The role of family members in the prospects of female entrepreneurs - Literature review Example

LITERATURE REVIEW Family and its members are important forces in the Chinese way of life and the body of literature on Chinese entrepreneurship alsoreveals that these variables wield extremely influential roles in Chinese business landscape. This is supported by theoretical and empirical evidences, which should provide the context and framework that could explain the role of family members in the prospects of female entrepreneurs in Shanghai. Family in the Chinese Tradition It is important to cite that business as a profit-oriented initiative primarily entails risk. This is the tone of the works of authors such as Timmons and Spinelli (2009) and Ward and Aronoff (1990) who put forward conceptual definition of enterprise as a pursuit of opportunity that requires the investment of resources and the exercise of control. The definition involve the variables such the requirement of considerable investment that one cannot control and the role of people and their motivation towards the enterprises cause and objective. For these prior works, family becomes an inevitable model - ready and stable - that could address the social, economic and psychological challenges involved in starting and managing businesses. Indeed, even the most liberal and sophisticated economies such as those in Europe and the United States, family-owned businesses constitute as much as 85 percent of the respective aggregate enterprises (Burns and Whitehouse, 1996; Shanker and Astrachan, 1996). There is no business landscape wherein family-owned or controlled business model thrives than in Asian countries such as China. The cultural and social contexts underscore tight familial relationship as ideal, which naturally extend to business pursuits because it provides mechanism of effective control and support. Zapalska and Edwards (2001) work tells us more about this in detail with their in-depth analysis of the Chinese Confucian thought and how and why it places great importance to the family. As has been the case in China, the culture emphasizes respect for the elders as well as high regard for authority and the hierarchy on social and organizational levels. Pistrui et al. (2001, p. 142-144) supported this by arguing that that family as the core social unit promotes collectivism and harmony, which are characteristics that are extremely beneficial to business organizations. Zapalka applied to an organization by pointing out the dynamics and values of the Chinese family establishes a strong network of relationship that forms the bedrock for effective Chinese companies. The cultural variable is important here because, family not only provides the system in which modern organizations navigate social and economic issues but that it also effectively addresses the Chinese cultural context. The people that make up the organization could perform better within a work environment that they understand and, in turn, understand their needs as well. The idea, at least, based on the available literature so far is that the role and authority exercised within the traditional Chinese family becomes imbued within business enterprise. In order to explain this further, one could turn to the Chinese concept called Guanxi. Guanxi Guanxi means relationships (Poutziouris, Smyrnios and Klein, p. 464). The body of literature on this particular subject is comprehensive on account of the fact that the concept plays a critical role in the Chinese business mentality. According to Lu (2207, p. 72), this is the personal relationships or ties among people and that it also connotes the benefits drawn from these networks and connections. Depending of the research and themes addressed, Guanxi could have positive or negative function as business practice. But one should remember the essential underpinning of the concept, which is rooted in the need for familiarity, closer relations and familial constructs that are deeply embedded in the Chinese culture. It is important not to judge it according to moral and theoretical grounds based on Western business practices and principles because the context is entirely different. A very interesting position was posited by Huang and Bond (2012, p. 422) regarding the relevance of Guanxi. They proposed that Guanxi or guanxi ties are how the family-focused Chinese entrepreneurs navigate business transactions with strangers. The connections and networks that both parties are able to muster - in this particular example - in order to be able to finally do a transaction must be an arduous process of selection, recommendation and cross-referencing to finally enter into a business relationship. Here, it is easy to understand how the concept of profit is inextricably linked to the achievement of good relationship, which - for its part - follows the standards of familial relationships. Prior works have established the positive outcomes of guanxi for Chinese companies. For example, Farh et al., (1998) found in their study that this variable is critical in many Chinese firms’ success because it is primarily behind the enhanced interpersonal level trust on all levels of stakeholders. This finding is further supported by the empirical investigations of authors such as Hill (1995), Zhang and Li (2003) and Batjargal and Liu (2004) who found that guanxi encourages trust-based relationships and interactions, moderates the behaviours entailed in investment and negotiations, finally leading to increased performance and, therefore, profitability. Based from these empirical evidences, Lu is correct in his conclusion that stated: The transaction cost advantage of guanxi-based exchange specifically rests in the way guanxi deals with governance problems associated with bounded rationality and opportunism. Thus a well developed guanxi network in China can assist that firms carry out asset specific value chain activities (Lu, p. 73). Again, guanxi demonstrates an aspect of doing business in China that is rooted on the familial relationships and kinships. It is the bedrock of most business transactions and operations because it is aligned with the Chinese cultural and social tradition. Entrepreneurs will do business with friends and family because it reduces risk and uncertainty. Guanxi network replaces the family when it comes to doing business with others and strangers. Instead of blood and kinship inherent in families, guanxi rely on connections. A Tradition of Control and Management As previously cited, there is the influence of Confucianism in the manner by which family-owned businesses dominate in China. The theorizing involved in the body of literature involves several related variables that support the Confucian thought - that family business is not only recognized as a business practice but that it is ideal in the Chinese setting, including the management