Beyond profit in family businesses: ESG-driven business model innovation and the critical role of digital capabilities

Purpose

This study aims to analyze the interaction between environmental, social and governance (ESG) practices and digital capabilities in promoting business model innovation (BMI) in family firms. Specifically, it researches how ESG practices influence BMI in family firms, breaking down this influence into its ESG components.

Design/methodology/approach

We used microdata from the Flash Eurobarometer 486 survey, conducted by the European Commission in 2020, which provides detailed data on the challenges and obstacles faced by European businesses. The survey included telephone interviews with key managers from 2,483 family-owned businesses across 27 EU countries.

Findings

The analysis found that the environmental, social and governance dimensions of ESG significantly enhance business model innovation in family firms. Additionally, the interaction between environmental practices and digital capabilities significantly enhances business model innovation in family firms, while the interactions between social or governance practices and digital capabilities do not show significant effects.

Research limitations/implications

The study supports the theoretical framework that integrates ESG practices into business model innovation, providing empirical evidence for the concept of sustainable business models. It emphasizes the importance of environmental sustainability, social engagement and robust governance in driving innovation.

Practical implications

Family business managers can use the findings to guide their innovation strategies by integrating ESG practices with digital capabilities. Policymakers can also benefit from understanding the importance of supporting ESG practices and digitalization in family businesses, fostering a regulatory environment that encourages sustainable innovation.

Originality/value

This research expands the theoretical understanding of how ESG practices and digital capabilities interact to foster BMI, particularly in family firms. By breaking down ESG practices into environmental, social and governance components, the study offers a detailed view of their interaction with digital capabilities.