chapter
27 Pages

The Family Firm in Industrial Capitalism: International Perspectives on Hypotheses and History

The resilience of family firms, which survive even among the largest companies of the major industrial nations, is commonplace. A survey reported in the Financial Times in 1989 concluded that about one in eight of the firms listed in the FTSE largest 100 companies possessed strong family connections. The New York Times referred to a growing opinion among management scientists during the 1980s that the management practices and business values associated with family firms, their regard for quality of product, respect for employees, and a focus on 'more lasting concerns than the next quarter's results' offered a model for the rest of American business. Many of the surviving family firms were large, publicly traded companies whose traditional strengths were then becoming acknowledged by an increasing number of large managerial corporations, reflected in their use of advertising and logos to project images linking past long-standing service with present efficiency. 1

There is also, of course, an extensive literature which emphasises the inherent weaknesses of family firms and their inability to adapt to the pressures of competition and change. The declining numbers of such firms in the twentieth century have been interpreted as evidence of an inability to compete with the large, modem corporations in which widely dispersed share holding has been combined with multidepartmental or multidivisional organisation and professional, salaried managers working within extensive administrative hierarchies.' A similar interpretation, associated particularly with Elbaum and Lazonick, has concluded that from the late nineteenth century successful competitive economic performance in the international arena depended on the replacement of the institutions of traditional competitive capitalism by large-scale corporate enterprise on the Chandler model. From their perspective, the survival of family firms, conservative and resistant in the face of pressures for change, are seen to be both symptomatic and a cause of the institutional sclerosis that afflicted British industry from the late nineteenth century. 2

This survey considers the historical experience of family and managerial enterprise in Britain, the US, Germany and Japan during the late nineteenth and the first half of the twentieth century, when their role has been a matter of debate. It concentrates on behaviour often considered to be peculiar to family firms, specifically that relating to ownership, control and management; motivation and policy objectives; succession, adaptability and performance. By its very nature a review of the literature virtually precludes the introduction of entirely new evidence and cannot, therefore, aim to present either novel or conclusive observations. There is, nonetheless, room for an adjustment of the perspective from which historians have tended to view family firms. The refocusing resulting from this exercise offers support for the argument that the widespread perception of the role of family firms in industrial capitalism is in need of revision.