Abstract Based on the unbalanced panel data of 1074 annual samples of family firms from 2014 to 2018, this paper empirically investigates the innovation investment level of the second generation successor after taking office from the perspective of the Differential Order Pattern under local scenarios. The empirical study shows that the stronger the relationship between the incoming second generation and the outgoing first generation, which is depicted under the Differential Order Pattern centred upon the first generation, the lower the innovation investment level after taking office of the successor. In further study of family business heterogeneity, the result shows that the “retired but not retreat”of the outgoing generation strengthens the negative correlation between the Differential Order Pattern and innovation input, that is, there is an inhibitory effect on innovation level. Political connection and non-family executive intervention weaken the negative correlation between the Differential Order Pattern and innovation input, that is, they promotes the level of innovation.
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