International Journal of Culture, Tourism and Hospitality Research

Innovation and service experiences in small tourism family firms

Birgit Pikkemaat Anita Zehrer
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Birgit Pikkemaat Anita Zehrer , (2016),"Innovation and service experiences in small tourism family firms", International
Journal of Culture, Tourism and Hospitality Research, Vol. 10 Iss 4 pp. -
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 Innovation and service experiences in small tourism family
firms

1. Introduction
In the literature, innovation is defined as the creation of novel or advanced products, ser-
vices or processes that the market sees as new or desirable (Garcia and Calantone, 2002).
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Following Schumpeter’s (1965) path-breaking work on innovation, a clear distinction

between the development process, the outcome and the commercialization of innovation
has to be made. Recently Witell et al. (2016) carried out an analysis of research on service
innovation and found support that the often commercialization process is ignored, which in
turn hinders explanations why some new services are successful and others fail.

As tourism is a service-intensive industry, the competitive success of any service provider

depends on customer satisfaction, which, in turn, is ultimately determined by the
consumers’ experiences with services. According to Grönroos (2001), customers do not
buy goods or services, but the benefits and experiences that goods and services provide for
them (Pine and Gilmore, 2000). Since a customer’s service experience reveals how service
contacts actually occur, a customer purchases not solely a service, but an experience creat-
ed in the service delivery of a service provider (Bateson, 1995). However, as a
consequence of a multitude of services, services resemble each other and have become
more complex. Moreover, changes in consumer behaviour have asked providers to revise
the way services are set up.

Although innovation used to be a rather under-researched field in the tourism industry for a
long time, it has become the centre of attention in the last few years. Since the beginning of
the new millennium in particular, researchers have increasingly begun to discuss innova-
tion in tourism (Jacob et al., 2003; Ottenbacher and Gnoth, 2005; Novelli et al., 2006; Hall
and Williams, 2008; Camison and Monfort-Mir, 2012). Nowadays, little doubt remains
about the importance of innovation for the tourism industry (Aldebert et al., 2011) with
single tourism businesses (Orfila-Sintes et al., 2005; Sundbo et al., 2007; Pikkemaat, 2008;
Tejada and Moreno, 2013; Thomas and Wood, 2014; Tajeddini and Trueman, 2014;
Nieves and Segarra-Cipres, 2015) as well as destinations (Svensson et al., 2005; Zach,

1
 2011) competing for innovation to gain strategic advantages. However, conceptual works
developing an appropriate innovation approach for small tourism businesses hardly exists
(Hjalager, 2010; Thomas and Wood, 2014).

In many European countries, the tourism industry is characterised by a large proportion of

small and medium-sized enterprises (SMEs), with the majority of hotels being run by
families (Eurostat, 2011). Family firms can be defined “as one that will be passed on for
the family’s next generation to manage and control” (Ward, 2011, p. 273). Altogether,
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family businesses are the most prevalent form of organizations (Astrachan and Shanker,
2003) and family business research has grown as an emerging research area (Chrisman et
al., 2008). Research for instance found that family-run SMEs are not only different
compared to large firms, but also differ significantly compared to non-family businesses
(Hallak et al., 2014). Family firms have to cope with competitive disadvantages, which,
among others, include poor economies of scale and scope, minimum potential for
diversification and innovation, as well as limited access to capital markets. A possible way
to reduce these weaknesses lies in a change of the organizational orientation of the firms
towards innovative service experiences.

Based on social identity theory dating back to Tajfel and Turner (1979), which explains
intergroup behaviour, an individual recognizes himself as a member of a social group
(Albert et al., 2000); this is also referred to as a group’s cohesiveness (Davis and Herrera,
1998). Within a family business context, social identity theory can be used as a lens to
understand social and family identity both at the individual and organisational level
(Tajfel, 1982; Kallmuenzer and Peters, forthcoming). Moreover, longstanding families and
their firms show a deep social rootage in and awareness of the community. Social relations
with the community seem to be prevalent amongst the family firms; these in turn can then
form social identity. With regards to entrepreneurial attitudes and economic action (Grano-
vetter, 1985) firm owners are very likely influenced by social identity thinking (Kallmuen-
zer and Peters, forthcoming).

The objective of the present study is, therefore, to establish a link between service
experiences and innovation with a view to identifying the factors that might assist family-
run small tourism businesses to deal with the challenges to their operating efficiency and
profitability. The paper is conceptual in nature and builds on social identity theory.

