Abstract: This research, through the lens of “relational culture”, investigates the inherent logic behind the “family business succession” phenomenon in Chinese private enterprises. We develop a city-level “relational culture” intensity index and combine it with data from a survey on succession issues in Chinese private enterprises for empirical analysis. The results indicate that in areas with a strong “relational culture”, private entrepreneurs are more likely to hand over their businesses to their children. Heterogeneity analysis reveals that for businesses with a long operating history or entrepreneurs possessing political status, the city’s “relational culture” significantly influences the entrepreneur’s preference for their children to take over the business. Conversely, in companies with strong technology R&D capabilities and significant growth potential, the influence of local “relational culture” is less. Additionally, cities in the eastern coastal provinces exhibit a lesser influence of “relational culture” compared to those in the central and western regions. The empirical conclusion remains robust after addressing potential endogeneity issues using instrumental variable regression. The empirical results support the view that in private enterprises that rely on relational culture, “family business succession” becomes an inevitable institutional choice to protect the enterprise’s social relationship capital; the higher the value of relational culture is, the more common this arrangement is. Therefore, to mitigate the “family business succession” phenomenon and its adverse impacts, it is necessary to establish transparent government-business relations and a rule-of-law business environment to promote high-quality development of the private economy.

Key words: private enterprises, family business, relational culture, family business succession