Family Business in China, Volume 2: Challenges and Opportunities (Palgrave Macmillan Asian Business Series)

Unlike other economies, family businesses in China are greatly affected by the derived Confucian culture, excessive marketization, as well as the seemingly endless institutional supervision by a transitional Chinese government. China has a strong historical legacy, devoted to patriarchal values and strong family-centered traditions. This volume discusses the current status, upcoming challenges, and future prospects for family businesses in China. It explores unique organizational characteristics that are associated with Chinese family firms, such as being entrepreneurial, having concentrated power in the hands of the family business owners, and extensive family and semi-family involvement in the business. It also discusses shared features of strategic actions among Chinese family firms that include technology innovations, diversification, and internationalization, as well as the political connections that Chinese family firms often have. This book offers researchers a comprehensive overview of small family firms that are likely to be home-based microenterprises as well as large publicly traded business groups that are frequently owned by business families. Contents 6 List of Figures 9 List of Tables 11 1 Introduction 12 1.1 Family and Family Business in China 13 1.2 Challenges and Opportunities in Chinese Family Business 16 1.3 What This Book Is About 17 References 18 2 Family Business in China: Present Status 19 2.1 Defining Family Business in China 20 Family Business Definition: Alternative Standards 20 Defining Family Business in China 20 2.2 Prevalence of Family Business in China 25 2.3 Employment in Chinese Family Business 25 2.4 Economic Scale in Family Businesses 29 2.5 Individual Characteristics of Chinese Family Entrepreneurs 33 2.6 Differences Between Family and Non-Family Businesses 36 References 42 3 Entrepreneurship and Family Business in China’s Modernization 44 3.1 Why Family Business When Starting a Business? 44 3.2 Business Types in China 46 3.3 The Rise of Self-Employed Entrepreneurs 48 3.4 Economy of Arbitrage 51 3.5 Innovation and Entrepreneurship in the Modern Age 53 3.6 Crossroad: Economy of Scale and Economy of Focus 55 Chinese Entrepreneurs and Economy of Scale 55 “Invisible Champions” of Germany and Economy of Focus 55 David and the Giant in China 55 3.7 Tianlong Cylinder: A Story of Family Succession and Trans-Generational Entrepreneurship 58 Gas Cylinder Industry in the 1990s 58 Parent’s Legacy 58 Rookie in the Business 58 Parent–Child Tension in Business 58 Trans-Generational Entrepreneurship 58 References 66 4 Succession Challenges 67 4.1 Current Succession Challenges in Chinese Family Business: An Overview 67 4.2 Mismatching Between Two Generations? 70 Founding Generation’s View 70 Late-Generation’s View 70 4.3 De-Familization? 78 Challenges of De-Familization in China 78 Reasons Behind the Challenges 78 Intertwining Between Three Types of Successions 78 De-familization Cures some But Not All 78 Lack of Capable and Loyal Professional Managers 78 Transitional Institutional Context 78 4.4 Ge’s Family and the Tianle Group: A Story of Struggled Family Business Succession 85 Founding Generation 85 Family Business Succession: First Attempt 85 Failed Diversification 85 Darkside of Nanyao Ge Family Governance 85 Betrayal by Linchai 85 Third-Generation Ge 85 Reference 95 5 Succession Planning in Chinese Family Business 96 5.1 Succession Planning: An Overview 96 5.2 Wonbly and Liu Family 99 Pre-Succession in Wonbly 99 Succession in Wonbly 99 5.3 Succession Planning in China 103 5.4 “Vague” Succession Planning 106 5.5 Non-Family “Veterans” in Succession Planning 112 Family-Veteran Relationship in Chinese Family Business 112 Tension and Conflict Between Successor and Veteran 112 Triangle of Success in Successor-Veteran Relationship 112 5.6 Succession Planning for the Single-Child Family 117 Decreasing Family Size in China 117 Single-Child as Family Business Leader 117 References 121 6 Governance in Chinese Family Business 123 6.1 A Family Governance Case: Lee Kum Kee 125 Family Splitting 125 Family Governance in Lee Kum Kee 125 “Firewall” Between Family and Enterprise 125 Reflections on LKK 125 6.2 Family Governance in Husband-and-Wife Enterprises 134 6.3 Family Governance in a Brother Consortium 139 References 141 7 Chinese Family Business in Southeast Asia 142 7.1 The Columbia Group in Indonesia 143 7.2 Chinese Family Businesses in Southeast Asia 150 7.3 Characteristics of Overseas Chinese Family Businesses 152 7.4 Chinese Family Businesses in Hong Kong and Taiwan 154 References 156 8 Conclusion 157 8.1 Economic Function and the Rise of Socio-Psychological Function 159 8.2 Historical Heritage and Cultural Identity 163 8.3 Non-Family Management in Family Business 165 8.4 Rent-Seeking or Entrepreneurial? 167 References 171 Postface 172 Index 177