and operational strategies within its framework. Zapalska and Edwards provided comprehensive insights to this area. They have outlined, for instance, that business and work is considered paramount, taking precedence over leisure. The blurred demarcation line between work/business and personal/family affairs has been successfully demonstrated in the work of Tsang (2002), who helpfully provided the case as to why businesses are generally viewed as the ownership of families and that their management follow the hierarchy that governs the structure of authority within the owner families. There is, for example, the manner in which decision making is usually reserved for the elders or patriarch. A very important resource in this area is the descriptive study published by Wong, which explained the Chinese family-owned enterprise within the wider context of China’s society, culture and history. He had several theories, which could help this review provide better context, particularly with how he was able to establish how the family constitute the very essence of Chinese economic organization. This same area will also be explored later from the standpoint of policymaking. Wong declares that all aspects in Chinese enterprise are validated in terms of familism. He provided two analogies for this position. The first is the observation regarding nepotism: that Chinese enterprises commonly suffer from this dilemma wherein firms typically recruit people that are relatives, friends and people from the same village (Wong, p. 58). This is what most of Western authors label as nepotism (see, for example, the work of Refkin and Cray 2012 and Doh and Stumpf 2005). According to Wong, however, there is more to this practice than mere preference for kin and relatives. The idea is that by hiring family members, relatives and friends, the Chinese firm is practicing a model that is inherently typified by strong hierarchical power structure that allows for seamless interactions between superiors and subordinates (p. 58). Clearly, this goes beyond the concept of nepotism, where familial connections are prioritized over skills or performance or that entrepreneurs feel some obligation towards these people to the detriment of the productivity of the company. Chinese firms want the organization to be some sort of family. There is an advantage in the dynamics of this system. By guaranteeing that the employees are part of the family, the commitment of the workforce to the organizational objectives is stronger. Indeed, if the work of authors such as Poutziouris, Smyrnios and Klein (p. 464), are to be considered, this business model has better a chance in achieving collective behavior. This is particularly critical in the manner by which organizations display flexibility in responding to the business environment particularly with regards to risks and changes. Poutziouris, Smyrnios and Klein (p. 464) observed that the Chinese cultural traditions make it seem natural the workforce to actively participate and engage in organizational initiatives. A statement taken from one of Wong’s interviews summarized this best: There were those who governed and there were those who were governed, each according to his ability but all having an equal interest in the success of the operation. Acceptance of the established order, as advocated by the Confucian school, made it possible for persons of diverse origin to fit into a family pattern (Wong p. 58-59). The above quote has vestiges of what may be considered as paternalism, which is also an enduring dimension to the Chinese familial tradition. What these variable demonstrate is that Chinese family-owned businesses are different from its Western counterpart and that family, paternalism, nepotism are inherent components and these are crucial in the manner by which these companies succeed. The body of literature – both general introductions of theory and empirical research - supports this position so far and this underpins the dynamics by which female entrepreneurs navigate the local business landscape. Policy and Family Business Another factor that institutionalizes family-owned businesses in China is the policy network. In an article, The Economist wrote about a system that highlights the link between government policy and family business. To quote: Given this high marginal cost of cultivating new relationships, it makes sense to do business first with close family, then with the extended family, then neighbours from your home town, then former classmates, and only then, reluctantly, with strangers. This is how market reforms spread in China during the 1980s and 1990s. Instead of incurring the high fixed costs involved in setting up a rules-based system, the country took the cheaper route of relations-based development (The Economist 2001). One should remember that the business landscape in China only kicked off again in the 1970s after about two decades of hiatus. As the government embraced enterprise in a bid to take advantage of the increasing integration of the global economy and become a global economic power, it is scrambling to support local businesses. Previous studies are replete with this theme. Authors such as Buckley et al., for example, followed the trajectory of several Chinese multinational companies and how several of these began as small family owned enterprises. Prior literature on this subject has outlined a strong case for the high degree of governmental involvement in the manner by which these enterprises grew and expanded (Tsui, Bian and Cheng, 2006). Family-Owned Business Model and the Female Entrepreneur As family-owned businesses pervade the Chinese business landscape, it is inevitable for it to have a crucial role in the emergence of female entrepreneurs and their successes. To put this into perspective, one could turn first to the outline of benefits offered by family-owned business model cited by Habbershon and Williams (1999). These are: the existence of a unique working environment, one that is based on family orientation and has greater degree of employee commitment and loyalty; greater flexibility when it comes to work and career trajectory within the organization, which drives better productivity especially in comparison to non-family member employees; family-owned businesses have their respective “family language”, which allows for better communication; decision-making is informal but highly efficient. The above information is widely recognized across the literature particularly those contributed by Chinese authors. If the cited benefits are correct then women have better chances at succeeding as entrepreneurs in family-owned enterprises. If they are part of the family, their gender would – in effect – be subordinate to the most important variable, that they are part of the family. The connections and relationship would guarantee advancement or opportunities. This