Can the Elite Holding Family Affect the Green Innovation of Family

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Business?

- The Moderating Role of Social Ties

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Shihui CHEN

School of Business, Ningbo University, Ningbo 315211, China

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China institute of Non-public Economy, Ningbo University, Ningbo, , 315211, China

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Email: chenshihui@nbu.edu.cn

Jing SHI
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School of Business, Ningbo University, Ningbo 315211, China

Email: shijing99124@163.com
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Zhongju LIAO*

School of Economics and Management, Zhejiang Sci-Tech University, Hangzhou

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310018, China

Email: zju96437@163.com
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* Corresponding author, Email: zju96437@163.com

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The authors declare no conflict of interest.

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Funding

This work was supported by National Social Science Funds of China(23GLB04648),

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the National Natural Science Foundation of China (71972042; 71802114 ), Soft

Science Funds of Zhejiang Province, China(2024C35127).

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 Can the Elite Holding Family Affect the Green Innovation of Family

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Business?

- The Moderating Role of Social Ties

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Abstract

This research examines the relationship between family control and corporate green

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innovation, and the contextual role of social resources. We tested our hypotheses

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using data from Chinese family-listed companies from 2016 to 2019. Our findings

reveal a negative correlation, indicating that greater family control rights are linked to
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a decreased likelihood of participating in green innovation initiatives, and the

existence of political and commercial ties significantly mitigates the negative

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correlation between family control and green innovation. The implications underscore

the crucial role of social ties as a reference point for decision-making in shaping
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family enterprises behavior .

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Keywords: Family control; Green innovation; Social ties; Family business

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1. Introduction

The extensive focus on economic development through green innovation has

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sparked discussion about issues such as resource depletion and pollution (Hu, et al.,

2021). Consequently, environmental conservation has become as a global concern. In

this regard, the Chinese government has increasingly focused on addressing resource

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limitations and environmental preservation, with a prominent emphasis on fostering

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green development (Zhang, et al., 2022). The report from the 19th National Congress

of the Communist Party of China's emphasized the commitment to achieve carbon

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peaking and carbon neutrality, further strengthening the significance of green
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initiatives. It involves the development of novel or enhanced processes, technologies,

and products aimed at reducing or minimizing environmental impact (Chen, et al.,

2006). By promoting energy conservation, environmental protection, and efficiency

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enhancement, green innovation is an important way to promote organizational and

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environmental performance (Ahmed, et al., 2023)As an integral component of China's

sustainable development, family businesses have increasingly embraced green

innovation as a key development strategy in response to government initiatives. The

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stance of family enterprises toward green innovation, especially among elite holding

families with high political and commercial status, has significant implications for the
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full implementation of a green economy. While existing research has examined the

environmental responsibility of family businesses from various perspectives, the focus

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has mainly been on comparing family businesses with non-family counterparts. This

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 has resulted in a lack of investigation into the differences among controlling families

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(Daspit, et al., 2021), thereby limiting our understanding of how families influence

enterprises (Marques, et al., 2014). This study delves into the role of controlling

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families as potential drivers or impediments to the adoption of environmental

responsibility by companies. Conflicting conclusions arise from relevant research,

with two primary analytical perspectives: Socioemotional Wealth (SEW) and

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Resource Based View (RBV). Notably, from the SEW perspective, families show a

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stronger tendency to take on environmental responsibility because of their

commitment to protecting the extended SEW. The study conducted by Agostino and
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Ruberto (2021) reveals that family businesses show a strong interest in adopting green
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practices. This eagerness stems from the fact that these businesses are motivated to

demonstrate care and consideration for their stakeholders, aiming to preserve their

family’s "endowment". The emotional attachment to their family legacy and

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reputation motivates family businesses to actively participate in environmentally

responsible behaviors and initiatives. Ardito, et al. (2019) found a positive correlation
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between family involvement and the promotion of green innovation. Conversely,

Aiello, et al. (2021) found that family firms are less inclined to adopt green
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technology innovation compared to their non-family counterparts. The existing

conclusions present conflicting viewpoints, primarily due to differences in research

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perspectives and sample selections. Consensus has not been reached in relevant

research regarding the measurement of environmental responsibility in family

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enterprises. Instead of assessing the actual environmental behavior of these

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 enterprises, many studies rely on using symbolic indicators, such as environmental

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assessments, to measure their level of environmental responsibility (Forés, et al.,

2022). Another contributing factor to the discrepancies is the heterogeneity within

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holding families (Daspit, et al., 2021). Elite-holding families, distinguished by their

elevated political and commercial status, show a greater tendency to utilize social

resources. These families consider green responsibility as a strategic behavior aimed

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at fostering a favorable external environment (Yuan and Cao, 2022). Consequently,

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understanding the true stance of family firms towards green innovation requires

taking into account the "leader" effect exerted by these elite controlling families
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within the industry.
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This paper argues that gaining an understanding of family attitudes towards

environmental responsibility requires delving into the substantive level of research,

specifically by investigating green innovation. Furthermore, acknowledge the

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influence of the elite controlling families in shaping the environmental practices of

family enterprises, this research calls for a more thorough investigation of

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environmental responsibility, particularly focusing on green innovation, to reveal the

genuine commitment of family enterprises to environmental obligations. By

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examining the effects of controlling family heterogeneity, with a specific focus on

elite controlling families, this study aims to offer a more comprehensive

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understanding of how these dynamics influence green innovation behavior in family

enterprises. Through an empirical examination of listed family firms, this paper aims
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to provide insights into the complex relationship between family control and

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 environmental responsibility, thereby enhancing understanding of these interactions in

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various contexts.

