Purpose Based on the theory of dynamic capabilities, the purpose of this study is to examine how generation influences the effect of innovation capability on family business performance. To achieve this purpose, a moderation model is tested using the generational level as the moderating variable. Design/methodology/approach This study used a sample of 106 family businesses CEOs who were surveyed by mail using the Limesurvey 2.5 platform. The results obtained were analyzed using the second-generation partial least squares (PLS) structural equation model. The MICOM (Measurement Invariance of Composite Models) approach was used to analyze the moderating effect. Findings This research sheds lights on the innovation capacity to influence the family businesses performance, and on the generational level moderating this effect. As a result, the influence of the innovation capacity in second generation family businesses performance is higher than in the first generation. Research limitations/implications This study reveals the influence that the generational level has on the effect of innovation capacity on the family business performance. A greater dispersion of ownership, more participatory decision-making, and greater CEOs commitment to leadership in second- and later-generation family businesses, are the main key drivers of this result. Originality/value In comparison to previous studies, this research provides insights into the moderating effect of the generational level on the influence of innovation capacity on the family businesses performance through the MICOM approach (Measurement Invariance of Composite Models).