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Framework: Chinese family business: Confucian vs. global
Elfren Sicangco Cruz

03/13/2001
BusinessWorld (Philippines)
5
Copyright (C) 2001; Source: World Reporter (TM) - Asia Intelligence Wire

Family businesses comprise anywhere from 65 to 80 % of business enterprises all over the world. In Southeast Asia, including the Philippines, almost all local businesses are family-owned or -controlled. This subject has, therefore, become very important in the field of management.

Most books dealing with the topic of family business believe that it is possible to have a universal model for the governance of family businesses. Corporate governance is defined in most business books as the system by which companies are directed and controlled. For those interested, you should read about the three-dimensional developmental model of family business. Most books on family business propose this model as the framework for the analysis and corporate governance of family businesses.

I have lots of Filipino friends of Chinese ancestry who are aware of my interest in the study of family businesses and have often asked whether these "universal" theories or models apply to Chinese family businesses. This is both an intriguing and critical question because of the dominance of Overseas Chinese-owned businesses in the economies of Southeast Asian countries. I wasn't sure of the answer because I really haven't found any really good books or studies on this particular issue.

Around three weeks ago, my daughter Tanya returned from a business trip to Singapore where she bought me a book entitled Globalization of Chinese Business Firms edited by Henry Wai-chung Yeung and Kris Olds published by MacMillan Press Ltd. 2000. It is actually a collection of twelve articles on Chinese business firms and their global operations. The second article written by Gordon Redding is entitled "What is Chinese about Chinese Family Business? And How Much is Family and How Much is Business?"

Professor Redding arrives at the conclusion that there are both similarities and differences. According to him, the similarities are the "employment of family in key positions, a family monopoly over strategy making, and a relatively low level of formalization associated with small and medium scale."

These characteristics lead to the universal problems of transition to a more professionally managed enterprise, managing conflicts between siblings, and succession from one generation to another.

The study, however, points out that there are at least two aspects in which Chinese family business may be said to be distinct compared to Western patterns of family enterprise. They are as follows:

* Chinese family enterprise has not so far entered the transition to professionalism and public ownership which is such a common feature of Western economic evolution, even though arguably it had plenty of time to do so;

* The personalism used in cementing stable market relation between enterprises, in general conditions of mistrust, seems to reflect norms and values about cooperation that are highly developed in the secular culture of Confucianism.

All family businesses are distinct due to the overlap of family and enterprise. The Chinese family has learned how to grow and still retain control partly through the art of alliance building through the Overseas Chinese network. The study attributes this phenomenon to the feeling of insecurity of an ethnic minority, generally not assimilated and yet successful in wealth terms. According to Professor Redding, added to this, the Overseas Chinese come from a "society in which the combination of totalitarianism and patrimonialism left a historical legacy of suspicion of any source of security except the family."

Redding continues that there are three sets of reasons for arguing that Chinese family business is a product of a unique set of forces and has become unique in itself. These reasons are:

* Chinese culture has seeped into it and continues to do so;

* The social dynamics of the family play an important part in its nature, but in ways that take on a Chinese flavor;

* Its particular historical circumstances are not replicated for other business systems.

In any organization there are rules that govern vertical relationships which define authority and governance. There are also rules that govern horizontal relationships which determine cooperation.

It is very critical to remember that in the case of Chinese organizations, the norms for vertical relationships are defined by the Confucian ethic. This provides very clear principles, most of which are based on the role of the father figure as the pivot of the social system.

This system is strengthened by the ideals of family perpetuity, the perceived importance of the family's reputation and the long-standing tradition of extended family support to members.

In terms of horizontal relationships, the Confucian view is that because society is generally seen with suspicion and mistrust, the handling of friendship takes on strategic significance. This suspicion of society and government seems to be a very strong theme in this study. The thesis is that this accounts for the very strong dependence on family protection combined with a cynical attitude towards politicians.

The strong, protective attitudes and reliance solely on its own community are perhaps understandable in countries where there have been and continue to have overt persecution of Chinese like Indonesia, and legalized anti-Chinese policies like Bumiputra in Malaysia.

In other societies, like Thailand and the Philippines, there is much more racial tolerance and the majority and the ethnic minority share a common religion, i.e. Buddhism in Thailand, Christianity in the Philippines. Furthermore, the exposure to Western culture and political systems has weakened. the influence of Confucian philosophy among the educated Chinese.

In contrast to traditional Chinese social norms, Western values emphasize individualism and democracy puts a premium on the freedom and the rights of the individual.

No business system can forever be sealed from outside influences. The Chinese family business, even with its foundation on the oldest existing civilized culture in the world today, must begin to adapt to a radically new competitive landscape brought about by globalization and extremely rapid technological change. ***

JASM Update. The Joker Arroyo for Senator Movement finally has its headquarters. It is located on the 2nd floor at 131 Shaw Boulevard, Pasig. There is an Ibank branch on the ground floor. The telephone numbers are 638-8238; 638-8243; 638-8249; 638-8257; 638-8262; 638-8241; 638-8244; 638-8252; 638-8259; and 638-8263. The JASM Youth are inviting young painters to join them as they continue to make original handpainted streamers for Joker who does not have the resources for campaign materials. The Joker Volunteers will meet again at 2 pm, Saturday, 17 March at the headquarters.

Elfren S. Cruz is a professor of Strategic Management at the De La Salle University Graduate School of Business. E-mail comments to: cruzes@info.com.ph