2
 Following this introduction, the paper undertakes a review of the relevant literature
regarding: (i) the concept of service experiences; (ii) the concept of innovation; and (iii)
small family-run enterprises in tourism. The paper then elaborates four propositions
regarding the most crucial issues of innovative service experiences for family firms in
tourism, which are built on social identity theory. For each proposition empirical proofs
and cases from the family-run small dominated tourism industry are presented. Finally, the
paper discusses the limitations of the study, future research avenues, and concludes with a
summary of the major findings.
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2. Literature review
2.1 The concept of ‘service experiences’
In general, market orientation is as a firm’s strategic behavior and helps to meet the needs
of customers more closely (Slater and Narver, 1995; Kumar et al., 2000; Ghauri et al.,
2016). The interaction between the management of an organization, its employees and
customers is critical for a successful market-oriented strategy, which, in turn, is highly
dependent on customers’ experiences and satisfaction (Reed et al., 2016). Following Nar-
ver et al. (2004), a responsive market orientation is the answer to market changes, while a
proactive market orientation focus on the latest needs and experiences of customers is
highly relevant for the development of innovative products and services as well as the
success of innovations.

The experience, which is actually a series of discrete sub-experiences, is full of messages

that impact how customers feel and tell a story about the service and the company that
provides it. We know that customers buy the benefits and experiences that goods and
services provide for them (Grönroos, 2001). However, relatively limited attention has been
paid in the literature to understanding the role of consumer experience in the services
industry (O’Neill and Palmer, 2003; Sheth et al., 1991). Nevertheless, several definitions
of ‘experience’ in general (and ‘service experience’ in particular) have been suggested
(Zehrer, 2009).

The range of definitions suggested by Zehrer (2009) indicates that the concept of ‘experi-
ence’ remains vague and difficult to define in purely cognitive terms. It is apparent that
emotional (or affective) states play a significant role in making experiences memorable;

3
 indeed, it could be said that emotions act like triggers for memorable experiences (Hanna
and Wozniak, 2001; Kotler et al., 1996). According to Haeckel et al. (2003, p. 20),
customers:
… consciously or unconsciously filter a barrage of ‘clues’ and organize
them into a set of impressions, both rational and emotional.

Despite this lack of terminological precision with respect to the notion of an ‘experience’,
Bateson (1995) has proposed that when a customer purchases a service, he purchases an
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‘experience’, which is created in the service delivery of the provider. In a similar vein, Pine
and Gilmore (2000, p. 11) have suggested that an experience is created when:
… a company intentionally uses services as the stage, and goods as props,
to engage individual customers in a way that creates a memorable event.

The principles of services experience management imply two significant shifts in basic
thinking compared to the traditional approach to management in manufacturing industries:
(i) a shift from a focus on internal performance to a focus on external consequences; and
(ii) a shift from an emphasis on structure to an emphasis on process. According to
Grönroos (1999), a successful service strategy should rely on both of these shifts in
thinking. Applying this to the specific question of ‘service experience’, the question that
arises for services management is whether (and how) the provider should attempt to
manage the customer’s experience systematically. According to Berry et al. (2002, p. 85):
“An organization’s first step toward managing the total customer experience is recognizing
the clues it is sending to customers”. This implies that the awareness of the service-
delivery process and potential gaps or missing items in the eyes of the customers is among
the first steps in delivering a consistent customer experience. Involving the customer into
service creation, and thus ‘walking in the shoes of the customer’ (Stickdorn & Zehrer
2009), might well create innovative solutions. This approach is often referred to as open
innovation or customer integration (Egger et al., 2016).

2.2 The concept of ‘innovation’

In most business contexts, innovation is linked to the growth theory of the economy
(Freeman, 1990). While the neoclassical growth theory uses explicit and implicit assump-
tions to faultless maximisation, the Schumpeterian theory is quite different. According to
Schumpeter (1965), innovation depends on the characteristics of the entrepreneur, who is

4
 faced with a dynamic economic environment. Basically, Schumpeter (1965) identified five
types of innovation: product (1) and process (2) innovations, the utilization of new re-
source markets (3), new suppliers (4) and the change of market structures (5).

An innovation generally results from new technology, by individual entrepreneurship, or

by strategic decision and management (Sundbo, 1998): the first paradigm is characterized
by the organisation of the innovation process in R&D departments; in the second case
innovations are the result of entrepreneurs who are willing and able to innovate; the third
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paradigm is the strategic innovation paradigm, which emphasises the strategy as the core
innovation determinant. Following the strategic approach which is favoured for services,
innovations are market-driven and are formulated within the framework of a strategy: “The
top managers of the firm control the innovation process, but ideas for innovations come
from all parts of the organisation and from the external network of the firm” (Sundbo,
1998, p. 436).

