The Theoretical Analysis of the Allocation of Family Control Rights B Oc10/17 | Page 6

L. Y. Gu
Guanxi between the actual
controller and manager

Trust Level

Transaction Costs

The allocation paths of family
managerial control rights

Oneself: The actual
controller himself

The highest
trust level

The lowest
transaction costs

Kinship: Family members
besides the actual
controller

Higher trust
level

High transaction
costs

Non-Kinship: Professional
managers

Lower trust
level

Higher
transaction costs

1、The actual controllers take
the family managerial control
rights by themselves;
2、The family members
besides the actual controllers
take the family managerial
control rights;
3、The actual controllers take
the family managerial control
rights with the other family
members ;
4、
Professional managers take
the family managerial
control rights.

Figure3.The analysis of the allocation paths of family managerial control rights.

5. Conclusions
This paper discusses the allocation of family control rights in Chinese family firms. We find that the allocation
of family control rights is embedded by guanxi, especially the sibship. This distinguishing feature is related with
the Chinese Confucian culture. Chinese culture shows the interpersonal relationship as distinction between inside and outside, and priority in rank. These principles are also applied in the allocation of family control rights.
Different guanxi between family members influence the control rights he or she may have.
This paper proposes the allocation concept of the family guanxi-oriented control rights for the first time. Following the logic of guanxi → trust level → transaction cost → the allocation of family control rights, we construct two concept models about the allocation of family equity and managerial control rights. Different family
may choose their own allocation path. The allocation of family control rights plays an important role in family
firms, and sometimes may affect the survival of the firm. Therefore, how will the different allocation path impact the performance of the family firm needs to be further studied.

Acknowledgements
This paper is supported by the Humanities and Social Sciences Planning Foundation of Ministry of Education of
China (11YJA630171) and Zhejiang Gongshang University (X13-16).

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