Evolution Of Internal Governance Structure Of Family Business In China

Chinese family businesses were born after the reform and opening up. They have made great contribution to the development of Chinese economy in their short history. But with the development of the society and the growing up of the enterprises themselves, many family businesses begin to face with the problems in their management. They must change their old mange style and governance structure, build up a new governance structure accommodating to the new time of knowledge economy.Firstly, this article analyses the status and efficiency of the current internal governance structure in Chinese family business. And proposes that the current governance structure, which is taken by the family business, has its inevitability during the initial market economy. However, with the expansion of the enterprises, their internal governance structure should take corresponding changes for the healthy and sustainable development of the enterprises.Secondly, this article analyses rationale and practical process of the evolution of the governance structure within the family business. Through a game, we conclude that the rising importance of human capital is the main causes of the evolution of the internal governance structure .In fact, the specific evolutions of the American and Japanese internal governance structure of family businesses certificate the argument. It also gives us some suggestions for the evolution of the internal governance structure.In the paper, the author builds a four-dimensions model to describe the evolution of the internal governance structure. These dimensions are enterprise form dimension, management post dimension, control rights dimension and family dimension. And suggests that the transfer of the control rights from the family members to the non-family managers is the key to optimize the internal governance structure .Finally, this article uses the perspective of system economics to analyze the process of the evolution, and proposes that the evolution is path dependence. Then it analyses the factors that impacts the evolution of the internal governance structure in our family business and gives some suggestions on how to optimize the internal governance structure.