Purpose In this paper, the authors have used a systematic literature review methodology of 147 journal articles published in peer-reviewed journals. The analysis includes studies based on country of origin, the periodic proliferation of studies and the methodological design of the studies. As an outcome of the review, the studies are classified on the innovation in family firms under four broad categories - innovation input, family governance mechanisms, innovation output and the external environment. Some fruitful avenues of research are outlined in this domain. Design/methodology/approach The literature on innovation in family firms - the most dominant and ubiquitous form of organization across the world - is gaining pace. The influence of family by way controlling ownership, management and governance on, and in interaction with business acts as a complex proposition that shapes the strategic decision-making in the family firm including innovation. The purpose of this paper, therefore, is to advance the understanding of innovation in family firms and provide a list of future research questions of theoretical and practical value. Findings Based on this review, the authors provide future research directions pertaining to innovation in emerging economy family firms, effect of the institutional environment of family firm innovation as well family firms' innovativeness in the wake of pro-market reforms, different classes of ownership in family firms and innovation, family firm goal heterogeneity and innovation, and family firm dynamic capabilities and innovation. Originality/value The review provides a comprehensive understanding, trends and future research directions in the domain of innovation in family firms.