This paper makes the following contributions. First, extending the current

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understanding of the family antecedents that influence corporate green innovation

behavior. This study aims to offer a through and detailed analysis of the influence of

family control on corporate green innovation behavior. Second, it also aims to

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illustrate how the existence of strong social ties can either enhance or alleviate the

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impact of family control on green innovation, ultimately contributing to a more

comprehensive understanding of the factors that influence sustainability initiatives in

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family businesses.
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2. Theoretical Background and Hypotheses Development

The green innovation of family enterprises, which serves as a reference point of

for public opinion and academic research, embodies the dual nature of assuming
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“green responsibility”, while pursuing "innovative behavior". The developmental

perspective of controlling families towards green innovation emphasizes the

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enterprise’s proactive involvement of enterprises in green responsibility and

high-quality development. This shift in focus goes beyond “short-term interests” to

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prioritize “long-term benefits”, aiming for a harmonious coexistence among

enterprises, ecology, and society, rather than solely pursuing shareholder interests.
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Considering that green innovation lead to both reputation and benefits, as well as

potential risks and losses, the question arises. Under what circumstances are family
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firms more likely to adopt green innovation? Drawing on the theoretical frameworks

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 of SEW and the RBV, this study presents novel insights into the motivating factors

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that drive family business to promote green innovation.

Green innovation refers to the creation of products, technologies, or processes

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designed to minimize environmental pollution and energy consumption (Ardito, et al.,

2019). Family businesses play a crucial role in advancing sustainable development.

This article aims to uncover the challenges faced in balancing short-term resource

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constraints with the long-term benefits of green innovation. Integrating sustainable

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development practices becomes a natural choice for family businesses when their

reputation and status are closely intertwined with their operations (Curado and Mota,
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2021). However, green innovation is a multifaceted process influenced by various
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factors, including resource availability and stakeholder attitudes. When family

businesses are confronted with the dilemma of resource allocation, opting for green

innovation, which necessitates long-term and continuous investment, becomes a

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relatively challenging decision. Therefore, the family’s long-term focus on green

innovation may be constrained by short-term resources limitations, requiring a

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balance between reputation and innovation benefits.

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2.1 Family Control and Corporate Green Innovation

SEW posits that the strategic decision-making of family businesses should

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consider the non-economic benefits that the family derives from the enterprise to

fulfill its emotional needs (Gómez-Mejía, et al., 2007). However, in today's

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intensified business competition, family businesses might reduce their investments in

green innovation (Craig and Dibrell, 2006). This finding may contradict the beliefs of

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 scholars who argue that family businesses actively adopt green responsibility to

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protect their reputation (Bammens and Hünermund, 2020, Berrone, et al., 2013).

however, it also signifies that listed family firms may show a willingness to take on

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green responsibility, but their actual dedication to green innovation may not match

with their stated intentions. This highlights the presence of complex conflicts within

controlling families, where the choice to pursue green innovation depends on the

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distinct characteristics and dynamics of each family entity.

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Regarding family heterogeneity, Sharma and Sharma (2011) suggest that we

should investigate the impact of family control on green strategies. Firstly, a greater
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level of family control is linked to a stronger sense of attachment and
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acknowledgement of the family’s role in the enterprise (Schulze, et al., 2003), as well

as an increased determination to maintain control of the enterprise (Chrisman, et al.,

2012). Family control is a critical requirement for family firms to pursue

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non-economic goals. Without it, family firms would not survive (Swab, et al.,

2020).The motivation to preserve SEW through maintaining family control leads to

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loss aversion and a short-term orientation (Miller and Le Breton–Miller, 2014), which

in turn discourages family firms from engaging in green innovation activities that
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entail high risks and uncertainties (Chrisman, et al., 2012). This can be attributed to

the fact that green innovation requires significant investments in updating production
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equipment and adopting green technology processes (Biondi, et al., 2000). When

confronted with limited resources, family businesses often need to pursue external
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investments, which would diminish the family's strategic control over the enterprise

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 and create a perceived threat of losing control (Chen, et al., 2022). Moreover, the

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green innovation process is inherently novel and complex (Peng and Luo, 2000),

requiring increased external collaboration(Chen, et al., 2022). To catalyze green

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innovation within companies, it is imperative to strategically incorporate non-family

directors possessing pertinent experience and expertise in environmental sustainability.

Such individuals can furnish valuable resources germane to green innovation, may

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attenuate the familial influence over the enterprise(Du and Cao, 2023). Secondly,

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considering the input and output, green innovation has dual externalities. On one hand,

enterprises need to invest a significant amount of resources in the early stages, which
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can impact the short-term performance. On the other hand, green innovation often
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brings about positive externalities for the government and society. The costs and risks

borne by enterprises do not align with their benefits (Amore and Bennedsen, 2016).

Therefore, the greater the level of family control, the more significant the impact on
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corporate values and cultural influence. Family managers have the authority to make

strategic decisions and the capability to engage in self-interested behavior (Sharma,

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2004). As the family control increases, family assets become more reliant on

corporate assets, and family members are more sensitive to the loss of corporate
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economic interests compared to other dispersed shareholders. When internal interest

coordination is more extensive, there may be a phenomenon of “dominance”, leading

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to inefficiency, lack of transparency in information, and weak governance. When

pursuing green innovation involves sacrificing some economic benefits, family

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enterprises tend to adopt a more conservative attitude toward green innovation.

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 In conclusion, a higher level of family control rights corresponds to a stronger

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ability of the family to exercise control over the entire enterprise. This includes

having greater authority in personnel appointments, resource allocation, and business

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decision-making processes. Simultaneously, as the family's influence increases, there

is a tendency for enterprises to adopt a more control-oriented approach because of

their emphasis on SEW (Chrisman, et al., 2012). Consequently, it is expected that the

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depletion of SEW in the context of family control will have a negative impact on the

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green innovation effort of family businesses. Therefore, we propose the following:

H1: Family control has a negative relationship with corporate green innovation.
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2.2 The Moderating Effect of Social Ties
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The controlling shareholder is a crucial decision-maker in the development of

family enterprises, green innovation, and related activities. Therefore, the subjective

thoughts (Dong and Li, 2023) and experiences (Zheng, et al., 2023) of the controlling
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shareholder in family enterprises can influence the green innovation of the company.
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Berrone, et al. (2012) categorized SEW into five distinct dimensions: family control

and influence, identification of family members with the firm, binding social ties,
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emotional attachment of family members, and renewal of family bonds to the firm

through dynastic succession. Scholars such as Swab, et al. (2020) and Brigham and
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Payne (2019) have emphasized the importance of examining SEW across multiple

dimensions. This is because family businesses typically pursue diverse objectives, and
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the various dimensions of SEW can complement each other. It is important to

acknowledge that different families may prioritize specific dimensions of SEW, and

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 the potentially negative impact of family control on corporate green innovation could

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be mitigated by other non-economic goals pursued by the family.

