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Chua, Chrisman and\nSharma proposed a slightly different theoretical definition of family business:\n\u201ca company is a family business because it behaves as one and that this\nbehavior is distinct from that of non-family firms\u201d (Defining the family business by behaviour. 1999) <\/p>\n\n\n\n
In China private firms\ndistinguish two different forms \u201cprivate firms\u201d (\u4e2a\u4f53\u6237 g\u00e8 t\u01d0 h\u00f9) and \u201cprivately managed industry\u201d (\u79c1\u8425\u4f01\u4e1as\u012b y\u00edng q\u01d0 y\u00e8) (Wu 2006)\nas one opposite to the \u201cstate-owned enterprises\u201d (\u56fd\u6709\u4f01\u4e1a gu\u00f3 y\u01d2u q\u01d0 y\u00e8). Privately managed industries match more with\nthe above defined characteristics of a family business. Private firms in\nmainland China are more about self-employment with a private business hiring\nless than 8 employees.<\/p>\n\n\n\n
To understand family\nbusinesses in China, one must understand Confucian traditions that relates to\nfamily, social ethics, loyalty to a hierarchical structure of authority and\ntrust between close friends, relatives and family members. Family businesses\ntend to do business with those who share a common culture and direction, where\nthe collective good of the group and society is more important than the needs\nof the individual. Many relationships are formed based on informal networks (\u5173\u7cfb gu\u0101nxi) lacking a formal\ndocumentation system (Weidenbaum 1996). To achieve the success and\nsustainability of the family firms, Chinese entrepreneurs came to a modern\nvalue of Confucian thinking to combine traditional features and cultural\nheritage with management thinking, entrepreneurial spirit and a unique commercial\nculture (Wah 2001).\n<\/p>\n\n\n\n
The International\nFamily Enterprise Research Academy (IFERA) reports 2003 (Family Businesses Dominate) that 96% of all US companies\nare family businesses, but contribute only with 40% (-50%) to the gross\ndomestic product (GDP). Whereas in Europe from 60% in Germany\/France over 70%\nin Belgium, 75% in Spain up to 80% in Finland and Greece are family businesses.\nDespite Finland with 45% of GDP (-35%) the difference is more moderate, Belgium\n55% (-15%) and Spain 65% (-10%), insignificant in Germany 55% (-5%) or even nonexistent\nin France with 60% (+\/- 0). (International Family Enterprise Research Academy (IFERA) 2003)<\/p>\n\n\n\n
An increasing number\nof family businesses had been very important to China\u00b4s economic success and\nrapid growth (Tsui, Cheng and Bian 2006). The privately\nmanaged industry (\u79c1\u8425\u4f01\u4e1as\u012b y\u00edng q\u01d0 y\u00e8) contributed\nin the past decade to more than 66.7% of the GDP in China (Wu 2006).<\/p>\n\n\n\n
The world\u00b4s largest\nexport nations are China (US$2.157 trillion), USA (US$1.576 trillion) and\nGermany (US$1.401 trillion), but while this is only 11.9% of the GDP in the USA\nand 19.6% in China, it accounts for nearly 50% (46.1%) in Germany. (Wikipedia, List of Countries by Export 2019) <\/p>\n\n\n\n The German successes in export are coming less from large enterprises, but from SMEs. Germany has more hidden champions than any other country in the world. The large number of hidden champions can be explained from the history of the 19th<\/sup> century, when Germany was not one nation, but split in many small states with traditional decentral competences, which made it already necessary to trade across borders. This developed already the mindset for internationalization. (Simon 2012, 79f.) <\/p>\n\n\n\n The strength of these\nbusinesses is that they do not offer a broad portfolio but are very specialized\nin their offerings and focus often in niche markets, being 100% customer\noriented. The success factor is constant growth. Globalization and innovation\nare the outstanding engines of growth. But\nan innovation can be considered a success only if it had proved itself on the\nmarket. \u201cWhereas the industry study cited found that 23% of revenues were\ngenerated by new products, the percentage is much higher among innovative hidden\nchampions.\u201d (Simon 2012, 273). The range is between generating 48% of\nrevenues with products that are less than 2 years on the market (Bosch Power\nTools) or 85% with products younger than 5 years (K\u00e4rcher). As there is no\ndefinition of a new product, the comparability of these indicators seems not\nclear, but show that these companies are very innovative. \u201cIt is always\nimpressive to see what the hidden champions produce with relatively small\nR&D budgets and teams.