Negative link persists

To better understand the impact of female representation in decision-making groups on funding for women-led businesses, the researchers collected data from 151 US-based venture capital companies. They also conducted 20 semi-structured interviews using a qualitative approach to complement and enrich their quantitative findings.

After the analyses, surprisingly, researchers found that female representation is negatively associated with the funding of women-led businesses. More specifically, adding one additional female senior venture capitalist leads to an approximately 0.46 per cent decrease in the proportion of women-led businesses.

This negative relationship persists regardless of whether women constitute the majority within the decision-making group or not. When women are in the minority, men may leverage their dominance to assert their preferences during decision-making processes, while women defer to their male counterparts by adopting men’s preferences during investment decision-making.

“Such a tendency is driven by their desire to be perceived as valued and accepted group members,” Professor Jiang explains.

While some may argue that the increasing number of female members in the decision-making group could solve the problem, the findings paint a rather bleak picture. Professor Jiang attributes this to female senior members’ attempts to establish “external legitimacy”.

The gender composition of a predominantly women-led decision-making group becomes a notable characteristic that could capture attention. Consequently, when women constitute the majority in such groups, they may develop heightened concerns about their organisations’ legitimacy within the male-dominated investor community.

“To establish external legitimacy, female senior venture capitalists in these groups may opt to conform to, or even internalise, the prevailing norms and practices that favour men,” says Professor Jiang.

Chinese Clan Culture

Historically in China, clan culture was particularly strong in the South-eastern parts of the country, such as in Zhejiang province, Fujian province, and Guangdong province, and some parts of the central areas, such as Jiangxi province and Hunan province, but it was something that was not as influential in Northern or Western China. Each clan had its own kinship association. These Chinese kinship associations were highly authoritative as they had the right to control and allocate resources such as land that belong to their clan. However, the authority of kinship associations was greatly diminished after the Chinese Communist Party took power in 1949, centralising all common resources, including land.

But with the onset of China’s economic reforms which began in 1978, clan culture has made a comeback. Activities that relate to clan culture have re-emerged in recent years. For example, the Zhao Clan in Jiangmen city of Guangdong province raised more than 1 million Chinese yuan and gathered 800 clan members to celebrate the rebuilding of their Ming dynasty ancestral hall.

To study the influence of clan culture on family business ownership, the researchers first sought to measure the intensity of clan culture within different parts of China. They then cross-referenced this with publicly-listed company ownership data. They studied 1,821 family businesses in total from 2014 to 2016. What they found was that, holding everything else constant, a one-standard-deviation increase in clan culture intensity of the birthplace of the owner of a business leads to an increase of 2.88 percentage points in family ownership share, which is equivalent to about an 8 percent increase relative to the average family ownership share in the sample.

“What this tells us is that, despite the substantial modernisation that occurred in China over the years, clan culture persists and continues to influence modern business owners,” Prof. Ye says.

A Three-way Mechanism

So why does strong clan culture lead to an increase in family business ownership? The researchers came up with three possible explanations. The first one is known as the short-radius trust attitude. In ancient China, clan members usually lived in the same village and their close relationships fostered high trust among clan members and low trust for outsiders.

Putting this cultural trait into the context of this study, the researchers found that people who come from high clan culture influence areas exhibited higher trust in family members but lower trust in outsiders, which leads to a higher family ownership concentration. In addition, the study highlights that clan culture has a bigger impact on family ownership when the business environment is more volatile or less legally regulated because business owners tend to trust and rely on family members more in these environments.

Another factor is that, historically, clan kinship associations in China were associated with a long tradition of the pooling of resources and sharing among family members to help owners establish and run their businesses. In fact, typical clan rules often discouraged the selling of even private property outside of the clan, and is something which is only allowed if the sale cannot be completed with a member within the clan.

In turn, the propensity for clans to pool their resources lessens the need for business owners within the clan to seek external financing, such as by issuing equity, to outsiders. In turn, this can lead to a larger share of a firm being held by family members in areas of strong clan culture influence. In addition, the study found that clan culture tends to have a more pronounced effect on the level of family business ownership in provinces where financial institutions are weaker, and thus funding from the clan becomes more crucial to businesses.

Thirdly, under the influence of clan culture, business owners may also find it personally useful to keep the firm in family hands, such as for tighter control or to make it easier to provide employment for family members. Indeed, the study provides evidence from a third-party survey that shows business owners in provinces with strong clan culture influence are more likely to take on the duties of providing employment for family members.