Social ties include both political and business ties (Peng and Luo, 2000). These

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ties represent the social status of family members and contribute to the enterprise's

reputation and long-term mutually beneficial relationships. When families prioritize

SEW, it can motivate family managers to enhance corporate reputation by actively

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embracing green responsibilities and adopting environmentally friendly strategies

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(Dou, et al., 2017). Conversely, strong social ties can complement to SEW, helping to

reduce the negative impact of potential loss of family control.

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From the reference point of the resource-based view, social ties play a crucial
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role in helping family firms to expand their innovative horizons and gain access to

valuable business resources (Dayan, et al., 2023).Business owners' and executives'

social ties are considered essential components of organizational resources and have a
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significant impact on corporate strategic decisions (Hambrick and Mason, 1984). In

the context of a family business, while the emphasis on control by the family may
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lead to some level of strategic conservatism within the enterprise, social ties play a

pivotal role in integrating scarce resources, facilitating the exchange of critical

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information, and mitigating risks (Batjargal and Liu, 2004). As a result, social ties can

effectively alleviate the concerns of family members about the uncertainty associated
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with green innovation initiatives.

2.2.1 The Moderating Effect of Political Ties

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China is currently in a transition period, and the resources available to

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 enterprises for innovation activities are greatly influenced by the external environment

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(Gao, et al., 2016). In the Chinese context, strong political ties play a crucial role in

assisting enterprises in accessing external innovation resources (Wang, et al., 2018).

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Chinese family entrepreneurs often strengthen their political connections by serving

as deputies to people's congresses or members of the Chinese People's Political

Consultative Conference (Chen, et al., 2011). This political association enable

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businesses to obtain specific resources through special connections, making it easier

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to access unique opportunities. Therefore, this study suggests that the connection

between family control and corporate green innovation is significantly influenced by

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the presence of political ties.
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Jiang, et al. (2023) observed a positive correlation between political ties and

green innovation across listed companies in China. Political ties serve as a valuable

resource for companies, helping them mitigate risks associated with green innovation.
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While green innovation involves investment risks and challenges in mastering new

technologies, entrepreneurs can utilize their political connections to access current

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environmental policies and regulations. This active political participation enables

them to understand green transformation policies that are tailored to their specific
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industrial characteristics. Consequently, this access to information reduces the

perception of risk associated with green innovation among family enterprises,

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addressing issues of information asymmetry and resource limitations (Francis, et al.,

2008). Moreover, political connections increase the probability of businesses

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receiving government subsidies and tax incentives related to environmental protection

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 (Batjargal and Liu, 2004), thus lowering the overall costs associated with corporate

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investment in green innovation .

Moreover, companies with established political ties are more likely to attract

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attention from media outlets and government agencies. The corporate image is

closely linked to the family image, so family members are often very aware of their

personal and corporate reputations (Deephouse and Jaskiewicz, 2013). By taking into

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account the interests of various stakeholders and recognizing the importance of

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maintaining well-established political relationships, these companies actively embrace

their environmental protection responsibilities and participate in green innovation

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efforts (Huang, et al., 2021). Moreover, entrepreneurs can only achieve political
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recognition through a rigorous evaluation process. As members of social elite, they

often prioritize long-term interests over short-term gains and possess a broader vision.

These entrepreneurs prioritize the balanced development of enterprises, society, and

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ecology. Consequently, they actively demonstrate their social responsibility and

exhibit a strong moral consciousness, leading to the implementation of

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environmentally friendly practices in line with policy directives. Hence, we propose

the following,
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H2a: Political ties will mitigate the adverse effect impact of family control on green

innovation.
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2.2.1 The moderating effect by business ties

Chambers of commerce are organizational structures established by businesses

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within an industry with the primary objective of promoting self-discipline and

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 regulating enterprise behavior. Business ties refers to the connection between business

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managers and their suppliers, customers and competitors (Peng and Luo, 2000). These

ties play a crucial role in improving the management of uncertainty by strengthening

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mutually beneficial relationships between family businesses and their partners. By

promoting resource complementarity and information sharing (Zhang, et al., 2020),

business ties contribute to a more stable and dependable business environment.

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Similar to political ties, business ties also allow family businesses to access the latest

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industry information, which can reduce the negative impact of family control on green

innovation (Cao, et al., 2012). er

First, business ties play a crucial role in addressing the family's concerns about
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losing the loss of control in the context of green innovation. The process of green

innovation requires ongoing and significant investments, as well as close

collaboration with external stakeholders. In cases where there are challenges in the
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capital chain, the family may be forced to give up control in order to secure funds

(Ceipek, et al., 2020). However, companies with strong business ties can reduce the
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economic losses linked to green innovation through informal channels (Chen, et al.,

2022). Establishing close relationships with suppliers, customers, and other business
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partners enables the company to gain insights into competitors' activities, thereby

reducing information asymmetry between companies and partners, and helping

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companies control potential opportunistic behavior.

Second, business solidarity creates a social network that strengthens social ties
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and family reputation. Family businesses are deeply connected to social networks

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 often prioritize the cultivation of strong relationships with stakeholders and the

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establishment of a favorable reputation. Such businesses are more likely to consider

reputation mechanisms as a means to achieve their long-term development goals. By

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demonstrating active social responsibility, they align with stakeholders' expectations

and gain social recognition. According to Bammens and H ü nermund (2020), green

innovation may bring about expected benefits for certain SEW sub-dimensions while

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potentially causing anticipated losses for others. In this context, business solidarity

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strengthens the motivation to capitalize on reputation benefits. Consequently, the

anticipated compensation effect of reputation benefits mitigates the negative impact of

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family business control on green innovation. Therefore, we propose the following:
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H2b: Business ties will mitigate the adverse impact of family control on green

innovation.