For studying innovation in services, three approaches have been distinguished (Witell et
al., 2016; Carlborg et al., 2014; Coombs and Miles, 2000;): The assimilation approach
treats services as similar to manufacturing, while the demarcation approach treats innova-
tion in services as distinctively different from that in manufacturing. The third, a synthesis
approach, suggests investigating how the peculiarities of service activities reformulate
innovation approaches in manufacturing by considering both technological and non-
technological aspects. Following Bilgihan and Nejad (2015), using the latter requires the
consideration of new emerging business models, novel marketing approaches, customer
management, talent management, service delivery, distribution channels and discovery
tools. Furthermore, online co-innovation communities and networks enable customers to
share, discuss and advance their ideas, which, on the one hand, deliver companies’ highly
relevant sources of innovation, on the other hand, ask service providers to continuously
innovate and redesign their services (Roeffen and Scholl-Grissemann, 2016).

In the tourism industry, the distinction between product and process innovation is widely
accepted among various authors (Pikkemaat and Peters, 2005). While some remain true to
the traditional Schumpeterian typology of the five types of innovation (Hall and Williams,
2008; OECD, 2008), others add marketing, management, logistics and institutional innova-
tions (Hjalager, 1997; Hjalager, 2002). Within the last years, innovation has become a

5
 prominent field, both in tourism industry and research. Researchers have increasingly
begun to discuss innovation in tourism (Hjalager, 2010). While some authors concentrate
on the hotel industry (Jacob et al., 2003; Orfila-Sintes et al., 2005; Ottenbacher and Gnoth,
2005) or on destinations(Flagestad and Hope 2001; Pechlaner and Tschurtschenthaler,
2003), others are more interested in small and medium sized tourism enterprises (Hoelzl et
al., 2005; Pikkemaat and Peters, 2005). However, research on innovation in family-run
tourism businesses is limited so far on organisational questions, such as succession plan-
ning (Hauck and Prügl, 2015), social capital (de Clercq and Belausteguigoitia, 2015;
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Sanchez-Famoso et al., 2014) or other family governance aspects (Cucculelli et al., 2016).
Especially, conceptual works developing an appropriate innovation approach for the speci-
ficities of family-run businesses seldom exists (Pikkemaat and Weiermair, 2004). Thus we
claim for a more integrated approach to understanding innovation on a small family-run
business level.

2.3 Small family-run businesses in tourism

Although the focus of our paper is on small family-run firms in tourism, it seems important
to underline that research on small businesses and research on family businesses may have
conceptual overlaps but also significant differences as large firms can be owned by fami-
lies as well (Getz and Carlsen, 2005). A family owned business is often dominated by the
structure of the family, which influences its processes; however a small enterprise not
necessarily needs to be owned by a family, e.g. single entrepreneurs in the case of start-up
businesses. Innovation research has been carried out in both, small (Brunswicker and
Vanhaverbecke, 2015; Gronum et al., 2012) and family-run businesses (de Massis et al,
2013; Nieto et al, 2015). But to authors knowledge so far no research has been carried out
comparing both by focusing on the question whether small family-run businesses are more
innovative than small (non family-run) businesses owned by single entrepreneurs. It could
be assumed that the number and kind of conflicts within the family system determine the
firm’s success as well as its innovation behaviour (de Clercq and Belausteguigoitia, 2015).
The innovation behaviour of both, single entrepreneurs and leading family members may
be determined by “Schumpeterian” entrepreneurial characteristics (Schumpeter, 1965) and
entrepreneurial risk taking (Zhara, 2005).

Family-run businesses are of high importance in the European economy with more than
60% of family firms in the EU-28 countries (European Commission, 2016). Tourism is

6
 particularly appropriate for family-run businesses due to the direct host-guest interaction
and relationship (Getz and Carlsen, 2005). Moreover, Wanhill (2000) notes that the au-
thenticity of a tourism experience for consumers can be enhanced by contact with locals,
which explains the appeal to many cultural tourists of bed & breakfast establishments,
farm-stays, and the like. It is therefore not surprising that, in many countries, tourism is
dominated by family-owned businesses (Thomas et al., 2011; Getz and Carlsen, 2000;
Buhalis and Cooper, 1998).
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The main characteristic of family businesses is the interference between ownership and
control, which lie within the family itself; this setting exerts enormous influence on the
strategic and operative business processes (Sharma et al., 1997). The coexistence of the
family system on the one hand, and the business system on the other hand (Burns, 2001)
leads to competitive advantages for family businesses, knowing that this coexistence might
result in both, positive as well as negative synergetic effects (Burns, 2001). However, the
families’ social resources and involvement of the family in the core business, so-called
‘familiness’, can be utilized as a competitive factor and symbolizes the closeness of the
social system (Cabrera-Suárez et al., 2001; Habbershon, 2006; Habbershon and Williams,
1999; Pearson et al., 2008; Steier, 2001).

