One Child Policy and Family Business in China

• Main Authors: CAO, Xiaping, Cumming, Douglas, Wang, Xiaoming
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2005
• Subjects: one-child policy; economic growth; family firms; control; dynastic management; succession; China; Business
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4345
• Institution: Singapore Management University

Family business plays important roles to fuel economic growth in China. Due to the one-child policy, family firms are increasingly facing human capital constraints for within-family succession. Having only one heir decreases the probability of continuing family management by over 3 percent, reduces the probability of adult children working in family firms by 14 percent, and significantly decreases founders’ expectations of having young heirs for succession. Having fewer children negatively affects founder’s expectation to go public, reduces family firm’s reinvestment rate and R&D. Overall, the evidence suggests that the human capital constraints due to the one-child policy impose significant negative impacts on within-family succession. Dynastic management of family firms remains an important challenge for first-generation entrepreneurs in China.