Based on the above analysis, the empirical model of this paper is shown in
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Figure1.

[Insert Figure 1]
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3. Methods

3.1 Sample and Data Sources

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This paper focuses on Chinese family firms listed from 2016 to 2019. The

sample data is obtained from the family business database of CSMR. The definition of
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family business must meet the following two conditions. First, the actual controller is

a natural person or family. Second, at least two family members who are related hold
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or manage listed firms. In order to mitigate the impact of outliers, our initial sampling

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 process is as follows. First, we excluded financial listed companies. Second, we

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excluded ST, SST and * ST companies. Third, we excluded firm-year observations

samples that are missing necessary data. Finally, 4788 samples were obtained.

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3.2 Measurement

3.2.1 Dependent variables

Green innovation (GP). Considering the time lag between innovation input and

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patent output in enterprises, it is commonly observed that the number of patent

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applications is more timely and stable compared to the number of authorizations

(Tong, et al., 2014). To measure corporate green innovation, we adopted the number
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of green patent applications, which encompass both green invention patent
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applications and green utility model patent applications (Hall and Harhoff, 2012).

3.2.2 Explanatory Variable

Family control (FC). This study employs family voting rights as a metric to
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assess family control in the context of the listed company (Anderson and Reeb, 2003).
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Conceptually, family voting rights are gauged by determining the proportion of

ultimate control of the listed company held by the actual controllers and their family
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members. More precisely, this proportion corresponds to the weakest layer within the

multiple equity control chains between the family’s owners and the listed company
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within the pyramid ownership structure. In cases where there are multiple actual

controllers, their contributions to the overall family voting rights are combined
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through appropriate calculations.

3.2.3 Moderating Variables

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 In this study, the social ties of family businesses are defined based on the

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political identity and business identity of the family business owner or heir.

Political ties (PT). Following Joseph, et al. (2007)，we use a dummy variable to

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measure political ties. If the family business owner and /or heir has been former or

current government officials, deputies to the National People’s Congress, party

representatives or CPPCC members value of 1, otherwise 0.

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Business ties (BT). Following Zhu, et al. (2018), we use a dummy variable to

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measure business ties. If the family business owner or heir is a member of the national,

provincial or municipal federation of industry and commerce, or a member of an

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important organization such as an industry association, it is 1, otherwise it is 0.
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3.2.4 Control Variables

According to the existing research, we control the corporate governance and

corporate finance variables, which may affect the green innovation of family-listed
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firms, such as firm size, firm age, proportion of independent directors, duality, ratio of

net income to total assets, shareholding ratio of the largest shareholder and operating
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profit rate. In addition, this paper also controls the industry and year. The relevant

descriptions of the variables involved in this article are shown in Table 1.

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[Insert Table 1]

3.3 Research Model

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This paper examines the relationship between family control and green

innovation and explores the moderating role of political and business ties on this basis.
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To test hypothesis H1, the following regression model is developed in this paper,

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 which is shown equation (1). In equation (1), GPit is the explanatory variable, which

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indicates the green innovation performance of firm i in year t, and FCit is the

explanatory variable, which is family control. To test hypothesis H2a, this paper adds

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the interaction term of family control with the moderating variable PTit to equation (1),

equation (2). To test hypothesis H2b, the interaction term of family control with the

moderating variable BTit is added to equation (1), equation (3). Controlit represents a

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set of control variables, Yearit and INSit represent year dummy variables and industry

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dummy variables, respectively, to control for the possible effects of year and industry

on green innovation, and  it is a random disturbance term.

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GPit   0  1 FCit   2 Control it   3Yearit   4 INS it   it (1)
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GPit   0  1 FCit   2 PTit   3 FCit  PTit   4 Control it   5Yearit   6 INS it   it (2)

GPit   0  1 FCit   2 BTit   3 FCit  BTit   4 Control it   5Yearit   6 INS it   it (3)

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Prior to the hypothesis testing, the continuous variables are winsorized at the 1%
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level in this chapter in order to eliminate the effect of outliers.

4. Empirical Results
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4.1 Descriptive Statistics and Correlation Analysis

Table 2 presents the means, standard deviations, and correlation matrix for the
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variables. The mean value of green innovation is 0.269, with a standard deviation of

0.664, indicating that the overall level of green innovation is not particularly high and
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exhibits considerable variation among enterprises. The mean value of family control

is 0.48, suggesting that family control is generally strong within the sample.

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 Additionally, the mean values of political ties and business ties are 0.418 and 0.466,

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respectively, indicating that over 40% of the family firms in the sample have political

ties or business ties.

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The correlation coefficients in Table 2 indicate that family control is negatively

correlated with corporate green innovation at the 5% significance level. On the other

hand, political ties are positively correlated with green innovation, and business ties

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are positively correlated with green innovation at the 1% significance level. The

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Pearson correlation coefficients for the other variables are within reasonable limits.

[Insert Table 2]
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4.2 Hypotheses Tests
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The regression results of family control right and green innovation and its

regulatory mechanism are shown in Table 3.

[Insert Table 3]
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The number of green patent applications in this paper has a considerable number

of 0 values or undisclosed samples of green patent applications. Considering that this

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variable is a truncated data with a minimum value of 0, the Tobit model is used. This

paper first verifies the relationship between family control and green innovation. The
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regression results of all models are shown in Table 4. Model (1) is the base model

with only control variables, and Model (2) tests the direct effect of family control on
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green innovation. In Model (2), the coefficient of family control (β= -1.136, P < 0.01)

were significantly positive, which indicated that the higher the family control, the less
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willing the enterprise is to carry out green innovation. Therefore, H1 is supported.