According to the European Competitiveness Report of 2003, 99% of European tourism

firms employ less than 250 employees and 94% employ less than six employees (European
Commission, 2003). According to the EU standards, micro sized enterprises are defined by
1 to 9 employees, small sized enterprises by 10 to 49 employees, medium sized enterprises
by 50 to 249 employees and large sized enterprises employ more than 250 people. For
instance, in Austria, which is one of the most important winter tourism destinations in
Europe, more than 90% of all tourism enterprises are micro not even small sized enterpris-
es and the quota of medium sized enterprises amounts to about 1% (see table 1).

------
Please insert table 1 about here
------

According to Pechlaner et al. (2004) tourism has developed into a fragmented industry in
many regions in Europe, and, nowadays, is characterised by below-average company size,

7
 low growth rates, weak internationalisation, relatively low market entry barriers, limited
potential for diversification, high debt-to-capital ratios and relatively poor qualification
levels (Zehrer, 2009). Business failure research has revealed that the emotional attachment
of the owner-manager to the business, the lacking experience in business and marketing
background, the inadequate management skills as well as the low level of innovation in
small, often family-run businesses, increase the likelihood of business collapse (Zehrer,
2009; Pikkemaat and Peters, 2005; Getz and Carlsen, 2005 and 2000).
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Against this background, it is apparent that the traditional family-run small-sized structure
of tourism has resulted in a disadvantage and that the lack of innovation might be a crucial
point for future success. It is the contention of the present study that the innovation orienta-
tion of service experiences provided by family-run small businesses needs to change if
they are to remain competitive in the future.

3. Research Propositions
On the basis of the findings of the literature review, this conceptual paper puts forward
four propositions regarding service experiences and innovation for family-run small busi-
nesses engaged in tourism.

3.1 Family firms and innovation potential

Proposition 1: Family firms face major structural problems which render in-
novation more difficult.

A growing body of research is concerned with innovation behaviour and its outcomes for
family firms (De Massis et al., 2013; Nieto et al., 2015). There seems to be no doubt that
the characteristics of family firms influence innovation; while some argue that family
involvement has a negative influence on its innovation behaviour (Chen and Hsu, 2009)
other studies argue the opposite (Zahra, 2005). As discussed above, the coexistence of the
family system on the one hand and the business system on the other hand, plus the issue of
familiness as well as the structural challenges that family firms face, render innovation in
family firms more difficult (Sharma et al., 1997). On the other hand it could be argued that
the complexity of family firms is an advantage: the more family members involved in a

8
 family-run business the more external knowledge and the more communication among
family members and family members and their networks exists which could well provoke
more ideas and innovation. Using a large sample of Spanish firms Nieto et al. (2015) find
support that family firms are more likely to achieve incremental and thus small innovations
while non-family firms accomplish radical innovation, which show a significant impact on
the market.

Innovation in the tourism industry differs in many respects from other industries. The
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travel market is characterized by uncertainties. Due to rapid changes in terms of new tech-
nologies (e.g. social media), changing consumption patterns of customers (e.g. hybrid
consumer) and global economic changes (e.g. sharing economy), the travel sector has to
redefine its business strategies in order to remain competitive. These and changes in socie-
ty (e.g. migration issues) have deeply modified the ways in which tourism family firms
need to set up their services. Given the family and small-sized structure of businesses in
tourism they are particularly confronted with two major problems: (1) first, the low rate of
innovation in tourism which is among the lowest across all branches of the economy; (2)
second, the low degree of innovativeness being characterized by small, incremental im-
provements. One way to overcome these difficulties lies in a new strategic orientation
towards innovation. This could balance the market’s incompetence to compensate innova-
tors with temporary monopolies (through patents or licenses) in order to coexist with com-
petitors (Hjalager, 2002). All five types of innovation described by Schumpeter (1965)
could be contact points to initiate innovation, though innovative solutions are very unlikely
to change the market structure. Hence, innovative solutions are the key to long-term
growth and development, also in the tourism industry (OECD, 2006).

In product and service innovation research, empirical evidence is given that innovative
firms consistently outperform their competitors in terms of competitive advantage and
growth (Agarwal et al., 2003; Kirca et al., 2005; Mansury and Love, 2008). Even in a
hospitality context, various studies showed that innovative new products and services
increase the financial and non-financial performance of hotels (Oh, 1999; Ottenbacher and
Gnoth, 2005; Grissemann et al., 2013b), although innovation can take various forms, such
as developing appropriate strategies, encouraging employees to come up with new ideas,
sharing knowledge, being open minded or stimulating creativity processes within compa-
nies (Tajeddini, 2010). For human resource management, Chang et al. (2011) found sup-

9
 port that extensive training of customer-contact employees stimulates innovation since
these people are of high relevance in generating new ideas for the company. Chen (2011)
stresses the importance of rewards and recognition for employees delivering new ideas.
Management factors fostering innovation in hotels are management’s openness to change
and its ability to build a creative work environment (Martinez-Ros and Orfila-Sintes,
2009).

