The Influence Of Clan Culture On Family Business Governance

Family business is a significant and long-standing organizational form widespread around the world.European proto-industrialization was accompanied by the rise of family-owned businesses.Family businesses are still a numerically important group of enterprises and essential for economic growth in modern times.Since the reform and opening up,China’s family enterprises have mushroomed,and contribute actively to improvement,innovation and employment.There must be rationality and superiority of corporate governance system in family firms.However,as the improvement of development environment,there are still many problems in family governance.At the initial stage of establishment,small family-owned businesses tend to have low external credit.They rely mainly on the joint operation of entrepreneurs and their family members for development,thus showing a high level of family involvement in the management.With the continuous growth of family businesses,the complexity of management is gradually increasing,presenting the need for introducing external executives to participate in business operations.At present,family enterprises in China are undergoing a critical period of transformation and upgrading for sustainable development.A series of policies and measures aimed at helping them resolve the difficulties and problems,fully stressed the importance of optimizing corporate governance and nursing entrepreneurs and managers.In fact,many entrepreneurs have realized that over-centralized family governance needs gradual normalization and socialization.Previous studies on family businesses suggest that family firms differ from nonfamily firms in that family members with kinship ties participate in business operation in the former.Therefore,for a firm with two organizational systems(i.e.,family and business),factors such as family patterns and philosophy often become the primary reference point of behaviors and decision-making.Specifically,compared with nonfamily firms,family firms are more vulnerable to the influence of individual needs and emotions;thus,family firms depend on both business and family logic for operational and strategic decisions.Family businesses are established by blood relationships or legal marriage,which leads to an emphasis on family authority and human relationship.Therefore,their daily operations and decision-making not only depend on the rules of enterprise and market but also follow the local value system and cultural regulation.Theoretically,can the differences in the characteristics of governance among family firms be interpreted from a cultural perspective?There are few studies on it.Family businesses are not a homogeneous group,and the motivation levels of different businesses to prioritize familyspecific goals may not be the same.In addition,it is easy to put forward some "panacea" for corporate governance when studying family enterprises as the same entity,which is misleading for both the practical and academic circles.Meanwhile,family trust and relationship influence the corporate governance patterns in the Chinese context.Therefore,when studying the governance characteristics of family enterprises in China,we should pay special attention to the traditional cultural resources.On the basis of the existing literature,this study explored differences among family firms in corporate governance under the influence of clan culture and examined the mediating role of family management involvement.The study is divided into three parts.The first part is theoretical research.The knowledge background,research status,and knowledge structure of literatures on family business governance are visualized through literature co-citation and keyword co-occurrence by using CiteSpace based scientometrics survey.With special attention given to the heterogeneity of family business,this study summarizes and analyzes four types of theories(management,economics,sociology,socioemotional wealth)that have been significant in explaining the\characteristics of governance among family businesses.On this basis,the study focuses on the corporate governance from a culture-based perspective,especially clan culture which probably explains the heterogeneity of family business governance.This part also conducts research on the development trend and general applications of socioemotional wealth theory and social embeddedness theory,developing a theoretical foundation for constructing model and proposing hypotheses.The second part is the construction of theoretical model.On the basis of theoretical research,this study puts forward the following viewpoints:Clan culture firstly affects the willingness of family executives to participate in business operation,maintains a high level of family involvement in management and an embeddedness of family relationship and emotion in business;Controlling family strives to preserve their socioemotional wealth through family involvement in management,creating different effects of corporate governance.To enhance the understanding of the relationship between the mentioned variables,this study constructs a clan culture-governance effect model based on the use of family management involvement as the mediating variable.Hypotheses are proposed on the basis of theories and evidence that:family firms in regions with strong clan culture are more inclined to include family members in management,strengthen controlling shareholder constraint,improve management efficiency,and bear social responsibility;family management involvement plays a mediating role in the relationship between clan culture and local family business governance.The third part is empirical research.The study sample includes the data on all family firms listed on the Small&Medium Enterprise Board and Growth Enterprise Board of the China Shenzhen Stock Exchange.The genealogy data of cities were obtained by consulting The General Catalogue of Chinese Genealogy published by Shanghai Ancient Books Publishing House.Financial status,governance structure information,and personal information of the chairperson used in this study were all obtained from the China Stock Market&Accounting Research(CSMAR)database.After that,the descriptive statistics and correlations of the dependent,independent,and control variables are presented.On this basis,we employ the regression method for further testing the research hypotheses,including ordinary least square regression(OLS),limited dependent variable regression(Tobit),stepwise regression analysis of mediating effect,etc.The regression results can support the hypotheses of the main effect and the mediating effect in this study.Finally,various robustness tests are performed to ensure the reliability of the research results,and the results are still consistent with the original results.This study provides valuable contribution to research.First,this study takes regional cultural differences as a clue to explain the heterogeneity of family firms and promotes existing studies to focus on what are the differences between family enterprises.Second,this study proves that clan culture also affects the governance characteristics of family enterprises and introduces the macro-level factor into the analysis framework of "how to design the governance mechanism of family firm".Third,this study contributes to interdisciplinary research on sociology and management and provide empirical evidence from China for the interaction between social culture and business management.This study mainly has three practical implications.For policy makers,the positive role of culture in family business governance cannot be ignored,and more attention should be given to the regions where it is difficult to achieve effective governance relying on culture.For managers of family businesses,it is necessary to introduce the macro-level factor such as social culture into the designing framework of family business governance mechanism,and attach importance to the cultivation of emotions and trust depending on local culture.For the public,it should be comprehensive and objective to evaluate the influence of traditional culture on contemporary corporate governance,and deepen the understanding of the cultural function and value.