Dr Na Zou’s research focuses on the influence of family on entrepreneurialism. Here, she explains how the possibility of increasing family sizes led to a shift in small business thinking.
In 2011, a province in southern China began letting some couples have a second child. It was a small pilot scheme, the first crack in a fertility policy that had shaped Chinese family life for three decades. Nobody was thinking about corporate research budgets when it happened.
But in a study I carried out with Zhihao Ren (KIMEP University) and Cristina Cruz (IE University), we found this demographic policy shift did something unexpected: it changed how thousands of company founders invested in their businesses. Specifically, founders who suddenly had a realistic shot at having more children began spending more on research and development – the kind of long-term, high-risk investment that only makes sense if you're thinking many years ahead.
The 'born or made' puzzle
Family business researchers have long debated a deceptively simple question: are family firms born, or are they made? The conventional answer is that they're born. A business is a ‘family firm’ because relatives own shares in it, sit on its board, or run its day-to-day operations. Ownership and governance define the category.
But this misses something important. Long before any relative sets foot in the business, a solo founder can start acting like a family-firm owner – prioritising long-term survival over short-term profits and thinking of the business as something to hand down rather than cash out.
What drives this shift, and when does it happen? We suspected the answer had less to do with who is formally involved in a business, and more to do with what a founder believes is possible for their family's future.
The perfect test
To study this, we needed a scenario where a large number of founders suddenly had reason to believe a family successor was within reach – ideally, for reasons that had nothing to do with the business itself.
China's one-child policy gave us exactly that. Introduced in 1979, it restricted most families to a single child for over three decades, backed by steep financial and social penalties. This didn't just shape household size; it directly limited how many potential heirs a business owner could realistically have.
Then, starting around 2010, the policy began to loosen. A pilot in Guangdong province allowed some couples a second child, and national debate signalled that further relaxation was coming.
Crucially, this shift was driven by national demographic policy, not by anything happening inside individual companies.
What we found
We analysed nearly 3,000 Chinese listed companies between 2007 and 2015, comparing two groups: firms for which family succession was a realistic option, and firms with no such option – such as state-owned enterprises.
After the reform, R&D spending rose significantly more among firms with a plausible family-succession path, equivalent to roughly an extra $8 million per year in R&D spending for an average firm in our sample. We ruled out other likely explanations, including an anti-corruption crackdown that happened around the same time.
The most striking result, though, came from a specific subset of companies: those run by a single founder with no other family members yet in the business. On paper, these "lone-founder firms" looked nothing like family businesses. Yet once having a larger family felt possible, their R&D spending jumped more than that of any other group – more, even, than firms that were already recognisably family-run.
We call these lone-founder firms a transitional organisational form. They had not changed their ownership structure or brought in a single relative. What had changed was the founder's belief about the future and that alone was enough to shift how they invested.
To make sure this really was about succession and not something else, we checked whether the effect was stronger among founders young enough to realistically have more children, and in regions where people had shown a preference for larger families. In both cases, the effect was pronounced: reinforcing that family planning was driving the pattern.
Impacts beyond China
It would be easy to file this away as a quirk of Chinese demographic policy. We don't think it should be. We have identified that a credible change in succession prospects can shift how founders invest, long before any formal family involvement appears.
This mechanism should apply anywhere succession expectations shift: inheritance law reforms, changes to immigration policy, or even personal life events such as marriage or the birth of a first child could plausibly trigger similar reorientation in founder-led businesses elsewhere.
For policymakers, there is a broader lesson, too: family and succession policy does not stay in its lane. A reform designed to influence birth rates ended up reshaping how companies invest in innovation.
If we want to understand why some founder-led businesses take the long view and others don't, we may need to look beyond the boardroom and consider what founders believe about their own families' futures.
Respond
