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Family businesses are a significant part of the global economy, contributing to employment and GDP growth. However, they face challenges in a dynamic and competitive landscape, requiring a shift in traditional approaches and a focus on innovation. The success of a company ́s strategy relies on its people and organizational culture, which impact employee engagement, productivity and innovation promotion. In family businesses, culture rooted in the founder’s values can shape their approach to innovation. Some family businesses embrace change and innovation, while others hesitate due to risks and conflicting objectives, risking their long-term survival. Research on family business culture and innovation is underdeveloped, lacking empirical studies integrating the two concepts.

This thesis examines the intricate relationship between organizational culture and innovation in family businesses within Sweden and Italy. By conducting interviews with managers across diverse industries, we have uncovered significant findings regarding the influence of organizational culture on innovation outcomes. Key elements such as flexibility, long-term perspective, strategic vision and ethical commitment were identified as crucial in both countries. Family businesses prioritize enduring value, sustainability and adaptability while navigating the challenges of tradition and innovation. Some businesses adopt an exploitational approach, refining existing products, processes and business models, leveraging their heritage and internal capabilities. Conversely, others adopt an explorational approach, embracing uncertainty, remaining open to new possibilities and actively seeking innovative solutions through experimentation. Our research expands the understanding of family businesses’ culture and innovation through a theoretical model that considers different national contexts and the relationship between cultural characteristics and innovation. Furthermore, we offer practical implications for family business owners, managers, policymakers and advisors. These insights can help creating an environment conducive to innovation and long-term success in family businesses worldwide.