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 Based on model (2), model (3) increases the interaction term of family control and

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political connection for regression. The results show that political connection

significantly weakens the negative effect of family control on green innovation (β=

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1.335, P < 0.05), which verifies the H2a. Model (4) adds the interaction term of

family control and business ties for regression. The results show that business ties

positively regulate the relationship between family control and green innovation (β=

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1.245, P < 0.05), alleviate the negative impact of family control on green innovation.

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Therefore, H2b is supported.

[Insert Figure 2]
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[Insert Figure3]
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To provide a clearer presentation of the moderating effects of political and

business ties, we have generated plots based on the results of the regression analysis.

As depicted in Figure 2, when political ties are weak, family control exhibits a
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negative relationship with green innovation. However, the negative effect of family

control on green innovation is mitigated when political ties are strong, indicating that
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political ties act as a moderating factor in this relationship. Similarly, Figure 3

illustrates that family control is negatively associated with green innovation when
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business ties are weak. Nevertheless, the negative impact of family control on green

innovation is attenuated when business ties are strong, highlighting the moderating
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role of business ties in this relationship.

5. Robustness Tests
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To ensure the robustness of our findings, we conducted several additional tests.

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 Firstly, we employed an alternative measurement to assess green innovation output by

ed
using the number of green invention patent applications. Green invention patents are

considered to provide a better reflection of the quality of green innovation output

iew
compared to green utility model patents. The results of this robustness test, presented

in Table 4, supported the initial findings of our study. Furthermore, to address

variations in the definition of family businesses, we adjusted the research sample

v
based on different equity ratios held by the actual controller (family or natural person)

re
in the listed companies. Following the research of Porta, et al. (1999) and Claessens,

et al. (2000), we conducted regression analyses on samples with family control rights
er
greater than 10% and 20% respectively. The outcomes, presented in Table 5 and
pe
Table 6, further confirmed the robustness of our conclusions.

[Insert Table 4]

[Insert Table 5]
ot

[Insert Table 6]

6. Endogenous Analysis
tn

The endogenous problem arising from family control rights could lead to biased

regression results. One significant source of endogeneity is the presence of missing

rin

variables. In addition to family control, another essential aspect of family influence on

enterprises is family participation in management, where family members assume

ep

positions on the board of directors and senior management team. To address the

potential impact of omitted variables, we include the proportion of family executives

Pr

(FE) and the proportion of family directors (FD) as control variables in the regression

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 model. The results of these tests are presented in Table 8.

ed
To further estimate the effect of family control on green innovation while

minimizing endogeneity concerns, we utilize Propensity Score Matching (PSM)

iew
methodology. In this approach, we divide the samples based on the median of the

family control index. Sub-samples with high family control are designated as the

treatment group, while sub-samples with low family control form the control group.

v
This technique allows us to account for potential selection bias and evaluate the

re
impact of family control on green innovation more rigorously.

First, we conduct a balance test. The test results are shown in Table 8. After
er
matching, the standardized deviation of all covariates is less than 10 % and the
pe
absolute value of the standard error of the variables is reduced. The p values of all

t-tests are greater than 10 %, indicating that the covariates have passed the balance

test. Then we carry out ATT test, using one-to-one matching, adjacent matching,
ot

caliper matching, radius matching, kernel matching four matching methods, the test

results are shown in table 9. Each matching result is significantly negative, and family
tn

control is significantly negative at the level of 1 % or 5 %. That is, compared with

family firms with low family control, the degree of green innovation of family firms
rin

with high family control is significantly lower, which further illustrates the robustness

of the results. Comparing Figure 4 and Figure 5, it can be found that the common
ep

value range of the propensity score of the treatment group after matching is larger

than that of the control group. The two groups are closer to the observable variables,
Pr

and the common support hypothesis is also satisfied.

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 [Insert Table 7]

ed
[Insert Table 8]

[Insert Figure 4]

iew
[Insert Figure 5]

7. Discussion

This paper utilizes the SEW theory and the RBV theory to analyze and test the

v
relationship between family control and corporate green innovation. Moreover, the

re
study delves into the moderating impact of political ties and business ties. The

empirical results demonstrate the following key findings.

er
Firstly, family control has a negative impact on corporate green innovation. As
pe
family control increases, the family's motivation and capability to protect SEW also

strengthen. Due to the fear of losing control of business, family may be hesitant to

adopt green innovation initiatives. This conclusion is consistent findings of other

ot

scholars who have utilized various samples, indicating that family-owned companies

in mainland China may impede econ-innovation in clean production due to risk

tn

aversion (Chen, et al., 2022). Similarly, Forés, et al. (2022) discovered that

family-owned businesses often demonstrate strategic conservatism and risk aversion,

rin

which negatively impacts their environmental performance.

Secondly, social ties, including political ties and business ties, play a mitigating
ep

role by weakening the negative impact of family control on corporate green

innovation. Specifically, when political ties or business ties are strong, enterprises
Pr

find it easier to access innovative resources from their social networks. This reduces

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 the investment and failure risk associated with green innovation and alleviates

ed
concerns about potential loss of family control. Moreover, family businesses are

driven to actively take on green responsibilities by the pursuit of reputation and the

iew
maintenance of close relationships with stakeholders. Consequently, social ties,

through their resource advantages and reputation pressures, attenuate the negative

influence of family control on corporate green innovation.

v
In conclusion, this study provides valuable insights into the relationship between

re
family control and green innovation within family-owned enterprises. The study

emphasizes the significant impact of social ties in shaping the behavior of family
er
businesses in adopting green innovation. This underscores the importance of
pe
understanding how family dynamics and external networks interact to promote

sustainable practices in these organizations. Given China's accelerated efforts to

establish a green, circular, and low-carbon economy, it is essential for elite-controlled

ot

family enterprises, being a vital component of the private economy, to utilize their

social connections and collaborate with the government and other entities along the
tn

industrial chain to promote green development. Embracing the goals of energy

conservation, emission reduction, and improved efficiency, these businesses can

rin

actively promote green innovation, ultimately achieving a harmonious integration of

economic growth, social progress, and ecological environment protection. By actively

ep

engaging in sustainable practices, family businesses can make a significantly

contribution to China's broader environmental objectives while also ensuring their

Pr

own long-term success and reputation in the market.