3.2 Family firms and strategic management

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Proposition 2: Family firms show innovation deficits due to a lack in strategic

orientation.

Tourism involves a lot of family-run micro and small sized firms all over the world, often
known as one-man enterprises or mom and pop companies. In most cases, these companies
do not follow any strategy, which, for many cases eliminates the strategic and the R&D
innovation approach as theoretical background (Hoelzl et al., 2005). Thus, an innovation
deficit characterises the small-structured tourism markets while the international tourism
industry with its international hotel chains is managed similar to multinational conglomer-
ates in manufacturing. Amongst other factors, it is a totally different management thinking
which is responsible for an innovation deficit of small family-run businesses. This differ-
ence in management thinking relates to the theoretical approach of our paper. Social iden-
tiy theory is useful to explain intergroup behaviour within a family business context in-
cluding the entrepreneurial behaviour of family firms. Tajfel and Turner (1979) propose
that the cognitive assimilation of the self (self-categorisation), one’s evaluation attached to
the group (self-esteem) and one’s affective connection with the group (social identifica-
tion) lead to social identity. In this paper, social identity refers to social identification and
interaction rather than self-categorisation or self-esteem and proposes that a family firm
due to social identification with the business and social interaction with the family mem-
bers, is much more cohesive than non-family businesses (Tajfel and Turner, 1979; Davis
and Herrera, 1998; Albert et al., 2000; Kallmuenzer and Peters, forthcoming), However,
this cohesiveness, the longstanding existence of family firms and their sustainable thinking
and maintenance of the business, results into a different approach towards management
and innovation.

10
 There have been several studies looking at small and medium sized tourism enterprises.
Weiermair (2004), for instance, assessed determinants of innovation in North America and
Europe within larger national and global firms to test the prevalence of process versus
product innovation. Another study by Pikkemaat and Peters (2005) measured innovation
determinants in small and medium sized hotels in Austria. The same authors noted that size
and the level of quality (measured in terms of stars) of a hotel as well as a clearly defined
target market have a significant positive influence on the level of innovation; however, the
age of the entrepreneur, the amount of loyal customers and the satisfaction of the entrepre-
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neur with their business revenue do not influence the level of innovation. Similarly, Hoelzl
et al. (2005) identified management quality and organizational competence, profound
market knowledge about competitors, and leadership competences as well as personal
attributes as essential prerequisites for successful innovation. In 2006, Walder found that
product and service innovations dominate among SME companies. The same author noted
that risk behaviour and cultural values of SME owners or managers, their management and
leadership style and the overall structure of the organisation influence the innovation be-
haviour of SMEs. Ottenbacher and Gnoth (2005) identified nine significant success factors
of hospitality innovation: market selection, strategic human resource management, training
of employees, market responsiveness, empowerment, behaviour-based evaluation, market
synergy, employees’ commitment, and tangible quality. More recently, Grissemann et al.
(2013a) found support for five company internal dimensions influencing the innovation
behavior of small and medium sized hotels in the Alps: employee engagement, customer
engagement, information technologies, innovation management, and innovation networks.

Since innovation is not a stand-alone unit, we also have to consider related dimensions
forming the strategic orientation of a family firm, which relates to the overall entrepreneur-
ial orientation of a firm, often discussed in the context of family businesses (Cruz and
Nordquist, 2012; Kallmuenzer and Peters, forthcoming;). By entrepreneurial orientation we
understand a set of entrepreneurial activities, methods and processes which firms make use
of in their entrepreneurial behavior: innovativeness, pro-activeness, autonomy, risk-taking
and competitive aggressiveness (Nordquist and Melin, 2010; Cruz and Nordquist, 2012).
While innovativeness is considered an internal component, which is less susceptible to the
outside (Zellweger and Sieger, 2012), pro-activeness is regarded as a dynamic factor in
family businesses (Nordquist and Melin, 2010; Lumpkin and Dess, 2001). Autonomy
refers to the family firm’s autonomous way of value creation (Lumpkin et al., 2010; Zell-

11
 weger and Sieger, 2012) and has positive impacts on the innovation behavior of family
firms (Habbershon and Pistrui, 2002; Lumpkin et al., 2010). Risk-taking is considered
important in family firms, however decreases over time (Zahra, 2005; Zellweger and Sieg-
er, 2012). Naldi et al. (2007) as well as Gómez-Mejía et al., (2007) found that family firms
are both, risk taking and risk averse due to their superior goal of family control and owner-
ship. With regard to social identity theory, the degree of risk-taking of family firms relates
to the long-term orientation of the family firm to sustain economic wealth from one gen-
eration to the other (Kallmuenzer and Peters, forthcoming). Competitive aggressiveness is
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questionable, since family firms usually act less aggressively on the market due to their
long-term orientation (Nordquist and Melin, 2010; Zellweger and Sieger, 2012). More
recent research started to create a Family Entrepreneurial Orientation construct for entre-
preneurial attitudes in family firms (Zellweger et al., 2012). All mentioned factors and
dimensions impact on and foster innovation and therefore, account for innovation man-
agement strategies in family firms.

