Abstract: Because of the relative or absolute concentration of ownership structure, the multiple roles of participants and altruism, the governance of family business is very different from that of general companies. While recognizing the particularity of the governance structure of family enterprises, the researchers discussed its constituent elements and analyzed its governance mechanism. After the theoretical framework of family business governance structure was gradually established, the empirical research on the relationship between family business governance structure and business performance began to rise in view of the performance comparison between family business and non-family business. This paper mainly combs and summarizes the research on the governance structure of family enterprises abroad in recent ten years from the aspects of particularity, constituent elements, governance mechanism and its influence on enterprise performance.
Paper Keywords: family business; Governance structure; Enterprise performance
The study of corporate governance in mainstream economics is based on the separation of ownership and control to explain how to protect the interests of shareholders through a set of effective institutional arrangements and mechanism design. Most of these studies are based on the principal-agent relationship between owners and managers and the analysis perspective of interest conflict, which constitutes the mainstream paradigm of corporate governance research. But the fact is that a large number of enterprises, including listed companies, are controlled by major shareholders, and most of them are owned and controlled by families. Therefore, some scholars believe that there is a corporate governance structure based on family control besides the Anglo-American model and the German-Japanese model [1].
Reasonable governance structure is the key to the sustainable development of family business. American scholar Ward (1998) pointed out that family businesses with effective governance practices are more likely to make strategic planning and successor planning. Generally speaking, such enterprises grow faster and last longer [2]. In the existing literature of family business, many foreign scholars study family business from the perspective of corporate governance structure. While recognizing the particularity of the governance structure of family enterprises, the researchers discussed its constituent elements and analyzed its governance mechanism. After the theoretical framework of family business governance structure was gradually established, the empirical research on the relationship between family business governance structure and business performance began to rise in view of the performance comparison between family business and non-family business. The particularity, constituent elements, governance mechanism and its influence on enterprise performance of family business governance structure are summarized in this paper.
First, the particularity of family business governance structure
It is generally believed that the family's ownership and control over the enterprise are the essential characteristics of the family enterprise. Family members own all or most of the shares of the enterprise and have the right to make major business decisions, and the enterprise management system and family relationship system are integrated with each other. Because of its relatively or absolutely centralized ownership structure, multiple roles of participants and altruistic behavior characteristics [3], the governance of family business is very different from traditional corporate governance, which highlights the particularity of family governance, which is embodied in kinship, family trust, parental rights and altruism. Therefore, in the family business governance structure, besides the traditional corporate governance structure, it also includes internal governance, the relationship between family members and enterprises, and the relationship between family members and non-family members, that is, the family business governance structure includes formal contract governance and informal relationship governance [4].
Because of the different goals of families and enterprises, on the one hand, families value feelings and take members as the center, and usually resist change. On the other hand, if an enterprise wants to survive and develop, the enterprise system must take the opposite attitude-complete the task, pay attention to the external environment and try to take advantage of the change [5](P6). Therefore, "the design of the governance structure of family enterprises must promote the harmony and happiness of families and safeguard the long-term interests of family shareholders by ensuring the growth and continuity of enterprises." This means that both families and enterprises need governance "[6](P363).
Second, the elements of family business governance structure
The academic research on the governance structure of family enterprises began with the board of directors, discussing the function, scale and composition of the board of directors, emphasizing the important role of non-family members and external directors in the governance of family enterprises [7][8], but ignoring other elements in the governance system, such as the important position and role of families and their corresponding organizations and senior management teams in governance. Because the advantages and success of family business depend on the coordination and cooperation of all parties in the governance structure, a broader perspective (or systematic perspective) is more suitable for the study of family business governance structure.
Neubauer and Rank (1998) are the first scholars to discuss the governance structure of family businesses from a systematic perspective. They define corporate governance structure as a system that commands, controls and is responsible for enterprises, and think that the elements of family corporate governance structure should include the following three aspects: family and its corresponding organizations, board of directors and senior management team [2]. Most researchers believe that family business is still in the initial stage of starting a business, and there are fewer problems in family governance; With the development of enterprises and the increase of family members, there will be differences of opinion on family development goals, strategies and interest distribution. At this time, it is necessary to standardize the family relationship, standardize the role of the family in the enterprise through family governance, enhance its organizational commitment, coordinate the relationship between the family and the enterprise through the principles and rules of understanding, and ensure the normal operation and continuation of the enterprise. Family governance mainly includes family system, such as family or family agreement, family charter and family institutions, such as family meetings, family councils and other family institutions.
