The Impact of Family-Based Human Capital on Corporate Innovation: Evidence from Sibling-Chairpersons in China

Abstract

We examine the impact of family-based human capital stemming from a chairperson’s having siblings vis-à-vis not having siblings on corporate innovation in Chinese family firms. Using hand-collected data, we document that when a firm has a sibling-chairperson, it holds more patents, receives more total citations to their patents, and has greater innovation efficiency and innovation quality than an otherwise equivalent firm with a chairperson with no siblings. The results are economically significant and robust to a battery of alternative methods. Specifically, the findings remain intact after using China’s one-child policy as an exogenous shock to apply a regression discontinuity research design to mitigate endogeneity. Additional analysis suggests that the mechanisms behind the impact of siblings on innovation are consistent with family-based human capital embedded in the sibling relationships such as competition and knowledge spillover among siblings. Furthermore, we show that sibling co-management, sibling gender diversity, and siblings’ collaborative behavior matter in corporate innovation. Overall, family-based human capital from siblings impacts corporate innovation.