Abstract
The COVID-19 pandemic has been and is currently still affecting organizations of all sizes and in many industries, and research still lacks profound insights into the managerial implications of this phenomenon. In particular, it is unclear how family firms, which are the economic backbone of most of the countries affected by the pandemic, have adapted to COVID-19. This paper addresses this gap by drawing on a rich body of evidence collected from 90 interviews and secondary data in a longitudinal case study of four German family firms. We develop a framework for understanding how family firms adapt to exogenous shocks such as the COVID-19 pandemic and find that the exogenous shock further reinforces the family firm's resource constraints and the family's fear of losing their socioemotional wealth. These motivational sources, in turn, trigger behavioral changes in both the firm and the family. In addition to a temporarily induced short-term orientation, these changes manifest in (pseudo)family cohesion, less rigid mental models, and the utilization of digital technologies. Organizational outcomes such as new alliances, digital platforms, and the adaptive capacity of family firms are the result of these behavioral changes. By providing a comprehensive understanding of how COVID-19 affects family firms, the insights from our study contribute to innovation research, business practice, and policymaking alike. More broadly, we provide innovation scholars with a theoretical comprehension of how exogenous shocks can challenge our canonical understanding of organizations' (innovative) behavior.