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In the beginning of foundation, private enterprise selects family system has its rationality. We should realize that family enterprise is an inevitable stage of Chinese private enterprises’development history, and also can’t completely erase its maneuverability and achievements. But for anyone with an explicit development goal of enterprise, to be bigger and stronger is their dreams. When small family enterprises grow bigger, introducing professional manager, undertaking reforms turning, improving corporate governance structure become the internal development needs of "transformation", they have to do these.The family enterprise acts as a kind of common economic phenomenon in modern society, which is also a special cultural phenomenon, family enterprise with the family enterprises is quite different from non-family enterprise in many ways. For example, what is the development mechanism of family enterprises? What is the restricting factors of system innovation? What are the regularity among them? In the intergenerational changes in leadership, how to transfer power? How to charge family enterprise to overcome life cycle? How to change enterprise system to realize sustainable development? Family enterprise contributes greatly to the private enterprises and its existence has played an important role in economic development. But in modern times, family enterprises can not still adapt to modern enterprise development requirements. In today’s business environment, the family enterprises certainly can feel a lot pressure, and system environment change pressures may be the brunt. Forwarding, wandering, or reversing, this is the necessary decision that each family enterprise must make. Being able to continue moving forward, success only belongs to that kind of enterprises who can observe the changes, dare to choose the system innovation, deal with future challenges. To strain success, the key lies in whether enterprise can keep on the competitive situation with institutional environment, can create an upward vigor, be able to create a timely transformation of the initiative innovation spirit.In order to adapt the market economy development request, complied with the enterprise’s development rule, the family enterprise must in aspect and so on property right system, management system, servant mechanism, enterprise culture system carry on the system innovation, the circle which the breakthrough family seals up. Simultaneously, the family enterprise must also improve the social environment which the enterprise exists, for family enterprise smooth realization system innovation creation good external condition. The author believed that, passed through the system again structure, family enterprise’s superiority and the modern enterprise system organically unifies in together, in the future very long section of times, it still could be one kind of effective organization form.This article aims to base on family business related theories and the theory of institutional change, mainly adopt theoretical analysis and normative analysis and case analysis method, through the definition of family enterprises, analyzing different features of family enterprises, points out the necessity of family enterprises institutional changing, and furthermore gets a conclusion that during its lifetime if the family enterprise wants to grow and develop continuously, it must transform to the modern company, and establish the modern corporate system. Also, it discusses the system innovation during the transformation of family enterprise to modern company, which basically involves in two directions:the innovation of system and internal mechanism innovation, and combines with analysis of some related cases to offer some policy suggestions to the transformation.
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