Academic journal article Journal of Small Business Management

Internationalizing the Family Firm: A Case Study of a Chinese Family Business

Academic journal article Journal of Small Business Management

Internationalizing the Family Firm: A Case Study of a Chinese Family Business

Article excerpt

Chinese family businesses (CFBs), which are run by ethnic Chinese and can be headquartered anywhere, are said to make up the world's fourth economic power after North America, Japan, and Europe (Kao 1993). Sharing a common culture and working within a network of entrepreneurial relationships, CFBs have gradually formed what Kao (1993) calls the Chinese commonwealth. Although CFBs are scattered around the world, researchers find that they share unique characteristics. Since a CFB is essentially a family possession, top management positions are filled by close family members with the head of family assuming overall command. Non-family members have to serve the company for a long time before they are trusted and promoted to senior or top management positions. Managerial ideology is shaped by such Chinese cultural values as clear hierarchy reciprocal vertical obligation, and benevolent autocracy Authority and control are highly centralized. Making key strategic decisions is normally a family affair conducted beh ind closed doors and beyond the reach of non-family members. The head of family has the final say in these decisions. The internal system of coordination and control is highly personal. Tight control is exerted on financial and production management. Extensive networking and relational contracting are used when dealing with the external environment (Redding 1990).

With world markets rapidly merging, companies have become more and more globally oriented. While some CFBs may be content to operate on a small domestic scale, more are considering overseas expansion. Gallo and Sveen (1991) argue that family businesses are faced with many factors that either facilitate or restrain their internationalization. As a distinct type of family business, CFBs are no exceptions. Yet there is a paucity of empirical research on the foreign direct investment (FDI) approach to internationalization by CFBs. This article uses a knowledge-based and learning perspective to examine the internationalization process of a Singapore CFB with respect to its investment in China.

Research Method

The case study discussed here was part of a large-scale research project examining Singapore multinational corporations (MNCs). The objective of the project was to examine the experience in FDI acquired by Singapore companies in China. In this case study eight managers were interviewed. Three managers were interviewed in Singapore--the founder of the company his personal assistant, and the managing director. The interview with the founder was particularly crucial, as virtually all key decisions were made by him. The researcher also visited two wholly owned subsidiaries in China, located in two different cities. In one subsidiary two managers were interviewed and in the other subsidiary, three managers were interviewed. For each subsidiary the researcher interviewed the manager in charge.

The semi-structured interviews were conducted in either English or Mandarin, and all the interviews were tape-recorded. The interview tapes were transcribed and written up for analysis. During the interviews, some respondents provided the researcher with documents such as reports, memos, and manuals to supplement their answers. The researcher was also given a tour of each facility and had brief conversations with some managers and supervisors. Information obtained from the interviews was supplemented by observations of the facilities and by archive data. The archive data included company reports, newspaper cuttings, and other published materials.

Company Background

Like other firms, CFBs evolve over time. Wong (1985) maintains that a CFB often starts as a partnership. Financial resources are pooled by business partners who are largely unrelated by ties of descent or marriage. When one of the partners and his family ultimately attain majority ownership in the company a CFB emerges from the partnership.

The company in this case study appears to have followed this path. …

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