Institutional Environment, State Ownership and Family Business Succession: Evidence from China*

Abstract

We examine the impact of the lack of institutional environment on the succession of family businesses and explore the moderating role of state ownership in the relationship. The empirical results show that in areas with poor institutional environment, it is more difficult for family business to inherit from generation to generation. State ownership in a family business can be used as an informal system to mitigate the negative impact of an imperfect institutional environment on succession. We also find that when state ownership comes from the local government or participates in corporate governance, its moderating effect is more significant.

The influence of family firm succession on financialisaton: evidence from China

“…In China, a new generation of founder-owned and managed firms emerged in the early 1980s, playing important roles in economic growth and employment (Wang et al, 2016;Yang et al, 2022). Currently, these business owners are contemplating retirement and anticipating younger family members to take over the businesses they founded, thus entering a critical period of continuity for both the firm and the family (Weng and Chi, 2019;Yang et al, 2021Yang et al, , 2022Zhang et al, 2020;Zhao et al, 2020). The notion of family continuity is particularly underpinned by the distinct Chinese social and cultural conditions (an aspect of Confucianism ideology) and manifested in maintaining family control over the business, thereby encouraging intra-family succession (Chen et al, 2021;Dou et al, 2020;Shi et al, 2019).…”

“…, 2022). Currently, these business owners are contemplating retirement and anticipating younger family members to take over the businesses they founded, thus entering a critical period of continuity for both the firm and the family (Weng and Chi, 2019; Yang et al ., 2021, 2022; Zhang et al. , 2020; Zhao et al.…”

The Impact of Intergenerational Succession Intention on Family Firm’s Innovation Strategy: Evidence from China

“…In locations with inadequate institutions, Chinese family companies, like many other transition economies, face negative consequences such as lower-level legal systems, higher degrees of government intrusion, and poor financial growth. The inadequacies in these systems have become the major elements affecting the succession of organizations throughout the delicate period of a generation shift (Chen et al, 2021 ; Yang et al, 2021a , b ).…”

“…In family firms, authority is not only obtained from the corporate side; rather, the family side plays an integral part in the firm’s decision-making at times. As a result, succession planning frequently starts with family attitudes and values, relationships, family involvement, and family socialization and governance, all of which are antecedents to the actual succession process before important succession events occur (Kubíček & Machek, 2019 ; Shi, 2021 ; Yang et al, 2021b ).…”

“…The appropriateness of the successor is essential to what the creator has been capable of holding the country for a lifetime, given the obstacles of the complex and challenging international economic and political situation, increased domestic expenditures, and downward pressure on the economy (Huang et al, 2019 ; Sari & Masdupi, 2020 ; Yan & He, 2019 ). Because of China’s traditional “home” culture, many family enterprises in the country “follow the father’s company.” Many creators, on the other hand, have begun to free their minds, putting aside the outdated concept of “no outsider” and attempting to find appropriate successors from a wider variety of immediate children, friends, and relatives, as well as subordinate employees and professional managers, in order to open up a fresh way to pass the baton of the family business today (Qi et al, 2021a , b ; Yang et al, 2021a , b ; Yu et al, 2018 ).…”