\u201d Therefor quality of people is more important to\ninnovation than money. Loosing such experts can become a serious risk for the\ncompanies (Simon 2012).\n\u201cSuperior results seem to be a function of the quality of an organization\u00b4s\ninnovation process rather than the magnitude of its innovation spending\u201d (Jaruzelski, Dehoff and Bordia 2005, 2)<\/p>\n\n\n\n Many of these\nbusinesses grow from visionary self-employed entrepreneurial inventors, who\nstay as role models for generations, over hidden champions\u00ad\u00ad\u00ad to big champions\nwith more than US$5bn in revenue and more than 5000 employees. The risk of\nspecializing is that they are highly dependent on their focus markets, the\noften high-price market niche can be attacked by standard products or by\nlow-cost suppliers. They are exposed to a high risk of technological change. The\nthreatening situation caused by changing technological requirements makes it\nmandatory for companies in highly specialized markets to take the leap in\ntechnology to be able to survive. (Simon 2012)<\/p>\n\n\n\n Besides failing due to\ntechnology change, more often family businesses break down as a result of an\nunsuccessful succession. To understand the difficulties of transition processes\ninside a family business May (2012) classifies them in 3\ndimensions: ownership structure, company structure and governance structure .<\/p>\n\n\n\n The ownership structure\nand its complexity are increasing from a controlling owner over a sibling partnership,\ncousin consortium to a family dynasty. In companies with a controlling owner\nyou often find the founding entrepreneurial inventor, being the unquestioned\nvisionary and leading in many cases with a patriarchal style. Most conflicts\nand risks to fail are in a sibling partnership stage and cousin consortiums, where\njealousy plays a big role especially when money, power and heritage are unequal\ndistributed among the descendants of the family. With an increasing number of family\nmembers (>30) and shrinking shares in a family dynasty, many owners start to\nsee the business only as an investment and loose the relationship to the\ncompany (May 2012).\nStill the difference to a public company or private equity fond is the\nhomogeneous ownership structure. (Habbershon und Williams 1999) describe it as the\n\u201cfamiliness\u201d. \u201cIt is the unique bundle of resources a particular firm has,\nbecause of the system interactions between the family, its individual members,\nand the business\u201d (Habbershon und Williams 1999, 11), which is a\nprecondition for continuity over many generations. <\/p>\n\n\n\n The major issue with\nthe company structure is the risk resp. the risk limitation. The risk is\nincreasing starting from a family start-up business over the focused and then the\ndiversified family business up to the family investment office. While in the start-up\nand the focused family business the necessary competences and identification\ncan be found in the family, it will be difficult with a more and more\ndiversified investment. (May 2012) <\/p>\n\n\n\n The central aspect of\nthe governance structure in a family business is the principal-agent-problem.\nJensen and Meckling (1976) describe the conflicts\nof interest, when the owners (principals) assign external managers (agents) to\nlead the business. In other words, an external manager deals with other people\u2019s\nmoney different than the owner. While the owner is interested in the return of\nthe invested capital, it is the focus of the external manager to increase the\nown value. This risk is significantly lower when the owner or family members\nare managing the own business but is increasing when the business is only\ncontrolled by the family or even the control of the family business is executed\nby externals. <\/p>\n\n\n\n Family businesses\nfacing the same issues as public companies, but added the problems connected\nwith the family. On the one hand with the increasing complexity of the\nownership and company structure it then becomes necessary to create formal\nmechanism of coordination, planning and organization of family meetings. On the\nother hand, similar to other companies it is common to promote or fire people,\nset goals or measure performance. The difference here is, that these decisions affect\nmembers of the family \u2013 a father, sibling, son, daughter or cousin (Rodrigues und Andr\u00e9 Marques 2013). Typical risks are\nfamily patriarchs who despite their old age are unable to let loose of the\nbusiness or parents which promote their insufficient prepared children (May 2012,\n 144).