Incubating the next generation to venture: The case of a family business in Hong Kong


Many Chinese family businesses face the dilemma of building good operating and governance structures and systems while fostering an entrepreneurial spirit across generations. In this study, we explored trans-generational entrepreneurship in Automatic Manufacturing Ltd. (AML), a Hong Kong SME, to shed light on this problem. The first generation founded the company and chose a unique development path that emphasized quality, innovation, and learning before grooming a cadre of professional managers. To continue the family entrepreneurial spirit, AML used the “familiness” resources embodied within the family and its business to incubate the second generation. To test the wings of the second generation as entrepreneurs and then lure them back to AML to take over the responsibilities of the first generation, a unique succession plan nurturing spin-offs by the second generation was developed and implemented. Such a systematic approach, although still under experimentation, has the potential to become best practice for other family businesses. The implications of this approach for research in portfolio entrepreneurship and open innovation are also discussed.

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  1. 1.

    Among other accolades, the Hong Kong Institute of Directors awarded the co-founder cum chairman, John Mok, “Director of the Year” in 2005. John Mok is also the chairman of a bio-medical technology professional association in Hong Kong.

  2. 2.

    SGAI was formed with Sagentia to access advanced engineering product development and consulting. Sagentia employs over 150 PhDs in Cambridge, England, and is one of the world’s pre-eminent technology management and product development companies. In 2002, Sagentia formed a joint venture with AML to explore opportunities in Asia and reduce the costs associated with cultural differences. SGAI has been successful, and AML benefits from Sagentia’s technological know-how.

  3. 3.

    Note that some of the names have been changed to preserve anonymity.

  4. 4.

    In the 1970s an average manufacturer had 25 employees, but fewer than 16 by 1989 (Mo, 1997).

  5. 5.

    Research and development is a public good that the private sector cannot sufficiently provide. However, suggestions or even mere discussion of any “violation” of the laissez faire doctrine in Hong Kong are treated with the suspicion that a particular sector or vested interests might be receiving favor.

  6. 6.

    Since 1990, the Dongguan plant has become AML’s home base for manufacturing. At the beginning of the company’s China expansion, production was located in China and designed in Hong Kong. In 1991, however, AML moved its product design to Dongguan. Product design requires a lot of engineering time for testing, optimization, and tinkering. As more university graduates from northern China moved to the south in search of opportunities, AML took advantage of the supply of talent. Meanwhile, the headquarters in Hong Kong retained the primary design team and product planning due to the free flow of information and the availability of versatile engineers.

  7. 7.

    Traditionally, doctors have cultured replacement skin for patients using two-dimensional machines. Although the cultured skin resembles skin in vivo, the problem is that the surface of the human body is not 2D, which makes it hard to grow naturally. Because the 3-dimensional incubation machine better represents the microenvironment of living tissue, the skin cultured by the 3D machine is very similar to skin in vivo and it grows in a way that is similar to how it grows in the human body.

  8. 8.

    John Mok explained this in a class talk held in August 2009. As of 2012, the incoming generation has created a few more spin-offs out of AML.


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This paper is based on a case studied under the Successful Trans-Generational Entrepreneurship Project (STEP) and presented at the Asia Pacific STEP Family Summit in Hong Kong, 2008 (see Au, Craig, & Ramachandran, 2011). It was also presented at the Asia Pacific Journal of Management Special Issue Conference at Renmin University of China, Beijing, 2011. The project was partially supported by a research grant of the Hong Kong UGC awarded to the first author (CUHK 440008). We thank Mike Peng (Consulting Editor) and Yuan Lu (Guest Editor) for helpful comments.

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Correspondence to Kevin Au.

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Au, K., Chiang, F.F.T., Birtch, T.A. et al. Incubating the next generation to venture: The case of a family business in Hong Kong. Asia Pac J Manag 30, 749–767 (2013).

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  • Family business
  • Trans-generational entrepreneurship
  • Angel investment