- Succession is re-confirmation, not replication
- Innovation must be embedded in institutions
- Modern governance is the safety net for handover
Introduction: Handover as a Second Startup
On May 20, 2025, China's Private Economy Promotion Law took effect—the first foundational law dedicated to the private sector. The message is clear: private business is not a temporary expedient but a long-term institutional arrangement. For many first-generation founders, the law matters not only for property rights and market access, but because it writes the idea of an enduring enterprise into the institutional framework. A company lasts not because of one person's skill, but because of a mechanism that works across generations.
This brings succession back to the table. In the past, it was often framed as a choice between handing the business to one's child or to professional managers. The real question is harder: can entrepreneurial spirit be passed on at all?
1. Succession Is Re-confirmation, Not Replication
Many founders worry their children never endured the hardships they did. That concern is understandable but rests on a misconception—equating entrepreneurial spirit with hardship itself. Hardship was a product of its era. The core of entrepreneurship is judgment, responsibility and long-termism in the face of uncertainty.
What truly needs to pass between generations is a re-confirmation of values. The first generation opened doors by daring to go first. The second faces a more regulated market, a more complex global environment and more demanding customers. The context has changed, but the commitment to getting things done cannot. The first step in succession is not making the next generation repeat your path, but letting them form their own judgment through real business experience—even if they get it wrong.
The Private Economy Promotion Law emphasizes fair competition and legal protection, giving succession external certainty. Companies no longer need to survive on connections alone; they can stand on capability and credibility. Values now have cleaner soil to grow in.
2. Innovation Must Be Embedded in Institutions
The most visible expression of entrepreneurial spirit is innovation. But if innovation lives only in the founder, it is fragile. Enduring companies turn innovation from a personal habit into an organizational capability.
This means several things: R&D spending must be institutionally protected, not interrupted when leadership changes; decision-making must allow trial and error rather than relying on one person's call; and talent pipelines must be able to absorb new ideas. Many private firms make steady progress in digitalization and specialized niche markets not because one person is brilliant, but because innovation is written into processes and budgets.
The difficulty of succession lies here. The first generation's innovation was often driven by survival; the next generation's is driven by growth. The motivations differ, but both require a shared premise: a willingness to keep betting on an uncertain future. Institutionalizing this is far more useful than repeating the mantra "be innovative."
3. Modern Governance Is the Safety Net
The most vulnerable part of succession is not capability but governance. Friction between family members and professional managers, between old hands and new leaders, between emotion and rules, can easily cause internal exhaustion. Modern governance does not turn a family firm into a cold machine; it gives emotion a boundary and rules a place.
Specifically, equity structures must be clear, decision rights well defined, and financial information transparent. These look technical, but they are the safety net. With them, handover is no longer a zero-sum game but an upgrade of organizational capability. Entrepreneurial spirit can then move from one person's spark to a shared flame.
Conclusion: Let Spirit Outlast Wealth
The transmission of entrepreneurial spirit is never about copying the previous generation's answers, but about inheriting their questions. Wealth depreciates, positions change; only values, innovation capacity and governance keep appreciating across generations. For today's private enterprises, the best legacy is to make the company itself a living organism capable of self-renewal, self-restraint and self-growth. Only such a company deserves to be called an enterprise.