TMT Family Members’ Education and Firm Innovation: Evidence from Chinese Family Firms

This study investigates the effect of the educational level of top management team (TMT) family members on firm innovation among publicly listed family firms in China. Using a panel of 14,338 firm-year observations from 2015 to 2023, this study employs fixed effects regressions to show that the educational background of family members positively influences firm innovation, measured by the proportion of R&D personnel and capitalized R&D expenditures. Moreover, this positive effect is more pronounced under greater industry competition, higher transparency, and smaller firms. The mediation analysis identifies potential channels of asset tangibility, ownership concentration, and management fees through which family education influences firm innovation. Sectoral heterogeneity reveals a more pronounced effect within the manufacturing and service sectors, while no statistically significant relationship emerges in the agriculture sector. Concerns over endogeneity are mitigated using lagged family education, two-stage least squares regressions, and panel vector autoregressions. The baseline result remains robust when firm innovation is alternatively measured by the number of patents. These findings contribute to the literature on innovation in family firms and offer implications for investors, corporate decision-makers, and policymakers in emerging markets.