Diversity of second generation to innovation; Reflection from family business in Indonesia

Abstract

Purpose: this research aims to empirically prove the influence of the second generation on innovation in family companies in Indonesia. This research used 50 family companies listed on the Indonesia Stock Exchange from 2016 to 2022 Theoretical framework: Referring to the RBV theory, we tried to design a conceptual framework that shows the role of the second generation to increase innovation in family companies in Indonesia. Apart from that, the conceptual framework also explains the relationship between secondary generation gender diversity, education and management experience in a TMT organization as a trigger for increased innovation in family companies. In the conceptual framework designed in this research, we also want to prove again the influence of family ownership and institutional ownership in encouraging innovation in family companies in Indonesia Method: We used 50 family companies listed on the Indonesia Stock Exchange from 2016 to 2022. Sample selection was carried out using a purposive sampling technique. In our research, innovation in family companies is used as the dependent variable, as well as second generation, gender diversity, education, experience in organization/management (TMT), family ownership and institutional ownership. To control bias in the data, we also use control variables consisting of current ratio, fixed assets to total assets and leverage. The data analysis stages were carried out using binary logistic regression and Wald tests Results and Conclusions: We succeeded in proving that the second generation has a positive and significant influence on innovation in family companies in Indonesia. We also found that the diversity of types of education chosen by domestic CEOs encourages them to innovate in family companies. Furthermore, we also found that organizational/management experience has a positive and significant effect on innovation in family companies, while family ownership and institutional ownership do not have a significant effect on innovation in family companies. Thus we conclude that the second generation can encourage increased innovation in family companies in Indonesia. The previous CEO's awareness of preparing for regeneration without looking at gender preferences was the key to increasing innovation in family companies in Indonesia