According to the viewpoint of system theory, the governance structure of family business should include all stakeholders in the family business and their interactions within the system, such as the relationship between family and board of directors, the dynamic relationship between different stakeholders and board of directors, the relationship between family and operators, and the multiple relationships between family, board of directors and management. Perza pointed out that family enterprises can strengthen the role of corporate governance through the appropriate contributions of the board of directors, advisory committees, family councils, family gatherings, annual general meeting of shareholders and senior management teams [9](P 148).
Third, the governance mechanism
Researchers generally believe that the effective governance structure suitable for listed companies cannot be directly transplanted to family businesses. Due to the concentration of equity and direct management control, family members have a strong sense of mission, pursue long-term goals, are good at self-analysis, can adapt to major changes in time, and are more creative. Traditional corporate governance often focuses on establishing boundaries and defining the distribution of decision-making power. On the contrary, family business governance pays more attention to establishing fruitful and procedural work within the system. We explain it from control mechanism and trust mechanism respectively.
(A) family control governance mechanism
Family business is mainly controlled by centralized equity, and family members and cronies are arranged in key positions, which is pan-familial, showing the tendency and characteristics of thrift, particularism and personification authority [10]. In view of the integration of the identity of the owner and the operator in the family business, the undertaker of risks and opportunities is the same subject, which is conducive to overcoming the dilemma of high agency cost and supervision cost in the traditional principal-agent model. This interest alliance may be weakened by the participation of many families, but compared with other forms of enterprise organization in which owners and operators are completely separated, centralized ownership gives owners the motivation to supervise managers, thus reducing agency costs and supervision costs [1 1]. In addition, in order to ensure the most adequate and effective allocation of capital, family businesses often strictly control unproductive costs. Gallo, 2004) and others show that the operating expenses of family businesses are significantly lower than those of non-family businesses, which may be due to the fact that family businesses have less R&D expenses, advertising expenses and consulting expenses [12].
Family enterprises often rely on family authority and internal loyalty to achieve control of enterprises. In a typical family business, the decision-making power is in the hands of the head of the family. Family enterprises have the tradition of respecting authority, and authority replaces coordination, which is easy to obtain the recognition and active cooperation of subordinate departments on the decision-making objectives of enterprises and reduce the contradictions and frictions of different stakeholders in decision-making. Weber believes that there are three forms of legal authority, namely traditional authority, charismatic authority and legal authority [13]. Traditional authority comes from customs, practices, experiences and ancestral teachings. , its essence is obedience; Charm authority is based on extraordinary personality, heroism and entrepreneurial miracle, and its essence is admiration; Legal authority is based on the belief in the legality of rules and regulations and codes of conduct, and its essence is rationality. Family authority is based on respect and loyalty, rather than rationality, and has personalized characteristics. It is the authority of personification that enables the family to integrate its vision into the enterprise [14].
As the management right of family business is passed on to the next generation, the authority of the previous generation of parents is also given to the next generation of successors, but compared with the previous generation of parents, the absolute authority of the next generation of successors is often reduced, which is also the root cause of conflicts and contradictions in the second or third generation of family business.
(B) Trust governance mechanism
Fukuyama believes that "the so-called trust is based on the norms of community members and the role of individuals belonging to that community, and the expectation of normal, honest and cooperative behavior among members of the community" [15].
