How to boost organizational creativity in the complex and dynamic environment is of theoretical significance. For the Chinese family businesses in transition society, however, there is a trade-off between differential leadership which is based on a family logic and innovational requirement of a business logic. How to balance these two logics is extremely important for the growth of Chinese family businesses. This study attempts to unpack the dynamic process between differential leadership and employee and team creativity from the perspectives of employee psychology and team interaction. We make four contributions to the existing literatures. First, by using a multilevel and longitudinal design, we reveal the underlying mechanisms that how differential leadership influence employee and team creativity as well as the growth of Chinese family businesses. Second, from the motivation, cognitive and emotional perspectives, and also by focusing on the Chinese indigenous concepts of “Ren” and “Pao”, we unpack the psychological dynamics between differential leadership and employee creativity. Third, besides interactionism, we also investigate the relationship between differential leadership and team creativity from the network structure perspective. Finally, this paper clarifies the contextualized factors that differential leadership affects employee creativity. It provides managerial implications for Chinese family businesses.