A new study from The Chinese University of Hong Kong (CUHK) Business School suggests that Chinese family businesses may actually perform better when there are bigger differences between family and non-family executives—so long as these differences are managed with fairness and a spirit of collaboration. Contrary to the belief that a harmonious, like-minded leadership team always yields the best results, the research shows that greater demographic divides in age, education, professional experience, and background can enhance decision-making and spark more innovative thinking.
The study, led by Professor Dora Lau Chi-sun, Associate Professor (Teaching) in the Department of Management at CUHK Business School, examined data from 262 Chinese family firms listed on the Shanghai and Shenzhen stock exchanges. The findings reveal that these “faultlines” between insiders and outsiders can create two important advantages: dominance complementarity—where the balance of power is clear, with family executives often holding greater influence, leading to quicker decisions and more consistent execution; and information and knowledge complementarity—where differing viewpoints and expertise generate richer, more creative business strategies. “A well-defined power hierarchy allows the lower-status subgroup to defer to the higher-status subgroup, facilitating faster decision-making, clearer strategic direction, and more consistent execution,” Professor Lau explains.
However, the research also highlights a critical caveat: these benefits disappear when non-family executives face unfair treatment or when companies lack strong professional advisory networks, such as auditors, consultants, and other market intermediaries. Without fairness and robust external support, the same divides that can drive innovation may instead foster resentment, miscommunication, or inefficiency.
Family firms play a significant role in the Asian economy, but relying solely on family members for leadership can limit growth potential. Professor Lau advises controlling families to look beyond similarity and loyalty when hiring top executives. Instead, they should seek out professional non-family managers who can bring fresh perspectives, diverse skills, and complementary expertise to the leadership table. “Rather than prioritising similarity or loyalty, controlling families should focus on recruiting professional managers who bring fresh perspectives and expertise that complement the capabilities of family members,” she notes.
By embracing diversity in their top management teams—while ensuring equitable treatment and access to professional guidance—family businesses can strengthen their decision-making, drive innovation, and enhance overall performance in an increasingly competitive market.