\nThese authors argue that there is a way to minimize the impacts of these\nproblems by establishing a form of organizational governance for each of the\nsubsystems, family and business. <\/p>\n\n\n\n Astrachan, Klein and\nSmyrnios (2002) introduced the F-PEC\nscale measuring the family business in the dimensions of power, experiences and\nculture. Power as in the 3-dimensional model (May 2012). Experiences coming from\nthe generations of ownership, in active management\/governance and number of contributing\nfamily members. Culture, i.e. the overlap between family values and business\nvalues and the commitment to the family business. Mar\u00edn et al. (2017, 2)\nsummarize in their study about organizational culture and family business different\nsources that \u201corganizational culture has been traditionally considered as one\nof the most important intangible strategic resources in developing competitive\nadvantages [\u2026]. Organizational culture is even of greater importance in the sphere\nof the family firm, where a set of beliefs and interests, highly influenced by\nthe family relations [\u2026], may produce significant differences from any other\nnon-family organizations [\u2026].\u201d They conclude that to prevent the risk of subsequent\nloss of family wealth and family control and if family business want to change\ntheir emotional, internally-oriented organizational culture towards a more\nrational, market-oriented organizational culture, family owners and managers should\nconsider \u201ca professionalized and dynamic culture that favours innovation,\ninternationalization and financial outcomes\u201d (Mar\u00edn, et al. 2017, 8)<\/p>\n\n\n\n \u201cThroughout the world\nand across the centuries, family businesses share a common set of challenges: liquidity\nfor the shareholders, capital for business growth, and responsiveness to shareholders\u2019\ncontrol objectives.\u201d (Visscher, et al. 2011, 1) Family businesses\nhave different types of liquidity needs related to the family be it the dividends\nfor the invested capital, desire for income or to settle liabilities in case of\na shareholder\u2019s death. A family business needs capital to fund the working capital\nas well as the growth plans of the firm. \u201cThe business\u2019s needs for and access\nto sources of growth capital are likely to increase as the forces of\ncompetition, globalization and innovation challenge the company\u201d (Visscher, et al. 2011, 5). \u201cThe more control the\nfamily desires, the less liquidity will be available to shareholders and the\nless capital will be available to expand the business\u201d (Visscher, et al. 2011, 6). <\/p>\n\n\n\n In other words, the risk\nis that the family loose its control over the business when the growth plans\nbecome too ambitious. If the company’s independence from third-party influence\nis most important as the company should remain a family business, then\nstability must take precedence over profitability and growth. To be able that\nthe family remains to play a dominant ownership role, the business depends on\nthe financial resources provided by the family (May 2012). May also says when\nrejecting outside influence \u201cthe most contribution to the financing is the\nprofit\u201d as this is the major source for strengthening the equity capital in the\nfamily business (2012, 105). <\/p>\n\n\n\n Michiels and Molly (2017)\ncollated \u201cthat the literature still remains inconclusive on the level of debt\nused in family firms. [\u2026] A trade-off needs to be made in family firms between\nthe retention of control, which favors the use of debt financing over external\nequity, and risk aversion, which stimulates the company to adopt more cautious\nattitudes towards debt [\u2026]\u201d (Michiels and Molly 2017, 374). Schulze, Lubatkin and\nDino (2017) researched the use\nof debts of family businesses esp. in relation to the ownership structure. They\nfound evidence that sibling partnerships use less debts and are therefor less\nwilling to take risks than controlling owners or cousin consortiums, who show an\nincreased level of loss aversion and misalignment within the family. According\nto Visscher et al. (2011) companies in the\nstart-up phase more likely fund the capital needs with internal cash-flow and\nshort-term debts, while focused and diversified businesses use longer-term debts\nuntil family investment offices may also go to the private or public equity\nmarket. <\/p>\n\n\n\n According to May \u201cLow Leverage\nis Key\u201d, family businesses need high equity ratios. While financial investors\nuse the effect of