Digital transformation as a source of innovation in manufacturing family firms: Analysis of developed and emerging economies

In the current globalized economy, digital transformation is a major challenge faced by manufacturing companies, and family firms are no exception to this reality. Although digital transformation has been posited as necessary for firms to achieve higher innovation outputs, research into how it affects manufacturing family firms remains scarce. To shed new light on this question, this study analyzes how digital transformation drives innovation and how the generation in charge of the family firm shapes this relationship. We test the proposed hypotheses using survey data from 319 manufacturing family firms from a developed economy (Spain) and an emerging economy (Ecuador). The results indicate that, overall, digital transformation has a positive influence on the innovation of small- and medium-sized manufacturing family firms. However, the results vary depending on the generation that manages the firm: younger generations in leadership positions have a positive influence on the relationship between digital transformation and innovation in Spanish family firms but not in Ecuadorian family firms. These results highlight the importance of considering different institutional contexts. • Digital transformation affects innovation in manufacturing family firms. • Digital transformation positively influences innovation in developed and emerging economies. • The relative importance of the generation managing the firm depends on the economic and institutional context.