The Growth Mechanism And Change The Path Of The Family Business

Family business is one of the oldest enterprise organizations in the history of business industry. The development of modern market economy, to a certain degree, is a history of family business evolution. The family business is not only ancient, but also modern if it is identified by the ownership. The family business plays a universal and basic role not only in the Pan-East Asia with a thick family value of Confucianism culture, but also in the mature rational market economies. In China, with the emergence of family business and the deepening of the transformation of SOEs, it is inevitable that the private sector rejuvenates and develops fast. These are the reality basis of my research.The paper develops with the "embedding" and "withdrawing" of family capital in the orgalizational process of firm. Together with the relevant research fruits of modern firm theories and modern family economics, the paper aims to discuss the economic nature, growth mechanism and its path of change of typical family business. The core questions of this paper are the following: (1) what is the natural distinction between family business and non-family business? (2) How the family originates, how it promotes the form of the firm order and what decides the boundary of family business. (3) What is the reason of the change of family business and what decides and influences the trends and the path of changes, and what is the result of these changes.These pure theoretical problems hand closely with the practice of private sector in the Chinese eoconomic reform, and three other sub-questions will be extended: (1) If family business is an ineffective classical enterprise organization, why Chinese private enterprise will commonly choose to voluntarily lock in this classical institution structure? (2) If the transition from family-controlling type to manager-controlling type is inevitable, what hinders this transition from happening? (3) Is there another change path of the development of private family business, different from the normative growth type-separation of ownership and execution, if the institutions are exogenously given?The paper is divided into two parts . In the first part, which includes two chapters (Chapter2 and chapter 3), a theoretical framework is developed for analyzing the structures , operations and evolutions of classical family-firm . The second part consisting of chapter 4 explored a more convincing explanation for the past process and for the future Path about family business in china . in the fifth chapter , we make a summary at the end of the paper and present a brief prospect about research on family busniess.In Chapter Two, a literary review will be given about the "modem firm theory" and "modern family economics " as well as the systematic cognition of "family business" based on the above theories. Firstly we examine the concepts of "firm" and "family" in the neo-classical analytic frame. Secondly four main research paths in the development of modern firm theory are discussed on the base of classical ideas. Some relevant representative ideas about production organization withinfamily in family economics are reviewed. At last, a general evaluation about the ideas concerning those two research fields will be given, and the systematic cognition of the family business will be extended. "Family business" is regarded as a composite contract structure with "family capital" and "non-family capital" in this paper. Entrepreneur (or patriarch) plays a role of "central contract signatory" and he makes a choice between "familization" and "non-familization".In Chapter Three, the theoretical positive analysis about the establishment, enforcement, maintaining, and change of the family business contract is conducted, based on which, some general conclusions concerning the forming and change of family business are drawn. Firstly we examine the process of contract establishment under information asymmetry and prove that family business contract structure is the most economical and realistic choice that the entrepreneur c...