leverage to maximize the return of the invested capital, do\nfamily businesses exact the opposite. To stay as independent family businesses\nand be profitable over many generations, they favor financial stability. Among\nthe top family businesses May has seldom seen a worse ratios than 1:2 of external\nfinancing to equity capital. (May 2012, 108ff.) The research from\nHermann Simon showed that Hidden Champions have an average equity ratio of 42%\nund under the assumption of costs of debts of 6%, their return on equity (ROE)\nis 25%. (Simon 2012, 342)<\/p>\n\n\n\n As a conclusion,\nfamily businesses are characterized by a dominant ownership, \u201cfamiliness\u201d and\nthe aspiration to stay independent and within the family for many generations. Worldwide\nmost of the businesses are family firms with a high contribution to the GDP,\nespecially in Germany. Their success factor is coming from constant growth,\nwhere globalization and innovation play an important role. To be able to stay\nin control of the family business with the challenges of increasing family members\nover the generations in the dimensions of ownership, company and governance\nstructure an equilibrium between control, cash flow and capital needs must be\nachieved. A high ROE and therefor high equity ratio increase the entrepreneurial\nfreedom and creates good conditions for the typical competitive advantage in\nfamily businesses in the form of quick decisions uninfluenced by external\nconstraints.<\/p>\n\n\n\n Works Cited<\/strong><\/p>\n\n\n\n Astrachan, Joseph H., Sabine B. Klein, and\nKosmas X. Smyrnios. “The F-PEC scale of Family Influence: A Proposal for solving the\nFamily Business Definition Problem.” Family Business Review<\/em>, 03 01,\n2002: 45-58.<\/p>\n\n\n\n Basco, Rodrigo. \u201eThe family’s\neffect on family firm performance: A model testing the demographic and essence\napproaches.\u201c Journal of Family Business Strategy<\/em>, 01. 03 2013: 42-66.<\/p>\n\n\n\n Centre for European Economic\nResearch (ZEW); Institut for SME Research (ifm). Handout Family Businesses.<\/em>\nReport, Munich: Foundation for Family Businesses, 2019.<\/p>\n\n\n\n Chrisman, James J., Jess H.\nChua, and Pramodita Sharma. “Trends and Directions in the Development of a\nStrategic Management Theory of the Family Firm.” Ent. Theory &\nPract (Entrepreneurship Theory and Practice)<\/em>, 09 01, 2005: 555-576.<\/p>\n\n\n\n Chua, Jess H., James J.\nChrisman, and Pramodita Sharma. “Defining the family business by\nbehaviour.” Entrepreneurship Theory and Practice<\/em>, 07 04, 1999:\n19-39.<\/p>\n\n\n\n Churchill, Neil C., und\nKenneth J. Hatten. \u201eNon-Market-Based Transfers of Wealth and Power: A Research\nFramework for Family Business.\u201c Family Business Review<\/em>, March 1997:\n53-67.<\/p>\n\n\n\n Davis, Peter. “Realizing\nthe potential of the family business.” Organizational Dynamics<\/em>,\nSummer 1983: 47-56.<\/p>\n\n\n\n Dyer, W. Gibb. Cultural\nchange in family firms: Anticipating and managing business and family\ntransitions.<\/em> San Francisco: Jossey-Bass, 1986.<\/p>\n\n\n\n Habbershon, Timothy G., und\nMary L. Williams. \u201eA Resource-Based Framework for Assessing the Strategic\nAdvantages of Family Firms.\u201c Family Business Review<\/em>, 01. 03 1999: 1-25.<\/p>\n\n\n\n Handler, Wendy C.\n“Methodological Issues and Considerations in Studying Family\nBusinesses.” Family Business Review<\/em>, 09 01, 1989: 257-276.<\/p>\n\n\n\n International Family\nEnterprise Research Academy (IFERA). \u201eFamily Businesses Dominate.\u201c Family\nBusiness Review<\/em>, 01. 12 2003: 235-240.<\/p>\n\n\n\n Jaruzelski, Barry, Kevin\nDehoff, and Rakesh Bordia. Money Isn\u00b4t Everything.<\/em> Report, Booz &\nCompany, 2005.<\/p>\n\n\n\n Jensen, Michael C., und William H. Meckling. \u201eTheory of the Firm:\nManagerial Behavior, Agency Costs and Ownership Structure.\u201c Journal of\nFinancial Economic<\/em>, 10 1976: 305-360.<\/p>\n\n\n\n Lansberg, Ivan S.\n“Managing human resources in family firms: The problem of institutional\noverlap.” Organizational Dynamics<\/em>, Summer 1983: 39-46.<\/p>\n\n\n\n Lansberg, Ivan, Edith L.\nPerrow, and Sharon Rogolsky. “Editors’ Notes: “Family Business as an\nEmerging Field”.” Family Business Review<\/em>, 03 1988: 1-8.<\/p>\n\n\n\n Litz, Reginald A., Allison W.\nPearson, and Shanan Litchfield. “Charting the Future of Family Business\nResearch: Perspectives From the Field.” Family Business Review<\/em>, 08\n23, 2011: 16-23.<\/p>\n\n\n\n Mar\u00edn, Gregorio S\u00e1nchez,\nAntonio Jos\u00e9 Carrasco Hern\u00e1ndez, Ignacio Danvila del Valle, und Miguel \u00c1ngel\nSastre Castillo. \u201eOrganizational culture and family business: A configurational\napproach.