Family Enterprises In China To Explore

The definition of the family business between different scholars differs significantly, and the concept of the family business is fuzzy. So we might define it with fuzzy theory: If the proportion of the firm's capital occupied by a family is a, and the proportion of the firm'simportant management operation occupied by a family is b, then that the enterprise belongsto the family business as the jurisdiction degree is s (s =ab). The family business is popular all over the world, but the governance of family business is different between western countries and our country. Generally speaking, the governance of the family business in the western countries relies on the formal rule, and it in our country relies on the informal rule.In essence, enterprises are a kind of organizational form that the owners of production factor work jointly. Enterprises need governance because the opportunism will lead to some questions, such as principle agent problem, collective action problem and collective choosing problem, which have caused poor efficiency inside enterprises. The western scholar studies corporate governance in the formal rule, emphasizing the function in formal administration systems such as the board of directors and salary incentive system, etc. And there are some corporate governance mechanism, such as stocker holder's supervision , controlling of the board of directors , the excitation to the manager , the constraint of outside marketplace and the function of bank, etc.But for corporate governance, it is not enough to emphasize the function of the formal rule only. As North has said, the institution can be divided into formal rule and informal rule, and the latter is referred to culture. The study of the informal rule can't be neglected, in our country the culture (or informal rule) often plays a leading role in the family business governance. China is a country that owns a traditional family culture, in which people have a strong concept of family, and family ethics are putted in key status in social relationships, while social life out of family is extremely poor, so the function is very limited. The main characteristic of the traditional family culture in our country is: the altruism in the family, the family order and different trusting relationship between inside and outside the family. They can also solve the governance problem of the family business respectively: the problem of principle agent, collective choosing and collective action. So the form of the family cultural governance is effective to family business of our country recently.The family business of our country choosing this kind of governance form is not only influenced by traditional family culture, but also the rational behavior for enterprise in the particular environments. The imperfect legal system, abominable market circumstance, low -level technology and the small scale of the enterprise make it more excellently for the family business to rely on family culture than formal rule. However, as the improvement of the external economy environment and enterprise's own scale expanding, the incompatibility that this kind of governance brings is inevitable. And the change of traditional family culture also challenges this governance form. So the family business needs to change it's governance form.As the development of the governance of the family business in foreign countries, the formal rule has replaced the informal rule gradually. In fact, the governance of any enterprise is the combination of informal rule and formal rule, the difference lying in the relative function between them. In view of the above, the governance form can fall into three kinds: the forms that informal rule play a leading role, informal rule play the same role as the formal rule and formal rule play a leading role. We can't judge which form is better in the family business, it depends on the developing stage. Anything should suit the environment, therefore, when the family firm chooses it's governance form, it should also base on the factors such as it's own scale, family intensity of enterprise and the circumstance of external economy, etc.