Family Contracting Problems And Governance Mechanisms In The Family Business Research

Guiding principles of professional investigation in social sciences can help us to clarify understanding of the complicated segments of the social world(Sharma, 2004), but things doesn't seen to be in such circumstances in the field of family business research. It is becoming a common view that family firm theory has received scant attention in the mainstream management literature, particularly with respect to the development of Theory of the Firm(Chrisman et al., 2003).The biggest reason comes from the inner-field of family business research because it is still in a "pre-paradigm" condition and there is no consent about the range of key factors and theoretical framework(Xinchun Li, 2004). Some theoretical confusion occured in the family firm study as family governance, and the effects of family influences on firm performance, consequently the whole basis of the research field of family business is NOT in a steady situation under these reasons.Governance is a long-term difficulty in Family Business research, Melin(2000) considered that the definition and mechanism of governance of the mainstream theory can not apply well in family firm governance study, and Lubatkin et al. (2005) claimed that the governance problems of family firm are hard to solve in the existing theory.The role of family in the firm and its influence to the firm is becoming a common interest in recent research (e.g., Chrisman et al., 2003; Habberson et al, 2003; Mustakallio et al. 2002), and it can create unique resources and capabilities in the firm. Such inclines may clue to the importance of the family contracting in family firms:(1)nature of the firm: Family be much more stressed other than the firm(2)contract character: Family contracting be stressed other than the firm contract(3)agency costs: Family team's behavior be emphasized other than the managers'(4)family influence: Negative perspective be recognized other than the positiveThe purpose of this article is to find a new line of analyzing family governance, and the analysis base is the nature of family business. When the figure of the family contracting is drew in detail, a theoretical model is made to link the effectiveness of family governance with family firm performance by the mesne variables of Agency Problems and Altruistic Effect. The theoretical model simplified a mixed perspectives of different theories as agency and stewardship, and different evaluations of efficiency of family contracting.It's considered in this dissertation that the process of family contracting has a two-faced capacity: The condition of family governance will reduce agency costs meanwhile raise them, the governance of altruism can help to amplify the advantage of family firm, but it can also engender self-control problems which are difficult to solve in family firms. The better the family contracting is governed, the more efficient the family business will be.The main results and implications of the research in whole can be concluded in the following three aspects:(1)By getting the analysis deeper into the family, the mythos of this dissertation plays a new role in family business researching field, which is also valuable because of the extreme importance of family influence to the family firm governance.As considered by Chrisman et al.(2003), the viewpoint that family is to be most important analyzing variable in the study of family-controlled firms will be undertaken by more researchers. By revelation of the concluding of contracting governance factors and mechanisms of how the factors work on agency costs and altruistic effect and finally on the firm performance, this dissertation may give much help in the study of the characteristic of family business and it' governance.(2)The angle of view in this research may be more impersonal. NOT like some former angles of view, "good or bad"(Whiteside et al., 1996) is not to be a ingredient in this dissertation. This can be much more helpful for the study of governance of family business, because family influence will not only bring some governance obstacles but also can form some kind of special advantage.The describing of the purpose of family contracting governance can incarnates that angle of view, which means to reduce the agency costs and enhance the altruistic effect. This angle and researching style can be newly valuable academicly, and it also shows a veracious affiliation to the real world of family business governance.(3)The research put forward a model and demonstration process to test the theoretical hypothesises, which is a scarcity of the former research. Questionnaire and interviews are finished in family businesses from three area: Zhe Jiang, Guang Dong and Hu Nan. The demonstration process and results may promote contribution to the study of family business governance because it can show the linkage between family factors and firm performance, which is not considered to be notable and relevant statisticly in the former research.