chapter  4
Family Capitalism and Internationalization: The Case of the Czech Family Firm Bat’a up to the Early 1940s
Pages 16

Crossing national borders is among the crucial challenges for corporate business. Geoffrey Jones once pointed out that it has become imperative for firms “to move with the customer,” especially since the industrial growth of the markets. 1 The internationalization of family-owned companies from the late nineteenth century onwards, however, is still relatively unexplored territory in this field of research, although recent publications have begun to probe the early internationalization of family-owned companies in Germany. For example, Angelika Epple, Hartmut Berghoff, and Patrick Kleedehn in their studies of the family businesses Stollwerck, Hohner, and Bayer, respectively, highlight the fact that these companies began to internationalize early on, and, thus, followed a path similar to that of other multinational enterprises. 2 Epple characterizes the Stollwerck chocolate company’s approach to internationalization as “fraternalistic” (in contrast to “paternalistic”). In this approach, having a horizontal executive level and following the tradition of “consensual decision-making” are particularly important; this was the case in several businesses run by brothers at the end of the nineteenth century. This corporate governance concept that emerged in family firms was based on consensus, which was sometimes difficult to explain to nonfamily members. This strategy helped to reduce transaction costs, particularly those associated with information and communication. At the same time, the lack of hierarchical decision making triggered new conflicts when consensus could not be achieved among the family members. 3 Hartmut Berghoff describes a similar “fraternalism” in his study on the German harmonica manufacturer Hohner. 4

However, these studies have only begun to raise the question of the role of the family in the internationalization process. While European family-owned companies crossed national borders to gain access to foreign markets, the way they did so depended on the means they had at their disposal and how they structured their companies to take this step. Studies on Early Modern trade history have already highlighted the importance and strategic positioning of family members in the creation of international trading networks. 5 Can a particular organizational structure of “friends and families” be identified with the internationalization of family firms in the late nineteenth

and early twentieth centuries, as well? This chapter will explore these issues by looking specifically at the development of the Czech shoe manufacturer Bat’a up to World War II, which even today is one of the world’s largest family-owned companies. 6

This chapter offers initial insight into a comparative research project. In addition to investigating Bat’a, this chapter also provides insight into broader changes in the shoe-making industry by comparing Bat’a’s case to those of two other European, family-owned shoe companies, Bally and Salamander. Similar to the Swiss Bally and the German Salamander shoe companies (all founded between 1851 and 1894), Bat’a, by the 1930s, had already developed from a small family-owned craftsman’s workshop set up under difficult economic conditions into a family-owned global player. Around World War I, the firm-which adopted mass production methods from the United States very early on-developed innovative strategies for corporate organization and marketing; for example, it turned to international markets by exporting its organizational model all over the world. This involved founding industrial satellite towns for shoe manufacturing.