Why Do Family-controlled Firms Donate to Charity? The Role of Intrafamily Succession Intention, Social Status, and Religiosity

Abstract

Drawing on expectancy theory and the socioemotional wealth (SEW) perspective, we propose that family owners with intrafamily succession intention are more motivated to accumulate or preserve SEW. As corporate philanthropy is a critical way for family-controlled firms to accumulate or maintain SEW, family owners with intrafamily succession intention are more likely to engage in corporate philanthropic activities. Data on a nationally representative sample of family-controlled firms in China support our prediction. We also find that the relationship between intrafamily succession intention and corporate philanthropy is moderated by family owners' social status and religiosity. The findings contribute to our understanding about family businesses, in general, and those in China, in particular, as well as the SEW perspective.

When Does the Family Matter? Institutional pressures and corporate philanthropy in China

“…Since the majority of the firms in our sample are private small and medium firms, we adopt a higher threshold of 30% (Gómez-Mejía et al, 2011). In robustness checks, we used 20% and 50% as thresholds (Li, Au, He, & Song, 2015), and the proportion of firms in our sample that fall into the category of family firms changes only slightly (around 4%) when these threshold values are used.…”

Political connection and business transformation in family firms: Evidence from China

“…Chineseprivate firms were born in the early stage of the transition from a planned economy to a market economy. Due to the lack of accumulated core resources such as capital, technology, or management, they usually pursue profit by a simple combination of production factors and a low level of technical management under a scenario of labour-intensive and price competition (Li, Au, He, & Song, 2015;Li, Chen et al, 2015). The main characteristic of this business model is low entry barriers, which has helped many new private firms enter related industries.…”

“…The main characteristic of this business model is low entry barriers, which has helped many new private firms enter related industries. However, because too many companies entered the market, the competition among them was limited to competition via low prices, which led to a vicious price and promotion war (Li, Au, He, & Song, 2015;Li, Chen et al, 2015). Hence, private firms have a strong incentive to seek out new development opportunities by entering a new industry.…”

“…Therefore, government administrative licensing is an essential prerequisite of private firms' entry into an industry. Researchers have shown that, compared to family firms, the ownership of non-family firms is more diffuse (Chu, 2011;Jiang & Peng, 2011;Li, Au, He, & Song, 2015;Li, Chen et al, 2015;San Martin-Reyna & Duran-Encalada, 2012), and the distribution of their shareholders is wider. Accordingly, non-family firms' social capital is higher than is that in family firms.…”

“…The high requirements for resource reserves in M&A often force non-family private firms to give up this transformation model. However, for family private firms, family resources can be gathered adequately based on kinship to provide various forms of support such as financial, physical, and human capital for enterprise development (Anderson & Reeb, 2003;Dyer, 2006;Li, Au, He, & Song, 2015;Li, Chen et al, 2015). Based on the abovementioned analysis, it can be reasonably assumed that family firms are more likely than are non-family firms to adopt M&A for business transformation.…”