Takeaways for Policy Makers

“As clans have historically been organised along patrilineal descent, a key element is its emphasis on family values and loyalty to the family. That’s why, keeping other things constant, where the owner of a firm hails from regions where there’s strong clan culture influence, it is highly likely they would be more amenable to keeping their businesses within family control,” says Prof. Ye, adding also that it is highly likely that the three channels are intertwined. “Understanding the mechanisms of how clan culture can influence the operation and ownership of family businesses may be particularly important for policy makers, given that family businesses accounts for a major part of the country’s GDP.”

The researchers caution against using the study’s findings to draw conclusions on economic development for specific regions. Not only could there be potentially complicated interactions between the influence of clan culture and regional economic development outside of the scope of the study, but economic development also depends on a host of other factors, from the level of institutional reform, local financial market development and geography.

On the other hand, policy makers would do well to take heed of the study’s findings, for example, if their objective is to encourage family businesses to be more open-minded towards their ownership structure. In such a scenario, it would be conducive to establish healthy legal institutions and financial markets to counterweight the reliance of family businesses on clan resources.

“Finally, to the extent that clans are a type of ethnic organisation, our research may be viewed in a broader scope of other similar organisations such as the caste system in India,” says Prof. Ye. “What is particularly valuable about our findings is that we highlight the persistent and significant impacts of cultural traits on economic and financial outcomes.”

Origin of Workplace Accommodation

Awareness of workplace accommodation rose sharply after the passing of the Americans with Disabilities Act in 1990 in the U.S., and the U.N.’s adoption of its Convention on the Rights of Persons with Disabilities (CRPD) in 2006.

Gradually, workplaces around the world, particularly in the West, put into place practices that would make it easier for employees with disabilities to carry out their jobs. These included modifications in the work environment, work process, or work conditions that reduced physical and social barriers for these employees. People with disabilities started to enjoy an equal opportunity to be hired and to perform the same types of tasks as their co-workers without disabilities.

The years after the landmark legislation and international treaty, businesses and organisations have used workplace accommodation as an important diversity management strategy. It makes sense: When a workplace makes life easier for employees with disabilities, it attracts a more diverse workforce. When the playing field is level, these employees have time to complete their tasks unhindered. They can contribute their talents despite their physical limitations.

The reality, however, is that not only people with disabilities need special accommodations at work. Many other types of employees also need them. Surely, some companies have implemented workplace practices designed to accommodate different employees’ needs. These practices, such as flexible work schedules and family sick leaves, are often considered “perks” in human resource management practices to attract new hires. But seldom are they viewed as practices to bring out the human potential of employees.

Dr. Sun points out that there is a lack of research and knowledge in how workplace accommodation exerts a positive impact on the creative performance and psychological well-being of employees.

“The lack of knowledge prohibits the promotion of workplace accommodation in organisations and limits the utilisation and development of employees’ human capital—regardless of whether they have disabilities,” he says.

Creative Self-Efficacy

Dr. Sun, along with his fellow researchers Prof. Man Xiangyu and Prof. Zhu Xiji at Central University of Finance and Economics in Beijing, collected sample data from 300 employees. These employees came from two different companies—a manufacturer and a medical equipment company, both located in Northern China.

The study examined the relationship between workplace accommodation and employee creative performance. It found that workplace accommodation promotes employee creative performance by increasing their creative self-efficacy.

“What this means is,” explains Dr. Sun, “when an organisation plans to accommodate employees’ needs, these employees turn out to have a greater confidence in their ability to complete their tasks creatively or find creative solutions.

An interesting finding of the study is that the positive impact described above doesn’t equally apply to everyone at the workplace. The researchers found that employees with less severe disabilities benefit more from the positive effects of workplace accommodation.

Employees with more severe disabilities are often stigmatised and have an inferior status in the workplace. They often feel discriminated by others, and that they have a lower level of competencies. As a result, they are less likely to thrive at work than their co-workers without or with less severe disabilities.

In addition, there are fewer successful models for employees with disabilities than those without. That, along with the dissimilarities between the learner (with more severe disabilities) and the role model (with less severe disabilities or none), makes it much harder for employees with severer disabilities to learn new skills on the job.

“Our finding suggests that companies should provide appropriate training to employees with more severe forms of disabilities to help them better utilise their skill sets in dealing with workplace accommodation issues,” says Dr. Sun.

China

By investigating the effects of workplace accommodation on employees in China, the researchers hope their paper will facilitate proactive workplace accommodation measures in China. As the sample size of the data was relatively small and collected in only one country, more evidence is needed from different countries to support the generalisation of the results.

“We hope our work will lead to a broader exploration of workplace accommodation in the diversity management research, and contribute to the diversity workplace accommodation practices, maximising the utilisation of all employees’ knowledge, skills, and abilities,” says Dr. Sun.

The post Building an Inclusive Workplace to Foster Creativity first appeared on China Business Knowledge.

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