The transaction cost approach to collaborative innovation in family firms: A process of internal collaboration through integration of human assets

Abstract

Prior research has shown that family firms can innovate despite investing less in R&D. But research on how family firms effectively turn innovation input to innovation output is scant. Using a qualitative single case study of a family firm needing to constantly innovate to keep up with the competition and government regulations, I examine how a family firm collaborates internally through integration of human assets to achieve innovation. Using transaction cost economics approach, an inductive analysis from process research suggests that the process of economising non-family employees involves identifying the 'specificity' and 'deployability' of human assets in assessing new ideas for new product development. Failure to identify the deployability of human assets would result in high transaction costs, thus hampering innovation. This study contributes to existing literature about how family firms can do more with less by economising highly specified non-family human assets through the operationalisation of transaction cost economy.