and how does the family’s identification

with the focal firm affect that relationship?

Investigating a sample of 254 members of the next generation of enterprising fami-

lies, we found that family identification with the firm mediates the relationship between

family communication patterns and the strategic priority of ECV to embrace digital

transformation.

Our study aims to contribute in the following ways: First, we offer an alternative theo-

retical perspective of ECV, an organizational identity perspective. In doing so we aim to

explain why ECV, contrary to predictions from an organizational learning perspective,