The Institutional Analysis Of Family Business's Growth In China' Transformation Era

The central issue explored by this paper is that with economic transition how can the institutional innovation push the growth of Chinese family businesses in the economic transformation era. Request on this issue, analysis of the reasons of how can Chinese family business develop in the context of economic transition and the restraining factors in the development process, as well as the difference between the developed countries and China. In addition, it analyzes how to solve the problem by Institutional Innovation.First of all, it analyzes the property of family business and its growth mechanism. Family business system attributes can be divided into home and business properties, and the formation of system attributes, in addition to technical and market factors, interaction between macro and micro system as well as formal and informal system should also be noted. Family business is arising to meet the family interests and to overcome external market failure, and its formation mechanism can be summarized as follows: family capital is to meet the interests of the family, and it uses the internal resources to reduce transaction costs, and imposes the outside internalization to solve the external problem at the start of a business. With the expansion of the size of enterprise, earnings of enterprise are subject to decline due to the deficiency of capital, business management ability and trust breadth. Growth mechanism can be summarized as follows: enterprises are adapt to the demands of market competition and technological development trends, and establish inherent operating mechanism of exhaling the old and inhaling the new by getting rid of the path of death and recession. The basic symbol of it is marked by institutional innovation, technological innovation management innovation and networks innovation. It uses two creative ways including corporatization and networkization to innovate and then to enhance the quality of the growth of enterprises.Secondly, the paper analyzes the meaning and transformation of Relationship Contract of Family Business. Relationship Contract is a long-term incomplete contracts, but, without taking into account all the specific circumstances of the future, the contractors' personal relations of the past, present and expected future have impact on the long-term lease arrangements. Asset Specificity is the technical basis of contract, and the rule of law and social capital is the spiritual basis of the relationship. Matched with the economic system, there are two types of relational contract: personification and non_personification. In the adverse Macro-system circumstances, it often takes binding way, such as blood, kinship and economic transactions to reduce transaction costs and access to the resources is necessary and significant for the existence of the personification of the Chinese family business contractual relationship. Only with the transition of the contract relationship from personification into non-personification, can the transformation of family business system in institution and the healthy growth of family business be promoted.Furthermore, the paper has a systematic analysis on the Chinese family business' internal growth path, status quo and breakthrough of the issue. Relational contract provides the Chinese family business activities of the outcome of technological innovation for a more secure protection and support, but the overall relational contract is not conducive to help the Chinese family business transform into technological innovation enterprise. Family business should change the traditional thinking of growing, arranging property rights to arouse the creativity of scientific research personnel. Government should provide a better policy and legal environment for the " institutional innovation" of the technological innovation of the family business. The growth of the Chinese family business depends on the removal of the "one monopoly capital" caused by the single property. In order to compensate for the gap of the intellectual capital and the financing in the process of growth of family businesses, the opening up of property by the intellectual-oriented and financial-oriented is particularly important. In order to solve the problem of information asymmetry and moral hazard problems in the process of opening up management control of the information. The realistic goal of transition within the Chinese family business system is to change the reality of property rights and to address the family business' property rights disputes, at the same time, in the preservation of family control over through property rights and opening up the financing to achieve the purpose of financing and raising the wisdom; the right of controlling shared by the inside and outside of the family; the combination of relationship governance and contract governance.Finally, the paper has a systematic analysis on the Chinese family business' external growth path, status quo and breakthrough of the problems. Networkization development is the main form of external growth of the Chinese family business. The special significance of networkization for the family business lies in enabling family business to acquire the necessary resources and core competencies under the background of preserving the advantage of family enterprises and giving full play to the Chinese family business's advantage of networks of social relations. In transformation era, Chinese family business networking production relied on the relationship network to reduce external transaction costs; reducing asymmetric and incomplete information risk arising from opportunism; solving problems brought from the incomplete external market. The direction of Chinese family business networking evolution was decided by the capacity of expansion of Chinese micro-individual social capital and the dimension of quality of macro-social capital. The international development of Chinese family businesses is also the form of its external growth. Nowadays, most Chinese family business have realized internationalization through personification trading network, resulting in "path dependence." According to the different nature of networks, enterprise networks can be divided into mechanical and organic ones. To effectively meet the rapidly changing international business environment, family business should transform its mechanical networks into organic ones, in accordance with the changes both in international market and domestic and international policy.This paper has some major innovations in the following areas on the basis of existing research: First, it regards family businesses not as a system of transitional arrangements for the family business, it can grow in size and strength, but the premise is to solve the problem of family businesses' financial, technical, talent gap and institutional innovations (through corporatization and networkization). Second it clearly points out the the goal of transition within the Chinese family business system is to change the reality of property rights and to address the family business' property rights disputes, at the same time, in the preservation of family control through property rights and opening up the financing to achieve the purpose of financing and raising the wisdom; the right of controlling the shared by the inside and outside of the family; the combination of relationship governance and contract governance. With the completion of restructuring the family business, the family business' character dilutes gradually and the character of enterprise strengthens gradually. It argues that the networking is more suitable for small and medium-sized family busines to break through the limitations of the family business. It is worth considering as a model of industrial organization. Third it makes a analysis of the growth of the Chinese family business system's obstacles from the internal and external, macro-and micro-perspectives. A family-oriented culture is the internal radical obstacles to the growth of the Chinese family business ; legal, moral (mainly professional ethics), the policy environment is external fundamental obstacle to the growth of the Chinese family business. The key is how to push forward the transformation from Family Business system to relational contract. Fourth, the "corporate profit" business growth can be regarded as the ultimate symbol of the enterprise. To realize business growth through paths such as the way, scale, technological progress, management level, networking , to guide enterprises in improving the profitability of the ultimate goal, to explore a variety of growth methods of business. The "adaptive efficiency" as a judge of the growth of an enterprise's dynamic standard, the characters of "family" and "enterprise" of family business corresponds to a different environment for the development, there is no question of merits.