When Succession Meets Innovation——CEIBS 5th China Family Heritage Forum 2016

September 10, 2016. Shanghai – “The private sector in China contributes more than 60% to the country’s GDP, and family businesses make up about 90% of China’s private sector. The business magazine New Fortune’s 500 Richest People in China 2015 list reported that 67% of the country’s wealthiest men and women in the private sector are over 50, which means succession is becoming not only a family issue, but also a strategic matter that will affect China’s economy – especially now with the country facing economic challenges such as slowing growth and transformation, and moving industry up the value chain.” These were among the statistics that CEIBS Assistant President Dr. Snow Zhou shared in his opening address at CEIBS 5th China Family Heritage Forum 2016 held today on the Shanghai Campus.

Dr. Zhou’s address set the stage for the event, which aimed to give first-generation family business entrepreneurs and their successors ideas for crafting their succession plans within the context of the so-called “new normal” business environment in China. Speakers at the event included renowned scholars, family business leaders and future successors from around the world who shared their insights on innovation in family business succession.

INSEAD Professor of Economics and Political Science Morten Bennedsen shared his findings on how family businesses innovate through succession. Prof. Bennedsen is Academic Director, Wendel International Centre for Family Enterprise and the André and Rosalie Hoffmann Chaired Professor of Family Enterprise. Having studied many companies with a long, storied history he has found that all have an innovation-oriented culture that has been passed down through generations. “In order to survive, you have to make sure that your son or daughter knows how to step out of the comfort zone and renovate the business,” he said. “Let the next generation be real entrepreneurs within the existing family business structure.”

The CEIBS-Shanghai Trust Report on Innovation in China’s Listed Family Businesses was released during the forum. The paper’s findings show that China’s private sector is better at innovation than state-owned enterprises in terms of R&D investment. The report’s findings also show that China’s private companies are ahead of their public sector counterparts in patent ownership. It also shows that China’s family businesses in the automobile and real estate sectors have the most R&D investment, while their state-owned counterparts spend most in energy-related R&D projects.

The forum also featured the release of a new book co-authored by CEIBS’ Michelin Chair Professor in Leadership and Human Resource, Co-Director of CEIBS Centre for Family Heritage Jean Lee. Titled The Dual Challenges - Family Succession and Organizational Transformation, it combines case studies and theories to explore the question of transformation in family businesses from a succession angle. “We have tried to tell stories that explain the subject emotionally and intuitively,” said Prof. Lee. “We have also tried to figure out the trends that will inspire many family businesses to realize their business transition through succession.”

The afternoon discussions focused on how to cultivate an entrepreneurial mindset among family business successors. The long-existing stereotype of being “born with silver spoon in their mouths” makes people wonder how the word “entrepreneurship” can be linked to them. CEIBS Professor of Entrepreneurship S. Ramakrishna Velamuri thinks it’s necessary to pass the entrepreneurial spirit of the first generation down to the younger generations. “You may have a new idea that your father doesn’t like at all, but changes come from new ideas, so do risks,” he said. “Many family businesses died because of a lack of entrepreneurial spirit among the youngsters.” Afterwards, some second-generation entrepreneurs shared their bitter-sweet entrepreneurial stories within their own family businesses – how they have struggled to build a consensus with their elders and how they eventually achieved good results for their families’ business.

Family business leaders who attended the event include: General Manager of Shanghai International Trust Chen Bin, Chairman of Board of Supervisors of Dawu Group Sun Dawu, President of Red Collar Group Zhang Yunlan, Executive Partner of Creadev (Shanghai) Investment Consulting and Representative of Mulliez Family Alexis Grolin.

Shanghai International Trust is the exclusive strategic partner of this forum.