\u201c European Journal of Family Business <\/em>, 06 2017: 1-9.<\/p>\n\n\n\n May, Peter. Erfolgsmodell\nFamilienunternehmen. Das Strategie Buch.<\/em> Hamburg: Murrmann, 2012.<\/p>\n\n\n\n Mazzi, Chiara. \u201eFamily\nBusiness and Financial Performance: Current State of Knowledge and Future\nResearch.\u201c Journal of Family Business Strategy<\/em>, 07. 07 2011: 166-181.<\/p>\n\n\n\n Michiels, Anneleen, and\nVincent Molly. “Financial Decisions in Family Businesses: A Review and\nSuggestions for Developing in the Field.” Family Business Review<\/em>,\n11 7, 2017: 369-399.<\/p>\n\n\n\n Rodrigues, Jorge, und Mar\u00eda\nAm\u00e9lia Andr\u00e9 Marques. \u201eGovernance bodies of family business.\u201c EJFB (European\nJournal Of Family Business)<\/em>, 2013: 47-58.<\/p>\n\n\n\n Schulze, William S., Michael\nH. Lubatkin, and Richard N. Dino. “Exploring the Agency Consequences of\nOwnership Dispersion Among the Directors of Private Family Firms.” Academy\nof Management Journal<\/em>, 11 30, 2017: 179-194.<\/p>\n\n\n\n Simon, Hermann. Hidden\nChampions – Aufbruch nach Globalia. <\/em>Die Erfolgsstrategien unbekannter Weltmarktf\u00fchrer.<\/em> Frankfurt am Main: Campus Verlag, 2012.<\/p>\n\n\n\n \u2014. Hidden Champions \u2013 The\nVanguard of Germany in Globalia.<\/em> 14. 12 2017. http:\/\/eworkcapital.com\/hidden-champions-the-vanguard-of-germany-in-globalia\/\n(Zugriff am 14. 07\n2019).<\/p>\n\n\n\n Tsui, Anne S., Leonard\nKwok-Hon Cheng, and Yanjie Bian. China’s domestic private firms:\nMultidisciplinary perspectives on management and performance.<\/em> Armonk, N.Y:\nM.E. Sharpe, 2006.<\/p>\n\n\n\n Visscher, Fran\u00e7ois M. de,\nCraig E. Aronoff, John L. Ward, and Drew S. Mendoza. Financing Transitions:\nManaging Capital and Liquidity in the Family Business.<\/em> 2nd edition. New\nYork: Palgrave Macmillan US, 2011.<\/p>\n\n\n\n Wah, Sheh Seow. “Chinese\nCultural Values and their Implication to Chinese.” Singapore Management\nReview<\/em>, 2001: 75-83.<\/p>\n\n\n\n Ward, John L. Keeping the\nfamily business healthy. How to plan for continuing growth, profitability, and\nfamily leadership.<\/em> New York, NY: Palgrave Macmillan, 2011.<\/p>\n\n\n\n Weidenbaum, Murray. “The\nChinese Family Business Enterprise.” California Management Review<\/em>,\n07 01, 1996: 141-156.<\/p>\n\n\n\n Wikipedia, List of Countries\nby Export.<\/em> 07\n15, 2019. https:\/\/en.wikipedia.org\/wiki\/List_of_countries_by_exports (accessed\n07 15, 2019).<\/p>\n\n\n\n Wu, X.G. “Family\nbusinesses in China, 1978-96: entry and performance.” in Tsui, Anne S.;\nCheng, Leonard Kwok-Hon; Bian, Yanjie, China’s domestic private firms.\nMultidisciplinary perspectives on management and performance, Armonk, NY: M.E.\nSharpe<\/em>, 2006: 40-64.<\/p>\n\n\n\n Zellweger, Thomas M., Kimberly\nA. Eddlestone, and Franz W. Kellermanns. “Exploring the Concept of\nFamiliness: Introducing Family Firm Identity.” Journal of Family Business Strategy<\/em>, 02 06, 2010: 54-63.<\/p>\n","protected":false},"excerpt":{"rendered":" Handler claimed 1989 that \u201cdefining the family firm is the first and most obvious challenge facing family business researchers\u201d (Methodological Issues and Considerations in Studying Family Businesses, 258). In 2011 Litz, Pearson and Litchfield found out that between 54% of 80 surveyed family business researchers there is almost no consensus on the definition of family … Continue reading “Family owned hidden champions – technological change, family structures and financial stability”<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":27,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[41,5],"tags":[],"_links":{"self":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/164"}],"collection":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/comments?post=164"}],"version-history":[{"count":7,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/164\/revisions"}],"predecessor-version":[{"id":235,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/posts\/164\/revisions\/235"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/media\/27"}],"wp:attachment":[{"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/media?parent=164"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/categories?post=164"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/niehage.de\/dba\/wp-json\/wp\/v2\/tags?post=164"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"http:\/\/niehage.de\/dba\/wp-content\/uploads\/2019\/07\/figure2-1024x701.jpg\")
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