{"id":6702,"date":"2017-05-09T15:35:49","date_gmt":"2017-05-09T13:35:49","guid":{"rendered":"http:\/\/www.munich-business-school.de\/insights\/?p=6702"},"modified":"2023-07-02T13:46:32","modified_gmt":"2023-07-02T11:46:32","slug":"family-business-japan","status":"publish","type":"post","link":"https:\/\/www.munich-business-school.de\/insights\/en\/2017\/family-business-japan\/","title":{"rendered":"What Japan\u2019s Over 1,000 Year-Old Family Owned Businesses Can Teach Us"},"content":{"rendered":"\n

How do some family companies go on for centuries while others die early? What is the secret of a long corporate life? Is there an influence played by culture? And what can the unique Japanese „ie“concept of teach us about longevity? We offer some insight.<\/strong><\/p>\n\n\n\n

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The average lifetime of an American family business is 24 years according to Lansberg and corresponds with the tenure of the founder. We have all heard about the 3rd generation curse and are familiar with the statistics that only 3 % of all family-owned corporations make it into the fourth generation. There are many things that can disrupt the life of a corporation, but the most prominent could well be swift succession processes, in a way the Achilles heel of family businesses. Things that come to mind are father-son conflicts, silver spoon syndrome, Sticky Baton problems, and a growing family size, whilst growing profits become increasingly challenging.<\/p>\n\n\n\n

One country that seems to defy the 3rd generation curse much better than others is the land of the rising sun. Japan has 7 out of the 10 oldest companies on the planet and also has the highest concentration of old family businesses by any measure such as GDP, population, and landmass. According to a 2008 study from the Bank of Korea, the world had 5,586 companies that were older than 200 years. In this sample Japan was number one with 3,146 firms or 56 percent; the second was Germany with 837 or 15 percent; the Netherlands came third with 222 and fourth was France with 196 companies.<\/p>\n\n\n\n

But it is not only the extreme cases of very old companies that are surprising, the overall life expectancy of a Japanese family business is higher in general. According to professor Toshio Goto from the Japan University of Economics in Tokyo, the average lifetime of a Japanese family business in 2005 was 52 years, more than double that of its American counterparts.<\/p>\n\n\n\n

The Secrets of Japanese Family Companies and the Role of the \u201cIe\u201d Concept in It<\/h2>\n\n\n\n

Why is this so, and what are the secrets that we can learn from Japanese family companies?<\/p>\n\n\n\n

In a nutshell: Alignment of interest seems to be the key. Japanese family companies always have a competent family member at the helm of the organization, as active owner or manager, and there are no feuds between cousins. Sounds convincing in theory, but how do you do that when your business is over 400 years old and already in the 15th generation?<\/p>\n\n\n\n

There are a couple of unusual factors that are unique to Japan. The Japanese social value system is obviously very different from its Western comparisons, but also dissimilar to its continental Asian counterparts. It entails strong cultic features, very strong corporate identity that permeates every aspect of company life and most importantly \u2013 and for many people unknown \u2013 a substantially different system of family guidance and administration, that has continued to define the nature of Japanese society since the Edo period.<\/p>\n\n\n\n

The so-called \u201cie\u201d system, a patrilineal household, is at the core of the traditional Japanese family. It is a very complex kinship unit, a very complex multigenerational family system that is based on primogeniture. In this particular system, only one child inherits. All of the other children in any generation are expected to eventually leave the family and go establish themselves in some other family or some other social institution. The chosen successor, usually the eldest son, inherits the family, everything to do with the family, and the rest of the children have to find their own way in the world. In the \u201cie\u201d system lineage is important and meticulously recorded. In theory, the \u201cie\u201d should last forever and in principle never dies. It embodies all of its deceased and future members. Sounds weird? Let\u2019s explain the historical and philosophical background briefly so that one can understand the social dynamics better.<\/p>\n\n\n\n

Understanding the Japanese \u201cie\u201d Concept<\/h2>\n\n\n\n

The \u201cie\u201d concept, which is not existing in the Western world, is vital to the Japanese business community. It is firmly rooted in the historic and socio-cultural tradition of Japan. As in many Eastern civilizations, Japanese culture plays down the role of the individual and places significance on the importance of conformity and the success of the group. The roots of this groupism are to be found in the early rice culturing society, emphasizing Shintoist values, harmony, horizontal ties, and an egalitarian structure. During the military government of the Edo period (1603 \u2013 1886) this groupism was galvanized and the \u201cie\u201d institution, a vertically oriented hierarchical family model, became prevalent.<\/p>\n\n\n\n

The main reasons for the Shogunate to adopt the \u201cie\u201d system were:<\/p>\n\n\n\n