Non-family shareholder governance and the digital transformation of family firms: Evidence from China

Abstract

Research Question/Issue

We investigate the influence of non-family shareholder governance on Chinese family firms' digital transformation strategies.

Research Findings/Insights

We use the socioemotional wealth theory to examine the impact of non-family shareholder governance on family firms' digital transformation. We find that the influence of non-family shareholder governance by appointing directors can significantly promote the implementation of digital transformation strategies through their capital and human effects in family firms. In contrast, non-family shareholders only play a positive role in family firms' digital transformation when they are blockholders. In addition, non-family shareholder governance plays a significant role in promoting the digital transformation of family firms with entrepreneurship and a high degree of industry competition. Regarding external digital development, the Broadband China policy complements family firms' digital transformation strategies. The characteristics of the appointed directors suggest that the introduction of appointed directors, an excess of appointed directors, and the inclusion of appointed directors with digital expertise can effectively promote the digital transformation of family firms. The characteristics of controlling families show that socioemotional wealth can further optimize the relationship between non-family shareholder governance and digital transformation.

Theoretical/Academic Implications

We not only verify the rationality and effectiveness of non-family shareholder governance in combination with digital transformation strategies but also further observe the impact of the heterogeneity of directors appointed by non-family shareholders on family firms' digital transformation strategies. Thus, our study tests the influence of non-family shareholder governance on digital transformation and enriches the literature on non-family shareholder governance and family firms' strategies.

Practitioner/Policy Implications

This study offers insights to family firms regarding how to effectively promote non-family shareholders' participation in corporate governance and help family firms to achieve the goal of “everlasting foundation.”