This study analyzes the impact of ownership heterogeneity on corporate innovation strategy. Acknowledging the increasingly heterogeneous ownership landscape characterized by influential shareholders with diverging preferences we show that novel theoretical models provide a valuable guiding framework for corporate governance models. Contrary to previous research, we find that the effect of shareholder activism exercised by hedge funds on innovation is not unconditionally positive but depends on the ownership configuration. In this context, the impact of family ownership on innovation is theoretically ambiguous due to conflicting preferences. Our findings confirm our theoretical argumentation based on principal-principal theory and myopic loss aversion that conflicts between two influential principals (i.e., family owners and hedge funds) can lead to detrimental outcomes with regards to radical innovation.