Seen as the backbone of the Chinese private sector, family-owned firms have evolved beyond a focus on low-cost manufacturing to include a focus on technology and innovation. But their management practices remain immature, and many are reaching a crunch point as founders hand over to the next generation.
Launched by China’s Guanghua School of Management, Harvard Business School of the US, and the UK’s Saïd Business School at University of Oxford, the “Leading and Transforming Family Business” program is aimed at executives of family-run businesses in China that are keen to expand their global footprint.
“Chinese family businesses are at a historic turning point,” said Eric Thun, associate professor in Chinese business studies at Oxford Saïd. Speaking to BusinessBecause, he said that innovation is one of the most important challenges family enterprises face. “All of these firms are struggling to figure out how they can gain knowledge to compete in new ways.”
Succession planning is a particularly contentious issue. According to the Family Business Institute, just 30% of family-owned firms make it into a second generation.
Privately run businesses in China account for three-quarters of national output, according to Edward Tse, a management consultant and author of China’s Disruptors. In 2013, China had 42 million family-run businesses, compared with 2.3 million state-owned companies.
“Chinese family businesses have been and will increasingly be an engine of the Chinese economy,” said William Kirby, professor of business administration at Harvard Business School.
The Chinese economy has come under pressure in recent months, owing to the continuing turmoil in financial markets driven by fears about slowing growth in China and doubts over the state’s response.
“Addressing the development of [the] family business sector in China is an especially important topic for the Chinese economy and the many family firms here looking to go global,” said CAI Hongbin, dean of Guanghua School of Management.
Oxford Saïd’s Eric highlighted the importance of the family-dominated private sector to the Chinese economy. He said: “Even after decades of reform it [the state sector] is still from a productivity perspective much worse off than the non-state sector, and this is dominated by family firms.”
However, there have been signs that many young Chinese are turning away from family enterprises, preferring instead to pursue their own ventures.
“When they join the family business, these youngsters are full of enthusiasm and energy to make changes and apply what they have learnt,” said Rama Velamuri, chair of the Strategy and Entrepreneurship Department at CEIBS in Shanghai. “However, they often come up against elders who are risk-averse and do not let them make big-ticket changes.”
Taught in both Chinese and English, the Leading and Transforming Family Business course will be delivered in three modules, each module hosted by Guanghua, Oxford or Harvard, and features experts in key areas: such as governance, succession, culture, and global strategy.
The international triad joins a host of other top schools serving the family business segment of the global economy.
IMD, the Swiss business school, operates the Global Family Business Centre in Lausanne. IMD recently launched The Next Generation, a program for younger family business executives with modules in Singapore.
The Centre for Family Enterprise at Kellogg School of Management in the US has also developed a curriculum designed for the complexities of a family business.
Many have focused on the Middle East, where for example family-owned firms make up 80% of all companies in the Gulf region.
The Indian School of Business offers a general management program for family-run company executives. International business school INSEAD runs a five-day Family Enterprise course which focuses on governance and effectiveness, taught from its Abu Dhabi campus.
Both Cass and London Business Schools have expanded beyond the UK capital to open programs in Dubai that cater to family-run business managers.
Others, such as the Olin Graduate School at Babson College and IESE Business School, have held global summits for family enterprises.
The first of three international modules on the Leading and Transforming Family Business program will take place in Beijing in March 2016.
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