Reciprocity and Control: The Organization of Chinese Family-Owned Conglomerates

To poke fun at themselves and at their own branch of science, aeronautical engineers once proved that bees could not fly. With considerably more seriousness, organization specialists, applying sound principles of management, have demonstrated that Chinese family-owned firms cannot grow large and cannot undertake sizeable and complex projects. This reasoned conclusion leads to a second one: because Chinese firms cannot succeed in enterprises requiring scope or scale, those economies in which large Chinese family firms are found in some numbers must, therefore, be examples of ‘ersatz capitalism’ (Yoshihara, 1988) — speculative economies that are hollow at the core. This conclusion implies that an economy organized by Chinese firms cannot flower and bear the fruits of a capitalist way of life. Both conclusions, however, ignore the simple reality that Chinese family-owned firms do grow very large, that they do undertake sizeable and serious projects, and that the economies in which they exist have flourished in the last quarter of the twentieth century and will continue to flourish in the twenty-first. Like the allusion in Peyton Houston’s wonderful poem, the impossibility of the existence of large Chinese family firms belies their success throughout much of the capitalist world. Clearly, there is a gap between theory and fact.