Abstract: Purpose – The purpose of this paper is to contribute to the understanding of the factors that influence small to medium-sized family enterprises (SMFEs) innovation decision. Design/methodology/approach – This paper utilises an original data set of 73 SMFEs employing 5-249 people to run binomial logistic regression model which considers the joint effect of both internal and external factors. Findings – The results confirm, on the one hand, a significant and positive relationship between the long chief executive officer (CEO) tenure, the prospector and analyser strategic orientation, and the innovation decision in the Spanish family firms. On the other hand, the results confirm a significant and negative relationship between the risk taking, the cost of innovation, the lack of qualified personnel, a customer indifference towards innovation, and the innovation decision in the Spanish SMFEs. Research limitations/implications – The results contribute to the development of theoretical and knowledge bases, as well as offering results that will be of interest to research and policy communities. The results are limited to a small sample size, single survey, using cross-sectional data. Practical implications – The findings have a bearing on business innovation strategy for policy makers. The results suggest that policy measures that promote long CEO tenures, and the prospector and analyser strategic orientation may have the greatest impact in terms of helping to facilitate innovation decision. Originality/value – A novel feature of the model is the consideration of the joint effect of both internal and external factors in SMFEs.

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