3.3 Family firms and prevalent forms of innovation

Proposition 3: Cooperative business alliances are prevalent forms of innova-

tion among family firms.

Due to the dominance of small family-run businesses, the tourism industry displays inno-
vation deficits and disadvantages in terms of innovative product development: (1) first,
small businesses lack economies of scale and are not able to raise profit margins which
allow small units to reinvest in research and development, market research, product devel-
opment, skills or creativity enhancement. (2) Second, family SMEs in tourism are still with
some regard reluctant in terms of cooperation or strategic alliances with other competitors.
However, cooperation would help to gain economies of scope, which would likely increase
product- and services-variation and thus customer service experiences (Getz and Carlsen
2005; Buhalis and Peters, 2006).

Moreover, as a result of the complexity of the tourist product, most service companies,
often family-run, in a tourist destination are dependent on each another. Although they are
competitors, they have to work together in creating the overall quality of the tourist prod-
uct provided to the tourist along the value chain (von Friedrichs Grängsjö, 2003; Zehrer et

12
 al., 2014a). Therefore, there is growing interest in cooperation, alliances and partnerships
in many fields and industries, and particularly in the tourism industry (Morrison, 1998;
Augustyn and Knowles, 2000; Morrison et al., 2004; Zehrer et al., 2014a). Thus, new
opportunities for distribution management such as network structures, specialisation and
cooperation have become more essential (Gadde, 2000). Relationships and interdependen-
cies between different actors have become important issues and are lifted forward in mar-
keting and distribution research (Weitz and Jap, 1995; Gadde, 2000; Gummesson, 2002;
Rao and Perry, 2002). Owing to the complexity of the tourist product, these relationships
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and interdependencies are real competitive advantages.

In previous studies of small enterprises, independence has been emphasised as an im-

portant motive for the entrepreneur (Carson et al., 1995). This is paradoxical in the case of
a tourist destination, where the entrepreneur is bound up in a social and economic network.
“The fact that … companies establish themselves in a village or an area will naturally
affect the established formal and informal social patterns and organisation, and a new
consensus of norms must be reached” (von Friedrichs Grängsjö, 2003, p. 428). It is a big
challenge and responsibility for small family-run businesses to professionally network in a
sustainable way in order to guarantee high quality products and services and to remain
competitive towards industry competitors. The complex coordination of the tourism prod-
uct might be a stimulus for the widespread collaborative relationships in the tourism indus-
try (Murphy, 1997; Zehrer et al., 2014b). According to Lewis (2001) tourism networks
represent an integration of both business networks and service provider networks.

Family business managers are essentially individual entrepreneurs who are likely to make
decisions in a rather informal manner, which can result in a somewhat haphazard develop-
ment of the business (Morrison et al., 1999). Moreover, they often lack economies of scale.
Synergistic cooperation among these businesses can help to overcome both of these prob-
lems. The bundling of resources into a synergistic whole can facilitate market penetration
and integrate individual efforts. As Pechlaner and Tschurtschenthaler (2003, p. 524) ob-
served: “… the variety of individual performance [can be combined] … to a cooperative
whole”. Several studies have shown the advantages of a tourist destination that involves
several entrepreneurs in the production, marketing and distribution of tourist products
(Palmer and Bejou, 1995; Buhalis, 2000). The advantages of cooperation are reduced
transaction costs when it comes to searching for potential network partners, shorter infor-

13
 mation paths and common cultures and traditions, which help balancing common innova-
tion objectives among network partners and allies. Hence, diversity stimulates the diffusion
of innovation in the tourism industry, while competition has a negative external effect on
innovation; greater innovative activity improves the profitability of family firms in tourism
(Sancho Peréz et al., 2006) and the more they cooperate the more innovative they are
(Pikkemaat and Weiermair, 2007).

3.4 Family firms and customer integration

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Proposition 4: Service experience and customer integration might enhance in-

novation in tourism family firms.

