Family firms aren't investing in research and development — but why? Getty Images

Family firms are publicly traded companies in which family members own at least 20 percent of the voting stock, and at least two board members belong to the family. For obvious reasons, the central principals in these firms tend to have a longer view than principals in non-family firms. Yet family firms invest less in research and development (R&D) in technology firms than their non-family counterparts. Since investments in R&D are stakes in the future, why this disparity?

Robert E. Hoskisson, a management professor at Rice Business, joined several colleagues to answer this question. Refining a sociological theory called the behavioral agency model (BAM), the researchers defined family-firm decisions as "mixed gambles" — that is, decisions that could result in either gains or losses.

Because success in high technology relies so much on innovation, it's especially puzzling when such a family owned business underinvests in R&D. So Hoskisson and his colleagues focused on the paradox of family firms in high tech.

According to previous research, family owners weigh both economic and non-economic factors when making business decisions. Hoskisson and his team labeled these non-economic factors socioemotional wealth (SEW). SEW can include family prestige through identifying with and controlling a business, emotional attachment to the firm or the legacy of a multigenerational link to the firm.

That intangible wealth (SEW) explained some of the families' R&D choices. While investment in R&D may lower future financial risk, it can threaten other resources the family holds dear. Expanded R&D spending, for instance, is linked with competitiveness. At the same time, it is associated with less family control. That's because to invest more in R&D, businesses typically need more external capital and expertise. So when a family firm underinvests in R&D, it may in fact be protecting its socioemotional wealth.

To further understand these dynamics, the researchers looked at three factors that they expected would raise families' R&D spending to levels more like non-family counterparts.

The first factor was corporate governance. As predicted, the researchers found that family firms with a higher percentage of institutional investors invested in R&D at levels more like those of non-family firms. The institutional investors naturally prioritized economic benefits far more than the founding family's legacy wealth (SEW).

The researchers also analyzed corporate strategy. Family firms, they found, invested more in R&D when it might be applied to related products or markets. Even families bent on preserving non-economic wealth could be lured by a big economic payoff, and related business are easier to control because they are closer to the family legacy business expertise.

Finally, Hoskisson and his colleagues looked at performance. When a family firm's performance lagged behind that of competitors, they reasoned, the owners would spend more on R&D. A higher percentage of institutional investors, the team theorized, would magnify this effect. Interestingly, the primary data (from 2004 to 2009) failed to support this hypothesis, while an alternative data set (from 1994 to 2002) confirmed it.

Further research, the investigators wrote, could shed useful light on this puzzle. They also encouraged study of how family firms conduct mergers and acquisitions. After all, while families can seem inscrutable from the outside, most run on some kind of economic system. The currency just includes more than money.

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This story originally ran on Rice Business Wisdom.

Robert E. Hoskisson is the George R. Brown Emeritus Professor of Management at Jones Graduate School of Business at Rice University.

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Rice University MBA programs rank among top 5 in prestigious annual report

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Rice University’s Jones Graduate School of Business MBA programs have been ranked among the top five in the country again in The Princeton Review’s 2025 Best Business Schools rankings.

The university's MBA program in finance earned a No. 3 ranking, climbing up two spots from its 2024 ranking. Finance MBA programs at the University of Virginia's Darden Graduate School of Business and New York University's Leonard N. Stern School of Business were the only ones to outrank Rice, claiming No. 2 and No. 1 spots, respectively.

Rice's online MBA program was ranked No. 5, compared to No. 4 last year. Indiana University's Bloomington Kelley School of Business' online program claimed the top spot.

“These rankings reflect the commitment of our faculty and staff, the drive and talent of our students and the strong support of our alumni and partners,” Peter Rodriguez, dean of Rice Business, said in a news release. “They are exceptional honors but also reminders — not just of our top-tier programs and world-class faculty and students but of our broader impact on the future of business education.”

Rice also ranked at No. 6 for “greatest resources for minority students."

The Princeton Review’s 2025 business school rankings are based on data from surveys of administrators at 244 business schools as well as surveys of 22,800 students enrolled in the schools’ MBA programs during the previous three academic years.

"The schools that made our lists for 2025 share four characteristics that inform our criteria for designating them as 'best': excellent academics, robust experiential learning components, outstanding career services, and positive feedback about them from enrolled students we surveyed," Rob Franek, The Princeton Review's editor-in-chief, said in a press release. "No b-school is best overall or best for all students, but to all students considering earning an MBA, we highly recommend these b-schools and salute them for their impressive programs."

Rice's finance program has ranked in the top 10 for eight consecutive years, and its online MBA has ranked in the top five for four years.

Rice and the University of Houston also claimed top marks on the Princeton Review's entrepreneurship rankings. Rice ranks as No. 1 on the Top 50 Entrepreneurship: Grad list, and the University of Houston ranked No. 1 on Top 50 Entrepreneurship: Ugrad. Read more here.

Houston named ‘star’ metro for artificial intelligence in new report

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A new report declares Houston one of the country’s 28 “star” hubs for artificial intelligence.

The Houston metro area appears at No. 16 in the Brookings Institution’s ranking of metros that are AI “stars.” The metro areas earned star status based on data from three AI buckets: talent, innovation and adoption. Only two places, the San Francisco Bay Area and Silicon Valley, made Brookings’ “superstar” list.

According to Brookings, the Houston area had 11,369 job postings in 2024 that sought candidates with AI skills, 210 AI startups (based on Crunchbase data from 2014 to 2024), and 113 venture capital deals for AI startups (based on PitchBook data from 2023 to 2024).

A number of developments are boosting Houston’s AI profile, such as:

Brookings also named Texas’s three other major metros as AI stars:

  • No. 11 Austin
  • No. 13 Dallas-Fort Worth
  • No. 40 San Antonio

Brookings said star metros like Houston “are bridging the gap” between the two superstar regions and the rest of the country. In 2025, the 28 star metros made up 46 percent of the country’s metro-area employment but 54 percent of AI job postings. Across the 28 metros, the number of AI job postings soared 139 percent between 2018 and 2025, according to Brookings.

Around the country, dozens of metros fell into three other categories on Brookings’ AI list: “emerging centers” (14 metros), “focused movers” (29 metros) and “nascent adopters” (79 metros).