The Family Rationality And The Family Firms

The worldwide prevalence of family business has attracted serious attention of scholars in the areas of economics, management science and sociology. In spite of the boom of the Chinese family business during the twenty years after the reform and opening to the outside world, there are many problems and barriers in the development of the family business remained to be resolved. In this paper, we review and analyze the foregone research of family business and find there are five puzzles in the research of family business (especially of Chinese family business) at home and abroad. Firstly, many researchers apply western business theory to the study of the family business and ignore the specific of social cultural tradition and institutional background which influences the Chinese family business action, so these researches can not explain many problems of family business properly. Secondly, there are not a consistent logic basis to study the family business from the perspectives of economics, management science and sociology, which can be seen from the limitation of current methodology and concept system. Thirdly, although many bachelors have studied the special factors of the Chinese tradition culture, such as the important influence of family doctrine and the consanguinity network, they haven't use economic tool, concept and language to explain these problems, so there are many works remained to be done Fourthly, many important problems of family business, such as property rights, ownership, professional managers and trust, have not been compared and analyzed according to the different cultural tradition of China and the western countries. Because these researches are confined in the framework of the western business theory, they cannot provide a reasonable explanation for the Chinese family business. Fifthly, there lack juristic research for Chinese family business. The underlying reason of many problems such as inobservance of the contracts and the ambiguity in property rights is the Chinese juristic tradition which is quite different from that of the western countries. The "patriarchal clan system" existed for several thousands years in China still has great influence on the family business today, so we must study these tradition comprehensively, or we will not explain Chinese family business properly. We believe that these puzzles were caused by the hypothesis of "individual rationality" in the western economics. Because almost all researchers, especially the researchers of economics, hold the hypothesis, methodology and the concept system of the western business theory without paying attention to the situation of China, they are surely unable to provide reasonable explanations to the practical problems of the Chinese family business. The "individual rationality" is the most essential concept in the western economics. From the time of Adam Smith to now, it has been regarded as basic hypothesis of western economics. Meanwhile, because the nature of self-interest is supposed to be unconditionally right, this hypothesis inevitably suffers many attacks. Although some modification were made such as substituting bounded rationality for absolute rationality and substituting utility maximization for interest optimization, etc, there still exist some serious problems, for example, the western economy theory cannot resolve the coordination and moral problems of the rational individuals , so it can not explain many characters of family business( especially Chinese family business). Another defect of this hypothesis is the separation of egoism and altruism in the start point of logic, which made the western economy theory on the basis of this logical system, can not embrace these two kinds of rationality, not to say explaining the functional of consanguinity in economic behaviors. If we apply western business theory to the studies of family business and accept the "individual rationality" without proper analyses and judgment, we will not understand the nature of family business intensively After a...