One-child policy and family firms in China

• Main Authors: CAO, Jerry X., CUMMING, Douglas, WANG, Xiaoming
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2015
• Subjects: One-child policy; Family firms; Control; Dynastic management; Succession; Asian Studies; Entrepreneurial and Small Business Operations
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4977; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5976/viewcontent/One_child_family_China_afv.pdf
• 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%, reduces the probability of adult children working in family firms by 14%, 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. (C) 2015 Elsevier B.V. All rights reserved.