The importance of customers has also been recognized in recent innovation literature (von
Hippel, 2001; Füller and Matzler, 2007; Franke et al., 2010; Zehrer et al., 2014b). The
service- dominant logic (Vargo and Lusch, 2004; 2008) re-examines the role of innovation
in service delivery (Chen et al., 2009). Heart of the theory is the customer as co-creator of
value and the process of value co-creation that drives innovation and evolution within the
market (Vargo et al., 2008). As has been discussed extensively in literature, the customer
plays the central role in any tourism encounter evaluating his experiences and deciding
about further success and failure of tourism products and services (Mill and Morrison,
1985). In pursuing such a totally market oriented strategy to satisfy all needs and wants of
customers, the risk arises that tourism suppliers loose their authenticity and the integrity of
the community within a destination may decrease. From the perspective of tourism, a
market-oriented strategy is of utmost importance, but it has to be balanced with a resource-
based or tourism-product based approach. Restructuring tourism through innovation is
difficult to realize, as it requires both a market and a firm- or resource-based perspective;
moreover, it can be carried out from a single firm perspective or from a destination per-
spective including an amalgam of services and tourism enterprises.

Although the fit of innovation to the market seems to be a success factor for innovation in
tourism (Ottenbacher and Gnoth, 2005), customers’ demand is not really embedded in
innovation research in tourism. Grissemann et al. (2013b) analysed data from 203 hotel
managers in the Alps and found support for the influence of customer orientation on inno-
vation and business performance. Following their results, customer orientation directly

14
 affects financial performance, customer retention, and reputation. The study also highlights
that strategies focusing on customers’ needs positively influence hotels’ innovation behav-
iour and innovativeness. It would thus be interesting to analyse a new product or innova-
tion both from an entrepreneurial and a customer’s perspective. Following this procedure,
innovation gaps between entrepreneurs and tourists in a family-run hotel might well be
identified.

Today, customers are often seen as important information systems or even co-producers of
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new product developments and innovation (Egger et al., 2016). Following Roeffen and
Scholl-Grissemann (2016) there are four reasons, which explain the relevance of co-
creation for the tourism industry. First, involving customers in the creation of a tourism
product helps tailoring the service to customers’ needs and creates unique experiences.
Second, online reviews allow entrepreneurs to use these feedbacks as marketing infor-
mation about customer’s experiences and improve their services. Third, in online social
media networks customers share their experiences and thereby influence the purchase
decision of others. Fourth, nowadays online technologies allow even small and medium
sized family firms to compete on an international level: consequently they improve their
creation of memorable experiences and superior value as they cannot compete with the low
cost strategies of international hotel chains (Chen and Chen, 2010).

4. Results and Discussion

This conceptual paper is intended to understand the relationship between service experi-
ences and innovation among family firms in the tourism industry. The findings of our
study are underpinning the rationale of social identity theory; thus, we assume that social
identity theory can be applied to the context of family firms. High perceived individual
involvement within the family firm very likely leads to positive behavioural outcomes and
more intense attitudes in the family business, which can spill over to the customer. Never-
theless, the family cohesiveness might also hinder innovation. The paper finds that there is
a need to involve owner-managed firms in innovation, especially with regard to the defini-
tion and improvement of the service-delivery processes, if they are to improve service
experiences for their customers.

15
 To summarize the results figure 1 presents an overview of the propositions, which seem to
be relevant for small family-run tourism enterprises and are the focus of our discussion. On
the one hand this figure can be seen as the result of our paper, on the other hand it delivers
a framework for empirically testing innovation in small family-run businesses.

------
Please insert figure 1 about here
------
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First, figure 1 shows that the innovation potential of small family-run tourism firms is
determined by its structure, its size and other aspects which characterize family businesses,
e.g. family history (Getz and Carlsen, 2005; Buhalis and Peters, 2006). The social identity
of family firms, their rootedness in society and their cohesiveness also impact upon their
innovation potential. The coexistence of the family and the business system very likely
influences the innovation behaviour of family firms compared to non-family manager
dominated companies.

Second, innovation deficits are the logical consequence as small family-run tourism enter-
prises lack strategic knowledge. These innovation deficits are due to a number of lacks in
strategic management of small family-run firms, e.g. missing knowledge about the man-
agement of organizations, leadership, human resource management, innovation processes,
service quality, networking and finance, entrepreneurial orientation (Burns, 2001; Pik-
kemaat, 2008; Gronum et al., 2012; Nieto et al., 2015). To increase product- and services-
variation and thus customer service experiences these innovation deficits need to be over-
come.

Third, cooperation and networking are treated as appropriate means to overcome some size
disadvantages and gain stimuli for new ideas and knowledge for innovation processes.
Business alliances and cooperation become prevalent forms of innovation that help to
extend markets by teaming-up with non-tourism partners (Weiermair, 2004; Aldebert et al.,
2011). Various forms of synergistic cooperation among traditionally fragmented and fami-
ly-run tourism providers are essential for transferring external knowledge to their business-
es (Pikkemaat and Weiermair, 2007; Chen and Huang, 2009). This not only helps to im-

16
 prove existing services, but also benefits the creation of completely new synergistic inno-
vative service experiences.

