Innovation in Family Farms: The Roles of the Market, the Family, and Farm Performance

Abstract

Most farms are struggling with aggravating economic, social and ecological conditions. If family farms want to survive in the long run, they need to develop innovation strategies. In line with the resource-based view, this paper argues that market orientation and multiple family generations in management are valuable resources of a family farm, which can contribute to innovation by facilitating the development of innovative ideas. This paper also explores the role of farm performance as a moderator. Since small- and medium-sized businesses in rural areas tend to lack growth orientation, it is assumed that family farms do not feel a strong urge to make use of their innovation potentials unless their performance falls to a critically low level. A regression analysis is conducted to test the relationships with a sample of 690 Austrian family farms. The results confirm the positive effect of both market orientation and multiple generations in management on innovation. As expected, farm performance moderates this relationship negatively. The findings are discussed against the backdrop of the family business, innovation and farming literature and suggestions are made how family farms can make best use of the market and the family as two important potential innovation sources.