The problems of managing control in Chinese family firms : the case of Hong Kong

Abstract

(Uncorrected OCR) Abstract of thesis entitled The Problems of Managing Control in Chinese Family Firms: The Case of Hong Kong submitted by Wong, Kin Ki for the degree of Doctor of Philosophy at the University of Hong Kong in May 1998 The Paternalism-Personalism-Insecurity framework of Chinese mercantile capitalism has led Chinese firms to maximize an overall efficiency that is a combination of quantitative (economic) efficiency and qualitative efficiency. The framework influences all management functions. This thesis aims at describing, exploring and explaining the control phenomenon in Chinese family firms in Hong Kong. It proposes a hybrid control model to explain the development of the control system in Chinese family firms. The ideal control system is an optimum combination of organic and bureaucratic control that provides an optimum degree of control that is both effective and efficient in achieving corporate objectives. The control practice is cultural-specific and regarded as an emergent management practice that evolves in the specific internal and external environments. In this study, the raw data of the replication of Aston Study in Hong Kong was used to examine relationships among structural variables and contextual variables in Chinese firms. Moreover, the development of the control system with respect to organization growth in size in Chinese family firms was described and analyzed longitudinally and cross-sectionally. The findings support the stability of the correlation between specialization and organization size across different societies. Moreover, the rates of change of structural factors with respect to changes of organization size decrease as the organization size increases. Empirically, the changes of formalization, standardization and centralization in the Hong Kong Chinese firms, especially the manufacturers, do not correlate linearly to the changes of organization size. Thus, the hypothesis on stability of context-structure relationships is not supported by the findings. This study reveals that as Chinese family firms grow in size, they maintain organic control as a key control mechanism so as to protect the ultimate interests of the family and maintain the ultimate family control of their firms. The role of organic control may diminish and the extent of coverage may be diminished to the core group. In handling the size factor, Chinese family firms develop core and sub-core groups that enhance organic control and support family control. Core groups extend the personal influences of the family leaders and are responsible for familial leadership. Moreover, bureaucratic control is introduced initially to raise economic efficiency in the areas of concern, primarily production and accounting, and extend to all parts of the firm. Under the pressures of achieving qualitative efficiency and quantitative (economic) efficiency, the control system in Chinese family firms emerges and evolves as a hybrid of organic and bureaucratic control that is a mix of Chinese and Western management.