is best depicted in the case of succession within family-owned businesses. Despite the prevalence of family owned businesses in China, there is a surprisingly small body of literature on the issue of succession. There are authors such as Lawrence who have mentioned it in passing or Chung and Yuen (2003) who tried to address the issue but in limited context by focusing on authority and management style. But, all in all, there is not enough empirical research that could comprehensively address succession issue that includes socio-cultural factors. There is one important research, however, that could shed light to the issue: a case study conducted by Xin Deng (2012). It is also quite relevant to this study because it involved the succession of family business from parent to his daughter. Deng collected his data mainly from his interview with a female CEO who successfully took over the responsibility of the family business from her father. The process was a six-year affair. She joined the family business in the year 2000 and has occupied various positions within the company until finally taking the position of CEO in 2006. Deng’s case study is important in several respects. First there is the fact that the daughter was chosen to succeed the parent even when it is widely practiced in China to choose the daughter’s husband instead if there was no son to succeed. Secondly, there was the fact there were sons as well but the eldest daughter was still chosen to succeed the father. There is also critical information from the case study. One of these is the position that women now holds equal footing in Chinese society particularly in issues of business ownership, entrepreneurship and inheritance. According to Deng (p. 28), this can be attributed to two factors: China’s one child policy and the governmental policy giving equal rights to women as institutionalized in the propaganda of “women holding up half the sky”. With one-child policy, there are businessmen who have sired daughters, so there is really no choice but to set them up as successors. There is also the case of transition. Deng (p. 28) pointed out that in the case of the CEO in his study, there was a smooth succession because the daughter was recognized as the rightful inheritor and was – as a result – accepted both on the employee and managerial levels. Finally, there is the case of gender. The interviewed CEO articulated that it was still hard to be an entrepreneur in a male dominated industry. It was pointed out that she had to deal with officials from the government because the state formed the bulk of their clients. There were gender-based challenges. However, the concept of guanxi came into play. The relationships and networks cultivated by the father and the company allowed the female CEO to muddle through. This particular aspect to the case study is supported by the work of Xin and Pearce (1996), who – for their part – revealed how guanxi is critical in winning government contracts. Gaps and Issues in Literature The body of literature on female entrepreneurs heading China’s family owned businesses is scarce. There are bodies of literature, for instance, on Chinese entrepreneurship that touch on how family-owned companies tend to deploy family members in “voluntary” no-wage employment. This is what Getz, Carlsen and Morrison (p. 34) “family labour”, which is considered “a traditional, important and differentiating feature of entrepreneurial family.” The interesting dimension to this theme is that the assignment of family labour falls along gender lines but there is a dearth of research on this issue, which is unfortunate because it could have bearing on the career advancement of female workers or the chances of female heirs who are working (or competing with male kin) for the right to succeed in heading the family business. It is hard to determine whether “family labour” or other gender-based practices within the family-owned organizations could hurt or serve as a bonus for female entrepreneurs. Two rare works that explored this theme were those undertaken by Finch (1983) and Stockman (1995). Both of these studies were devoted to the evaluation of the success of Chinese small and medium enterprises but both revealed one of its critical factors, the unpaid participation of family members. These two studies were explicit in naming the wives as the most common family member to do the unpaid contribution to the family business. But, so far, the corpus of literature is limited to this issue. Other areas have not been extensively explored. This review, for example, was only able to secure a case study for the issue of succession for a female CEO. There are no existing prior works that could confirm if the findings of the case study were representative of the general Chinese business setting. This researcher believes that there is a need for deeper understanding of gender dynamics in family-owned enterprises. Particularly, the role and the rights of women need to be explored, paving the way for an explanation of the desirability of family businesses in China in more detail. Focusing on female entrepreneurs can provide more dimension and impetus to family-oriented business model so that it could be adopted elsewhere or be included as a best practice framework. It will also allow for the determination of problems and challenges. Questions such as whether family orientation means better opportunities for women as depicted in the impact of guanxi or how it could reinforce female empowerment could finally be addressed. Furthermore, the investigation should be able to reveal opportunities and insights that could help establish a framework for international adoption or propose reforms in cases where women are proven to be disadvantaged. These variables are expected to fill the gap in literature. The experiences of female entrepreneurs are central to comprehensively explaining family business orientation as a business model and act on the outcomes, whether they are positive or negative. All in all, the body of literature on family business in China is quite comprehensive because this business model is prevalent and is widely seen as ideal. Even the government encourages and supports these enterprises. It is ideal because it is aligned with the Confucian philosophy and is deeply rooted in Chinese culture and traditions. The governmental support forms part of the larger state objective of spurring domestic economy and family-owned businesses are seen as effective and cheaper way of achieving these goals. There are hence, legal, financial, social and cultural drivers in place that institutionalize family-owned businesses and practices. These have bearing on the career prospects of female managers or the opportunities and the challenges they have to face. The gap in literature is focused in this area. 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