The fourth and maybe most relevant factor for innovation in small family-run tourism
enterprises is customer integration. We assume that the more the customers are integrated
into service experiences, which in turn requires a market driven strategy and market re-
search, the more successful are innovations in the firm. Service experiences must be ap-
propriately managed by family firms by collecting, evaluating, storing, and reusing rele-
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vant data on customer experience and thus co-creating experiences. To foster innovative
solutions for customers as well as small firms, new technologies have to be implanted,
both, for attracting and analysing customers as well as developing new business models
(Sancho et al., 2006; Bilgihan and Nejad, 2015). Open innovation is of high relevance for
small family firms as it integrates customers’ needs and shows new market challenges
(Brunswicker and Vanhaverbeke, 2015). The integration of the customer into innovation
processes by family firms is necessary, as the fit of the innovation to the market is a suc-
cess factor for innovation in tourism (Ottenbacher and Gnoth, 2005; Roeffen and Grisse-
mann, 2015).

The results of this paper are in line with Kandampully (2002) who discussed the role of
technology, knowledge and networks in the context of innovation as core competencies of
service organisations. In addition, there are some more aspects to be considered in small
family-run tourism firms. As discussed, the entrepreneurial behaviour and the strategic
orientation seem to be crucial for the success of innovation (Cruz and Nordquist, 2012;
Zellweger et al., 2012; Hallak et al., 2014) as well as the closeness to the market and cus-
tomer integration (Agarwal et al., 2003; Narver et al., 2004; Kirca et al., 2005; Ghauri et
al., 2016). Moreover, small family-run tourism firms should focus on the advantages of
their size, such as being closer to customers, being more flexible, being more authentic and
local, rooted in society, which in turn makes it easier to integrate customers and deliver
more individual and personal services with high service quality (Oh, 1999; Grönroos,
2001). To overcome some disadvantages of the small size of many tourism firms, coopera-
tion in its various forms seems to be an appropriate way (Morrison et al., 2004; Pikkemaat,
2008; Hjalger 2010).

17
 The study concludes that the professional management of innovation in services by family
firms requires cooperative and synergistic attention with a view to producing memorable
service experiences for customers. As today customers share, like and dislike their positive
and negative experiences via online communities, small family firms in tourism receive a
great chance to better market and sell their innovation activities worldwide and create more
memorable service experiences.
5. Conclusions
The present paper has certainly has to acknowledge limitations that need to be taken into
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account when considering the results of the study and its contributions.

Although figure 1 presents a possible framework for first empirical studies, the most sig-
nificant limitation is the purely conceptual nature of the paper that has developed proposi-
tions regarding service experiences and innovation in family firms in tourism. The theoret-
ical concept of entrepreneurial orientation and social identity theory help to comprehend
innovation in family firms by elaborating methods, tools and approaches to understand,
design and manage innovation in family firms more effectively. The reason for undertak-
ing a conceptual study lies in its broad, unbiased concept that explains innovation in fami-
ly-run tourism businesses (Hjalager, 2010). By exploring several propositions we add to
the current body of literature with a literature-based introductory article to tourism small
family business innovation. It is apparent that follow-up empirical studies are required to
validate and/or modify the propositions that have been developed in this exploratory theo-
retical study. Such studies not necessarily need be restricted to the tourism industry. How-
ever, the fundamental characteristics of services—be it a tourism service or a non-tourism
service—are such that the propositions developed here might well be applicable to innova-
tion in a variety of service industries (such as banking, insurance or financial services).

Nevertheless, it remains true that the focus of the study has been on small family firms in
the tourism industry, and it is in that industry that the theoretical propositions of the present
paper particularly need to be validated or modified by appropriate empirical studies among
owner-managed family firms in the tourism industry. Indeed, it is the intention of the
authors to undertake a significant study on service innovation among selected small family
firms to better understand their service orientation, innovation potential and deficits, and to
further comprehend how the family system and the social identity within the family firm

18
 influence their entrepreneurial innovation behaviour. More generally, as with any academic
work, we hope that this paper stimulates other researchers to study innovative service
experiences among family firms and in particular undertake research on the role that inno-
vation can play in securing competitive advantages of small family businesses in tourism.
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19
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Figure 1: Overview of the results for innovation in small family-run tourism enterprises
 Size Number of in % Number of in %
Enterprises Employees
Micro 0-9 57.341 91,0 72.827 27,9
Small 10-49 4.903 7,8 95.313 36,5
Medium 50-249 677 1,1 66.034 25,3
SMEs 69.921 99,9 234.174 89,7
Large 250 and plus 63 0,1 26.757 10,3

Table 1: Number of Small and Medium Sized Tourism Enterprises in Austria

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(Source: WKO, 2016)