Examining the CEO-Owner Dyad: A Dynamic Model of Interrelationship Influences on Innovation Capability

Abstract

Innovation is fundamental to long-term business success in technology medium-sized enterprises (MSEs). The owner-CEO interrelationship is likely to set the culture and be an important influence on the enterprise innovation capability. Previous studies of the owner-CEO interrelationship have produced varying results but few have examined the influence on innovation capability. Agency theory assumes that owners and CEOs have contrasting objectives but it is silent when owners and CEOs are in accord. Companies may have varying dominant ideologies, such as entrepreneurialism, managerialism, and paternalism, which likely influence their innovation capability. Using primary data from three different German MSEs, selected for their contrasting ideologies, this study examines how interrelationship influences of the owner-CEO interrelationship have the potential to influence the innovation capability of MSEs. The results show that the influence of the owner-CEO interrelationship on the innovation capability is associated with social and situational influences. This thesis provides an original contribution by developing an “interrelationship influence model” that captures the interrelationship factors that influence innovation capability, namely: action, support, communication, responsibility, power and autonomy. This study has important implications for researchers in corporate governance as well as in innovation. Enterprises aiming to improve their innovation capability should pay attention to interrelationships and the influence of owners as well as to the CEO and the management team.