The Influence Of Product Market Competition And Investment Behavior On The Governance Transformation Of Family Firms

As an influential modern organization in contemporary economic society,family firms' importance to global economic development is evident.The issues around family firms have always been a research hotspot of scholars at home and abroad.Along with China's economic transformation,China's family firms have achieved vigorous and stable development,and family-controlled listed companies have also become an important force in the development of the market economy.However,due to that the founder's management skills and social resources cannot be effectively inherited,the performance of the company after inheritance is significantly poor,and some even fall into business crisis.Through summarizing experience of repeated failures in inheritance events,family firms continue to explore and move forward on the road of governance.The theoretical and practical circles have begun to find new ways for the long-term development of family firms,and family firms' governance transformation has been widely concerned.Based on the practical problem of how to transform family firms' governance,this paper subdivides family firms' governance transformation into internal control type(type I),external management type(type II),external ownership type(type III)and open type(Type IV)according to whether ownership and management rights are controlled by the family.It further explores the impact on corporate governance transformation from the perspectives of external product market competition and internal corporate investment behaviors.It mainly solves the following key issues: First,whether product market competition will lead family firms' governance transformation,and whether there is a difference in the impact of competition intensity and competition position on governance transformation;second,in investment behaviors,whether capital investment,R&D investment,and corporate merger and acquisition will lead to family firms' governance transformation,and what type of transformation will be caused by the above mentioned three investment behaviors;third,whether the interaction of product market competition and corporate investment behaviors will lead to family firms' governance transformation,and what type of transformation it will cause.In order to solve the above issues,this paper conducts research from the following aspects.First of all,this paper reviews the relevant literature on family firms' development,definition of governance transformation and the influencing factors of governance transformation.Then it sorts out the relationship between product market competition and governance transformation,product market competition and investment behaviors,and investment behaviors and governance transformation.Secondly,it introduces the control theory,the theory of family firms' governance,the theory of information asymmetry,and the hypothesis of incentive mechanism and liquidation threat,which provides necessary theoretical support for the subsequent mechanism analysis and hypothesis.At the same time,the research logic framework of the article is introduced.Thirdly,from macro level,it conducts an in-depth study on the impact of product market competition on family firms' governance transformation.By analyzing the path and mechanism of the influence of product market competition on family firms' governance transformation,the further empirical research draws the conclusion that product market competition promotes the family firms' governance transformation.Study finds that both competition intensity and competition position promote family firms' governance transformation,only that there is a slight difference in the way of transformation.Competition intensity promotes transformation by opening up management rights,and competition position promotes transformation by opening up ownership.Fourth,from micro level,it conducts an in-depth study on the impact of investment behaviors on family firms' governance transformation.It carries out theoretical analysis,proposes research hypotheses,and tests with empirical research from the impact and path of investment behaviors on family firms' governance transformation.The study finds that capital investment inhibits transformation,while R&D investment and corporate merger and acquisition make the firms promote transformation by opening up their ownership.Fifth,it examines the impact of the joint effects of macro and micro levels on governance transformation,and conducts an in-depth study of the interaction of product market competition and investment behaviors on family firms' governance transformation.The paper theoretically analyzes,proposes research hypotheses,tests with empirical research from the interaction of product market competition and investment behaviors on the influence and path of family firms' governance transformation.The study finds that the product competition market strengthens the negative effect of capital investment on family firms' transformation to opening up governance,strengthens the positive effect of R&D investment on the of family firms' transformation to opening up governance,and weakens the positive effect of merger and acquisition on family firms' transformation to opening up governance.Finally,the paper summarizes and proposes management implications.This study mainly has the following contributions and innovations:Firstly,it systematically provides theoretical and empirical evidences on the impact of product market competition on family firms' governance transformation,and expands the research perspectives of family firms' transformation.Previous studies on the macro environment were mostly limited to the impact of the institutional environment on family firms' governance transformation.In terms of product market competition,previous studies have shown that,compared with family managers,nonfamily managers are more adaptable to the fierce competition environment,which leads to improved corporate performance.And previous studies mainly explored governance transformation from the aspect of management rights.This study divides product market competition into competition intensity and competition position,and measures governance transformation from the two dimensions of ownership and management rights.It draws the conclusion that product market competition promotes family firms' governance transformation,and enriches the relevant theories of governance transformation.Secondly,the paper explores the influence path and mechanism of investment behaviors on family firms' governance transformation,which provides an important idea for governance transformation.This study divides investment behaviors into capital investment,R&D investment and corporate merger and acquisition.Most of the previous researches on family firms' investment behaviors focused on the differences between family and non-family investment behaviors,lack of in-depth exploration in investment behaviors and governance transformation.This study measures governance transformation from the two dimensions of ownership and management rights,analyzes the mechanism of how investment behaviors affect governance transformation,and draws the conclusion that capital investment inhibits transformation,while R&D investment and M&A activities promote transformation through empirical research,which makes up for the deficiency of existing research in this regard.Thirdly,the paper explores the impact of the interaction between product market competition and investment behaviors on governance transformation.Most of the previous studies focused on whether product market competition promotes family firms' investment behaviors,but lack of in-depth exploration on the interaction between product market competition and family firms' investment behaviors on family firms' governance transformation.This paper analyzes the mechanism by which the interaction effects of product market competition and investment behaviors affect governance transformation,and clarifies that family firms' governance transformation is the result of the interaction between market competition and micro-enterprise investment behaviors.The study results show that the higher the degree of product market competition,the stronger the negative effect of capital investment,the stronger the positive effect of R&D investment,and the weaker the positive effect of M&A activities on transformation.The conclusions make up for the lack of research on the impact of the interaction between the two factors on governance transformation,and provide theoretical guidance and practical reference for family firms' governance transformation.