An Approach To The Sustainable Development Of The Chinese Family Business

Though the Chinese economy depends heavily on the continuity and success of the Family Business, it is unfortunate, even alarming, that such a vital force has such a poor survival rate. Taking a contractual nature of the firm perspective, this article attempts to outline a new approach to the sustainable development of the Chinese Family Business (CFB). Since the Contracting Process of CFB is just an Incomplete Information Dynamic Game of the Human Capital and the Money Capital. The article establishes such a game model, based on the characteristics of the capitals and the gift of CFB, together with the changes of the stages of CFB as well. Through normative and positive analysis, we investigate that the Pareto optimal solution of the Game is a cooperative equilibrium solution, which can lead to form a self-optimizing Firm Contract. Content the qualifications of the cooperative equilibrium solution, a series of Institutional innovation should be implemented in CFB. Institutionalization, which leads to perfect matching between Human Capital and CFB, will make the Organic Rent maximized; the critical competitive power of CFB improved, observed in such aspects as the arrangement of property right and the right asking for Corporation Surplus, the reconstruction of Family Business Culture and the behavior of capital owners. Consequently, CFB can be built to last.