(Page 35). Because the family business embodies the economic goals that the enterprise must pursue on the one hand, and the ethical relationship among family members on the other hand, trust, as an economic ethics, has special significance to the internal organizational relationship of the family business. Trust can reduce transaction costs, promote management coordination, intra-enterprise cooperation and the emergence of adaptive organizations, and prevent opportunistic behavior. It is a substitute for hierarchical governance and an adhesive between trading partners. If both parties have enough trust, even if the formal contract is incomplete and the counterparty has the opportunity to speculate, the transaction can continue, because the trader believes that the counterparty will not speculate, even if they have the opportunity [16]. Steiner (200 1) points out that the governance mechanism based on trust is the competitive advantage of family businesses. His main viewpoints are as follows: some family businesses basically rely on trust governance mechanism, which greatly reduces transaction costs and provides important strategic advantage resources; In the early stage of the development of family business, trust is a prominent feature of its governance structure; With the evolution of enterprises, trust continues to be a governance mechanism, but its efficiency depends on the investment in this governance mechanism; The development of family business will be affected by the failure to introduce a new governance mechanism suitable for the development stage; The behavior pattern formed in the initial stage of family business may be integrated into enterprise system and enterprise culture, which makes it difficult for enterprises to introduce new governance mechanisms, such as formal contract governance; The degree of trust among the main participants in the governance structure of family enterprises determines the manifestation of the governance structure [17].
How to maintain trust is of great significance to the development of family business. Sundaramurthy, 2008) draws lessons from the research results of organizational behavior and social psychology on trust, and combines the practice of family business, and thinks that interpersonal trust in the initial stage of family business should be continuously strengthened and improved through structure and process. According to the development stage of family business, she divides trust into three types: interpersonal trust, ability trust and system trust, and points out that these characteristics provide a cognitive and emotional basis for interpersonal trust, because family members are based on kinship, familiarity and similarity, and family business has a high degree of interpersonal trust in the initial stage. With the growth of family business, ownership and management rights are gradually dispersed among family members, and some family members are also divorced from daily operations. Those family members who are not involved in daily management are more inclined to trust capable people to run enterprises. At this time, opening to experienced and knowledgeable people outside is conducive to enhancing ability and trust; With the further development of family enterprises, transparent and continuous regulations applicable to families and enterprises are conducive to enhancing institutional trust; In addition, when there are more than one generation in the family business, high-quality communication and exchange are the elements to promote interpersonal trust [18].
Fourthly, the governance structure of family enterprises and enterprise performance.
The related research on the governance structure of family enterprises ultimately lies in the research on the relationship between governance structure and enterprise performance. In recent ten years, based on the large sample data of micro-enterprises, there have been some empirical studies on the governance structure of family enterprises. These studies compare the different structural characteristics and corresponding enterprise performance of family enterprises and non-family enterprises. Jaaski Vika and Klein (Jaskiewicz &; Klein, 2005) analyzes 55 articles about the performance of family businesses (among which 14 samples are unlisted family businesses and 4 1 samples are publicly listed family businesses). It shows that 46% of the research thinks that the performance of family business is higher than that of non-family business, 20% thinks that there is no difference between them, and only 8% thinks that family business is lower than non-family business. Scholars generally believe that the factors that determine the performance of family enterprises are mainly industry, enterprise characteristics, governance structure and management characteristics (especially the personal characteristics of entrepreneurs in start-up enterprises). The existing literature mainly analyzes the influence of family enterprise governance structure on enterprise performance from the perspective of family ownership, management and control. Among them, the influence of family factors on enterprise performance is mainly analyzed and expounded from the dimensions of family or enterprise goals, family relations and family resources or family capital. They use agency theory, resource-based theory and transfer theory respectively, and propose that some factors in the family can reduce agency costs and are unique resources of family enterprises. These factors form the competitive advantage of family businesses and improve their performance, while other factors will increase agency costs and damage their performance. It is worth mentioning that Miller & ampLeBreton-Miller (2006) developed a model integrating agency theory, housekeeper theory and enterprise capability theory, explaining how family governance affects enterprise performance. They investigated family governance from four dimensions: family ownership and control, family management, family members' participation and intergenerational inheritance, which will affect agency cost and responsibility attitude respectively, and then directly or indirectly affect enterprise performance [20].
