Connecting Socioemotional Wealth to Green Product Innovation: The Role of Absorptive Capacity

ABSTRACT Academic Summary As one of the main drivers of sustainable development, green product innovation (GPI) has received increasing attention from academia. However, few works have investigated this issue in the family business context, none of which directly address the role of family owners' nonfinancial preferences on GPI. To extend our knowledge on this topic, this study builds on the socioemotional wealth (SEW) perspective to investigate how SEW affects GPI in family firms, while also considering the mediating role of absorptive capacity. Drawing on the FIBER conceptualization of SEW, we relate five SEW dimensions to potential/realized absorptive capacity and GPI. Our empirical analysis on a sample of 249 private family firms indicates that family firms' inclination toward GPI depends on the SEW dimensions that are valued by the owning family. Furthermore, potential and realized absorptive capacity mediate the relationship between four SEW dimensions (family control and influence, identification of family members, binding social ties, and renewal of family bonds) and GPI. Overall, this study demonstrates the importance of considering the interrelation between family and organizational factors to understand green product innovation heterogeneity in the family business context. Managerial Summary This study explores how family owners' SEW preferences influence GPI through absorptive capacity. Our findings reveal that when family firms emphasize reputation, stakeholder trust, or continuity across generations, developing both potential and realized absorptive capacity is essential for driving GPI. To achieve this, we recommend that firms invest in cross‐functional collaboration, form partnerships with universities or research institutions, and implement training programs that keep employees informed about emerging trends and technologies. These practices strengthen the firm's ability to identify, integrate, and apply external knowledge, translating it into effective green product innovation strategies. Additionally, we find that when family firms prioritize control, GPI practices must adapt to preserve family decision‐making authority. Family‐led innovation teams and collaboration with trusted external advisors can help firms absorb external knowledge while safeguarding family influence. Therefore, we advise family businesses to tailor their knowledge management and innovation strategies to their specific SEW priorities in order to foster GPI. For policymakers, these findings highlight concrete pathways to support family firms' roles in green innovation, contributing to broader policy initiatives such as the European Union's research and innovation agenda.