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 7.1 Theoretical Implications

ed
This study has several significant theoretical implications. Firstly, it contributes

to the existing literature, which has mainly focused on comparing green innovation

iew
behavior between family and non-family enterprises, without exploring the

differences within family businesses. This research explores the nuanced relationship

between family control and green innovation by recognizing the internal

v
heterogeneity within family firm. It sheds shedding light on the complexities of

re
decision-making processes in these organizations.

Secondly, the study introduces political and business ties as crucial situational
er
variables, examining how the impact of family control can influence green innovation
pe
through social ties. The findings support the perspective proposed by Bammens and H

ünermund (2020) that different sub-dimensions of SEW may have different effects on

green innovation. The potential loss of family control and the desire to enhance family
ot

reputation can drive the direct and indirect influence of family businesses on green

innovation. This contributes to a deeper understanding of SEW as a crucial reference

tn

point for family businesses when making decisions about green innovation.

By considering both internal heterogeneity and external social ties, this study
rin

expands the scope of research on the green innovation behavior of elite family

enterprises. It provides a more nuanced and comprehensive perspective, empowering

ep

scholars and practitioners to make well-informed decisions and policies to advance

sustainable practices in the family business sector.

Pr

7.2 Managerial Implications

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 From a practical standpoint, this study provides valuable insights into how to

ed
increase family firms’ willingness to adopt green innovation. Firstly, the research

highlights that excessive family control might impede green innovation. This is

iew
because such high levels of family control often prioritize protecting social-emotional

wealth from potential losses, leading to biased decision-making that may not favor

environmentally sustainable practices. Instead of imposing unilateral demands to relax

v
family control, practical strategies should focus on actively guiding family firms

re
toward adopting a long-term orientation that integrates environmental considerations

into their decision-making processes.er

Secondly, the study highlight the importance of political and business ties in
pe
lowering the cost of green innovation. Family businesses facing resource constraints

can strategically leverage these relationships to access green innovation resources

from the government and other stakeholders. By effectively leveraging social

ot

connections, family firms can overcome some of the barriers associated with green

innovation and enhance their capabilities in sustainable development

tn

Thirdly, promoting a green development concept and instilling social

responsibility consciousness among family entrepreneurs are essential for stimulating

rin

their "conscious effect". By fostering a sincere dedication to environmental

sustainability, family entrepreneurs can play a significant role in China's shift towards
ep

green practice. Encouraging family businesses to adopt green practices and participate

in eco-friendly initiatives can foster a positive impact on both the economy and the
Pr

environment.

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 In summary, this study provides practical recommendations to assist family firms

ed
in their pursuit of green innovation. By adopting a balanced approach that considers

family dynamics, social connections, and environmental consciousness, family-owned

iew
enterprises can actively contribute to sustainable development and align themselves

with the broader objectives of China's green transformation.

7.3 Limitations and Future Research

v
This study and its findings are subject to limitations in two main aspects. Firstly,

re
regarding family heterogeneity, this research primarily focuses on the influence of

family control rights. Future research could further explore the impact of other aspects
er
of family heterogeneity, such as the participation of second-generation family
pe
members and the distribution of family decision-making authority, on corporate

environmental innovation. Understanding how these factors interact with family

control to shape green innovation behavior would provide a more comprehensive

ot

understanding of the complexities within family-owned enterprises.

Secondly, the data used in this study is derived from a sample of listed
tn

companies, the majority of which are large-scale and widely dispersed. As a result,

the applicability of the research findings to unlisted family businesses in China is

rin

uncertain. Further investigation into unlisted family enterprises is necessary to assess

whether the influence of family control on green innovation remains consistent across
ep

different types of family-owned businesses. Exploring the green innovation practices

of family firms could provide valuable insights into how family control influence
Pr

environmental sustainability on a large scale.

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 ed
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 65-79+196.

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 ed
Political ties

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Green
Family control
innovation

Bussiness ties

v
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Figure 1. Empirical model

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 ed
Table 1 Variable definitions

Variable Variable
Variable Name Variable Definition
Type Symbol

iew
Dependent ln(green invention patent applications +green
Green innovation GI
variables utility model patent applications+1)

Explanatory The ultimate control ratio of the listed family

Family control FC business owned by the actual controller's family

v
variable members
Dummy variable, measured as 1 if the family

re
business owner and / or heir has been former or
current government officials, deputies to the
Political ties PT
National People’s Congress, party
er representatives or CPPCC , otherwise measured
Moderating as 0
variables Dummy variable, measured as 1 if the family
business owner or heir is a member of the
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national, provincial or municipal federation of
Business ties BT
industry and commerce, or a member of an
important organization such as an industry
association , otherwise measured as 0
Firm age Firm age ln(current year - year of establishment)
ot

Firm size Firm size ln(total assets)

Independent Number of shares held by the largest
Rffd
Director shareholder/total shares
tn

Measured as 1 if the CEO and chairman is the

Duality Dual
same person and 0 otherwise
Shareholding
Conrtol ratio of the Shares held by the largest shareholder/total
Shrcr1
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largest shares
variables shareholder
Net interest rate
ROA Net profit/average balance of total assets
of total assets
ep

Operating profit
OM Operating profit / operating income
margin
The sample interval is 2016-2019.Year dummy
Year Year
Variables.
Pr