Generally speaking, so far, there is no consistent conclusion about the relationship between the governance structure of family enterprises and enterprise performance, so it can be said that this issue is unresolved. Some scholars have pointed out that the differences in the research on the governance structure and performance of family enterprises and non-family enterprises are not necessarily valid, which may be caused by the different definitions of family enterprises. Furthermore, the selection of samples is also a problem, some are listed companies, some are unlisted or small and medium-sized family businesses. Finally, the measurement standards of performance are not the same. In the existing research, scholars mainly use the rate of return, Tobin Q and productivity as indicators to describe enterprise performance, and there are important differences between them. The rate of return mainly reflects the existing operating results, Tobin Q mainly reflects the market's expectation for the future, while the productivity reflects the output efficiency of all inputs in production. We summarized some empirical studies in recent years in the form of tables. Although the researchers have not come to a clear conclusion, they have gained some knowledge about some problems. First of all, there is enough evidence to show that the performance of family enterprises is not inferior to other types of enterprises, or even higher than them. The good performance of family business depends on patient financial capital, decision-making mechanism to assess the situation and proper market positioning. Secondly, entrepreneurs' participation in business management plays an important role in improving the performance of family businesses, but their descendants do not. The reason may be that most entrepreneurs are full of entrepreneurial talent, and their descendants often fall into the trenches of management. Thirdly, unrestricted family involvement will have a negative impact on enterprise performance, especially for enterprises that have stepped out of the entrepreneurial stage. Finally, in countries with better legal protection for investors, such as the United States and Western Europe, family ownership can improve the performance of enterprises, while in countries and regions with imperfect legal systems, such as East Asia, family controlling shareholders often infringe on the interests of minority shareholders, thus damaging the value of enterprises.
A brief comment on verbs (abbreviation of verb) and its future research direction
Looking at the existing research on the governance structure of family enterprises abroad, the author believes that, firstly, the family or family relationship system makes family enterprises more complicated than the general enterprise organization, and it is an all-encompassing group, ranging from mom-and-pop shops to multinational groups, from newly established small family workshops to century-old shops handed down from generation to generation. These factors make the previous corporate governance theory based on decentralized ownership structure unsuitable for direct transplantation to analyze the governance structure of family businesses. Secondly, the literature review shows that the governance structure of family enterprises is deepening with the advancement of research, from focusing on a single governance subject and highlighting the role of the board of directors in family enterprises to emphasizing the interactive and integrated governance system. Finally, from the literature of governance structure and enterprise performance, the existing research lacks comparability. First, the governance structure includes multiple roles. When discussing governance structure and performance, it is difficult to isolate a certain factor. Second, the different definitions of performance further limit the comparability of empirical research results. Third, governance practice and performance measurement change with different industries, enterprise scale and legal environment.
The main contributions of foreign countries to the study of family business governance structure are:
It makes up for the blank of traditional corporate governance theory in the study of family business as an economic organization form; This paper highlights the role of governance structure in the performance of family enterprises and makes an empirical study on it. In terms of research methods, scholars not only use the principal-agent theory, but also absorb the relevant theories of other related disciplines, such as strategic management, housekeeping theory, formal contract governance and informal relationship governance, social network theory and cultural and institutional environment analysis. However, the deficiency is that the relevant research results are still scattered, and there is no leading theoretical analysis framework and extensive research topics. In addition, researchers can expand the following questions in the future:
First, governance exists not only within enterprises, but also among enterprises. Most of the research is aimed at a single enterprise, and the relationship between family enterprises, such as the governance structure between enterprise groups and the influence of enterprise network on performance, is not involved. This kind of governance structure is also worth studying.
Second, although the empirical research conclusions based on different samples are inconsistent, it represents the trend of related research on family business governance structure. The further improvement of governance structure and family participation will improve the reliability and effectiveness of empirical research. In addition, the cross-regional and national comparative study based on large samples is conducive to bringing the external market, economic system and culture into the research framework.
Thirdly, most of the existing studies measure the performance of enterprises from market value and financial indicators, but the performance of enterprises is not limited to this. Many studies show that the goals of family businesses are diversified, such as providing job opportunities for family members; Provide customers with high-quality professional services; Family reputation and the inheritance of core values. If we don't consider the enterprise's goals, the analysis of enterprise performance is inappropriate. How to comprehensively and multi-dimensionally examine the performance of family businesses is a problem facing scholars.
Finally, it should be pointed out that the governance structure of family business itself is constantly changing and developing, and it will take time to give a clear answer to the nature and efficiency of the governance structure. The governance structure of family business is a complex research field, which needs further study. I hope our work can provide ideas for domestic related research. China Academic paper net writes academic papers for you, with professional integrity! Please contact our customer service for details.
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