Abstract: Using data from the Eighth National Private Firm Sampling Survey, this paper examines the impact of family involvement in management on Chinese private firms’ innovation activities, and further analyzes how this impact depends on local institutional environments. After controlling for other co-factors, the empirical results show that: (1) the number of family member on top management team has a significant positive effect on both firm’s innovation input and output; (2) the above effect is weaker in regions with better institutional environments, suggesting that in transition economy like China, family management is still an effective governance mechanism for firm’s innovation activities, especially for firms in regions with worse institutional environments.

Key words: family involvement in management, institutional environment, technical innovation