Industry INS Industry of the sample

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 e d
w
Table 2 Descriptive Statistics and Correlation Analysis

e
Variables Mean SD 1 2 3 4 5 6 7 8 9 10 11

1. GP
2. FC
0.269
0.480
0.664
0.190
1
-0.029** 1

v i
3. PT
4. BT
0.418
0.466
0.493
0.499
0.022
0.050***
0.034**
0.047***
1
0.513*** 1

r e
r
5. Firm age 2.808 0.307 -0.070*** -0.001 0.086*** 0.053*** 1
6. Firm size 21.849 1.067 0.161*** -0.003 0.199*** 0.174*** 0.100*** 1
7. Rffd
8. Dual
9. Shrcr1
0.380
0.420
0.003
0.053
0.494
0.001
-0.009
0.005
0.001
0.092***
0.033**
0.579***
-0.010
-0.073***
0.0110

ee
-0.005
-0.086***
0.029**
0
-0.061***
-0.048***
-0.076***
-0.143***
-0.049***
1
0.117***
0.081***
1
0.087*** 1
10. ROA
11. OM
0.084
0.104
0.132
0.317
0.061***
0.003
0.174***
0.086***
-0.037**

t
-0.021
p
-0.044***
-0.048***
-0.051***
-0.002
0.038***
-0.001
0.002
-0.016
-0.007
0.008
0.166***
0.082***
1
0.547*
**
1

Note: *p < 0.1. **p < 0.05. ***p < 0.01.

n o
ir n t
e p
P r
This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 Table 3 Regression Model Results

ed
Green innovation
Variables
Model (1) Models (2) Models (3) Models (4)
-1.136*** -1.764*** -1.739***

iew
FC
[0.378] [0.495] [0.496]
-0.905***
PT
[0.326]
1.335**
FC×PT
[0.627]

v
-0.707**
BT
[0.322]

re
1.245**
FC×BT
[0.622]
Firm age -0.664*** -0.661*** -0.628*** -0.653***
[0.209] er [0.208] [0.209] [0.209]
Firm size 0.445*** 0.439*** 0.460*** 0.451***
[0.061] [0.060] [0.062] [0.062]
Rffd -0.264 -0.130 0.081 -0.019
[0.996] [0.996] [0.999] [0.998]
pe
Dual 0.118 0.114 0.104 0.112
[0.101] [0.101] [0.101] [0.101]
Shrcr1 -41.363 48.776 56.757 55.409
[46.220] [54.960] [55.336] [55.316]
ROA 1.549** 1.740** 1.687** 1.729**
ot

[0.702] [0.705] [0.706] [0.707]

OM -1.020** -1.080** -1.059** -1.102**
[0.460] [0.460] [0.460] [0.460]
tn

Year control control control control

INS control control control control
-10.572*** -10.299*** -10.540*** -10.215***
Cons
[1.727] [1.724] [1.757] [1.740]
rin

N 4788 4788 4788 4788

Note: *p < 0.1. **p < 0.05. ***p < 0.01.
ep
Pr

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 ed
v iew
Figure 2 The moderating effect by political ties

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er
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Figure 3 The moderating effect by business tie

ot
tn
rin
ep
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 ed
Table 3 Robustness Tests :Substitute Explanatory Variables

Green invention patent applications

Variables

iew
Model (1) Models (2) Models (3) Models (4)

-1.079*** -1.871*** -1.676***

FC
[0.388] [0.516] [0.509]
-0.970***
PT
[0.333]

v
1.620**
FC×PT
[0.646]

re
-0.729**
BT
[0.328]
1.245*
FC×BT
er [0.638]
Firm age -0.582*** -0.580*** -0.557*** -0.574***
[0.215] [0.215] [0.215] [0.215]
Firm size 0.476*** 0.473*** 0.486*** 0.487***
[0.063] [0.062] [0.064] [0.064]
pe
Rffd -0.484 -0.341 -0.083 -0.197
[1.055] [1.054] [1.057] [1.056]
Dual 0.194* 0.190* 0.178* 0.185*
[0.107] [0.107] [0.107] [0.107]
Shrcr1 -44.544 42.178 55.276 50.170
ot

[47.498] [56.677] [57.195] [57.079]

ROA 1.003 1.176 1.148 1.160
[0.742] [0.746] [0.747] [0.747]
tn

OM -0.684 -0.739 -0.725 -0.764

[0.487] [0.488] [0.488] [0.488]
Year control control control control
INS control control control control
rin

-11.614*** -11.409*** -11.436*** -11.351***

Cons
[1.775] [1.770] [1.803] [1.785]
N 4788 4788 4788 4788
Note: *p < 0.1. **p < 0.05. ***p < 0.01.
ep
Pr

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 ed
Table 4 Robustness Tests: Adjust Sample (Family Control >10%)

Green invention

iew
Variables
Model (1) Models (2) Models (3) Models (4)

-1.134*** -1.704*** -1.676***

FC
[0.381] [0.499] [0.500]
-0.840**
PT

v
[0.329]
1.211*
FC×PT

re
[0.633]
-0.638*
BT
[0.326]
1.117*
FC×BT er [0.628]
Firm age -0.667*** -0.664*** -0.633*** -0.657***
[0.210] [0.209] [0.210] [0.210]
Firm size 0.452*** 0.446*** 0.466*** 0.456***
pe
[0.061] [0.061] [0.062] [0.062]
Rffd -0.171 -0.039 0.151 0.056
[0.999] [0.999] [1.003] [1.001]
Dual 0.130 0.125 0.115 0.122
[0.101] [0.101] [0.101] [0.101]
ot

Shrcr1 -33.166 55.899 61.899 60.952

[46.526] [55.220] [55.542] [55.527]
ROA 1.571** 1.771** 1.714** 1.758**
tn

[0.703] [0.707] [0.708] [0.709]

OM -1.062** -1.132** -1.106** -1.147**
[0.461] [0.462] [0.462] [0.462]
Year control control control control
rin

INS control control control control

-10.790*** -10.500*** -10.734*** -10.409***
Cons
[1.737] [1.734] [1.767] [1.750]
N 4771 4771 4771 4771
ep

Note: *p < 0.1. **p < 0.05. ***p < 0.01.

