Rationality and limitation of family system in private enterprises?

First, the rationality of the existence of family businesses in China at this stage

In reality, the entrepreneurs' first choice of family system is not the result of carefully comparing the performance differences of various systems, but the system choice they have to make when starting a business.

The necessity of broadening financing channels

Capital owners' investment in enterprises is essentially a transaction between material capital owners and human capital owners about the right to use factors. Because the quality of human capital is difficult to observe and quantify, before investing, the owners of physical capital often ask entrepreneurs to provide enough asset collateral and good business records to prove their entrepreneurial quality, so as to avoid the transaction risk under asymmetric information. In this way, family business has become an important carrier for human capital owners to display entrepreneur information and provide asset collateral before obtaining financing from potential external investors. In addition, there is no doubt that the business risks of start-up enterprises are very high, and commercial banks are generally reluctant to provide financing to such enterprises for their own interests and risks. In this way, in the initial stage or small scale, family businesses have to resort to family trust network to solve the financing problem.

Throughout the growth history of large-scale enterprises in the world, almost all of them are family-owned enterprises set up by entrepreneurs, such as Ford and DuPont, and some of them are still controlled or influenced by entrepreneurs' family members. Therefore, the family business system can be regarded to a great extent as a stage that enterprises can't cross in the entrepreneurial stage in China and even the world.

Demand of immature factor market

A mature market needs not only a developed social economy as the foundation, but also a corresponding legal system to regulate people's property rights in market transactions. Developed countries have clearly defined the behavior of companies and the right relationship in the trading market through company law and contract law, especially for listed companies. There are many investors in its capital market, and investors can buy and sell stocks according to the objective analysis of the company's operating performance and operator behavior by independent securities companies and audit institutions in the market.

However, in China, the capital market, manager market and other factor markets are underdeveloped and lack of specific records for managers, so it is difficult to make an accurate evaluation of managers. In this way, it is difficult for enterprises to hire suitable operators from the manager market. Because the market can not effectively restrain the behavior of operators, and non-family members serve as enterprise managers, the agency cost and risk are bound to be great, so family businesses will not easily hand over the right to operate. To sum up, in the case of sluggish market development, family businesses still have irreplaceable advantages in China.

The Social Structure with Low Trust and the Demand of China Traditional Culture

In the social system structure of the East and the West, the position and function of the family system are very different. As Fei Xiaotong discussed in the article "Differential Pattern", western society is a social structure of group pattern. This kind of society first assumes the existence of groups and emphasizes the independence and equality of individuals. It is an individualistic social structure. The concept and meaning of family are relatively simple. Childbearing is the main function and temporary. In our traditional culture, the interests and reputation of families are far higher than those of other organizations. Our traditional society is in a pattern of difference order. The distance between people is a concentric bundle formed with self as the center. Social relations with others are pushed out in circles like water waves, and the more they are pushed, the finer they are pushed and the farther they are pushed. In this social pattern, the concept of home has great flexibility and can be expanded outward along the gap as needed.

Therefore, the family in the traditional sense of our country is a clan in structure, not limited to reproductive function, but a system. It is precisely because the center of China's traditional ethics is the self in "pushing yourself and others", and the relationship between people is self-centered, and all relationships are their own. Therefore, the social trust between people is also measured by familism, forming a high degree of trust in the family and a low degree of trust in outsiders.

Fukuyama, a Japanese-American scholar, believes that the development of enterprises depends on three kinds of capital: material capital, human capital and social capital, among which the influence of social capital exceeds the first two kinds of capital. The so-called social capital, according to Coleman, refers to the ability of people in an organization to trust and cooperate with each other for the same purpose.

Usually, the generation and transmission of social trust is mainly through the gradual evolution of cultural mechanisms, such as religion, customs and national values. In western society, Christianity is the unity of people's beliefs, and the maturity of laws and regulations and the development of the market have formed a perfect contract system, thus forming a high degree of universal trust. In our country, due to the influence of traditional family system and family culture, extraordinary trust based on family relationship has been formed, which constitutes a high trust in family members and a general distrust of ordinary people. This kind of trust leads to the congenital deficiency of social capital, which is vital to the growth of enterprises in China, forcing private enterprises to rely mainly on their families in the process of starting their own businesses.

The need to save transaction costs

Coase 1937 first put forward the concept of transaction cost to explain the existence and boundary of enterprises. He believes that the use of the market to coordinate the allocation of resources has transaction costs, and enterprises as another mechanism to coordinate the allocation of resources can save transaction costs. However, with the expansion of enterprises, the cost of organizational governance increases, and the growth boundary and efficiency of enterprises depend on the comparison of total costs. When the cost of organizing internal transactions is equal to the cost of completing the same transaction through the open market, the enterprise reaches the boundary. Explained by institutional economics, compared with other types of business organizations, family business is efficient when it can save the total cost of the enterprise, otherwise it is inefficient.