Should Chinese businesses be ‘all in the family’?
Owners facing increasing pressure to recruit non-family professional managers
Family has long been treated as the most important unit of social interaction in China, and family firms are at the heart of Chinese enterprise. This is to be expected, given China’s strong familial culture, based in many ways on the teachings of Confucius.
However, many observers wonder if family managers increase business performance.
Research into the role of family managers in family business performance is timely and critical, because family firms are at a crossroads in China. Right now companies often rely heavily on family managers to fill the institutional void, given the lack of a stable external management labour market for family firms in the country.
Second-generation owners are expected to take over business from their first-generation founder-owners. Also, second-generation owners find their capacity to involve family clans into business is increasingly constrained by the effects of the mainland’s one-child policy.
Two competing theories have been used to explain the role of family managers in business performance: agency theory and stewardship theory
And yet surprisingly, there is little research into family firms in China. Business research literature is heavily concentrated on Western countries and it doesn’t paint a clear picture.