Pr

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307
 Table 5 Robustness Tests: Adjust Sample (Family Control >20%)

ed
Green invention
Variables

iew
Model (1) Models (2) Models (3) Models (4)

-1.089*** -1.666*** -1.706***

FC
[0.398] [0.530] [0.530]
-0.842**
PT
[0.362]

v
1.233*
FC×PT
[0.685]

re
-0.722**
BT
[0.359]
1.272*
FC×BT
[0.681]
Firm age -0.714***
[0.218]
er-0.710***
[0.218]
-0.688***
[0.218]
-0.708***
[0.218]
Firm size 0.433*** 0.429*** 0.444*** 0.434***
[0.063] [0.063] [0.065] [0.064]
pe
Rffd -0.394 -0.279 -0.102 -0.148
[1.041] [1.041] [1.044] [1.044]
Dual 0.100 0.096 0.088 0.093
[0.105] [0.105] [0.105] [0.106]
Shrcr1 -9.135 68.203 73.285 72.162
ot

[49.519] [57.013] [57.370] [57.318]

ROA 1.491** 1.681** 1.633** 1.668**
[0.726] [0.730] [0.731] [0.731]
tn

OM -0.978** -1.041** -1.024** -1.064**

[0.477] [0.477] [0.477] [0.477]
Year control control control control
INS control control control control
rin

-10.808*** -10.501*** -10.525*** -10.292***

Cons
[1.866] [1.861] [1.892] [1.882]
N 4555 4555 4555 4555
Note: *p < 0.1. **p < 0.05. ***p < 0.01.
ep
Pr

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 ed
Table 6 Endogenous Test : Adding Omitted Variable

Green invention
Variables

iew
Model (1) Models (2) Models (3) Models (4)

-1.087*** -1.716*** -1.699***

FC
[0.381] [0.497] [0.497]
-0.906***
PT
[0.326]

v
1.338**
FC×PT
[0.626]

re
-0.708**
BT
[0.322]
1.263**
FC×BT
er [0.622]
Firm age -0.663*** -0.660*** -0.627*** -0.652***
[0.209] [0.208] [0.209] [0.209]
Firm size 0.431*** 0.431*** 0.451*** 0.441***
[0.061] [0.061] [0.063] [0.063]
pe
Rffd -0.152 -0.061 0.150 0.048
[1.000] [1.000] [1.003] [1.002]
Dual 0.145 0.133 0.123 0.134
[0.111] [0.111] [0.111] [0.112]
Shrcr1 -39.381 46.273 54.201 52.806
ot

[46.270] [55.047] [55.421] [55.394]

ROA 1.562** 1.741** 1.689** 1.732**
[0.702] [0.705] [0.706] [0.707]
tn

OM -1.021** -1.078** -1.057** -1.101**

[0.459] [0.460] [0.460] [0.460]
-0.281 -0.192 -0.194 -0.220
FE
[0.419] [0.419] [0.419] [0.420]
rin

-0.404 -0.264 -0.267 -0.236

FD
[0.546] [0.548] [0.548] [0.550]
Year control control control control
INS control control control control
ep

-10.145*** -10.028*** -10.265*** -9.928***

Cons
[1.753] [1.750] [1.782] [1.768]
N 4788 4788 4788 4788
Note: *p < 0.1. **p < 0.05. ***p < 0.01.
Pr

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 ed
Table 7 Propensity Score Matching Balance Test

Matching Treatment Control % t-val p-val

Variables
Status group group Deviation ue ue

iew
U 0.1018 0.0696 31.3 10.82 0.000
ROA
M 0.1010 0.0989 2.0 0.77 0.443
U 0.3853 0.3742 21.5 7.45 0.000
Rffd
M 0.3850 0.3877 -5.3 -1.73 0.084
U 21.7710 21.9170 -14.1 -4.89 0.000
Firm size

v
M 21.7750 21.8070 -3.1 -1.02 0.309
U 0.4500 0.3891 12.4 4.28 0.000

re
Dual
M 0.4490 0.4541 -1.0 -0.35 0.727
U 0.1243 0.0908 21.8 7.55 0.000
OM
M 0.1240 0.1265 -1.6 -0.61 0.541
U er 0.2614 0.2507 2.4 0.84 0.398
2017
M 0.2610 0.2564 1.1 0.36 0.716
U 0.2702 0.2645 1.3 0.44 0.658
2018
M 0.2711 0.2736 -0.6 -0.20 0.845
pe
U 0.2560 0.2837 -6.3 -2.17 0.030
2019
M 0.2568 0.2631 -1.4 -0.50 0.620
U 475.1400 481.3700 -13.6 -4.7 0.000
Firm size×Firm size
M 475.3000 476.7300 -3.1 -1.03 0.303
U 8.3827 8.1999 15.6 5.40 0.000
ot

Firm size×Rffd
M 8.3767 8.4485 -6.1 -2.03 0.043
U 0.0306 0.0223 13.7 4.74 0.000
2017×OM
M 0.0303 0.0289 2.2 0.73 0.465
tn

U 0.0251 0.0155 14.5 5.00 0.000

2018×OM
M 0.0252 0.0244 1.2 0.44 0.661
U 0.0219 0.0146 10.0 3.47 0.001
2019×OM
M 0.0220 0.0224 -0.6 -0.20 0.841
rin

U 0.1003 0.0929 4.5 1.54 0.123

2017×Rffd
M 0.1000 0.0994 0.4 0.13 0.900
U 0.1046 0.0989 3.3 1.15 0.250
2018×Rffd
M 0.1049 0.1062 -0.7 -0.25 0.804
ep

U 0.0987 0.1074 -5.1 -1.75 0.081

2019×Rffd
M 0.0990 0.1023 -1.9 -0.65 0.514
Pr

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 ed
Table 8 Estimation Results of Propensity Score Matching Method
Matching Caliper inside
1-to-1 Radius Nuclear
method a pair of four
Matching Matching matching
Group matching

iew
(0.03) (0.03)
(0.03)
Control group 0.252 0.252 0.252 0.252
Treatment group 0.307 0.300 0.298 0.307
ATT -0.055* -.047** -0.046** -0.046**
Standard error 0 .030 0.025 0.021 0.020

v
t-value -1.94 -2.15 -2.26 -2.27

re
er
pe

Figure 4 Propensity score before matching

ot
tn
rin
ep

Figure 5 Propensity score after matching

Pr

This preprint research paper has not been peer reviewed. Electronic copy available at: https://ssrn.com/abstract=4757307