Family Capitalism and Internationalization

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