Monday, March 20, 2006

Family Firms Build for the Future

Princeton historian Harold James makes the argument in his chapter of The Meaning of Marriage that family firms connect markets with the future. Corporations tend to be driven to short time horizons – at the worst, looking no further than shareholder returns in this quarter. Family firms, on the other hand, look for sustainable production and consumption for generations unborn.

There has been a long-running belief that family firms are a dying form of business. They may have been necessary to get capitalism started, the argument goes, but the greater rationality of the impersonal corporation will drive out family firms in a mature market. Yet this hope, like its cousin belief in secularization, keeps failing to come true. James reports that three quarters of the registered companies in the industrialized world are family firms, some of them very large.

Family firms go further toward solving the problem of trust than a corporation can. The family members are bound to one another in ways that mere coworkers rarely are. And customers can believe that a family firm can be trusted now, because they want to still have customers when the next generation takes over.

Even in the most impersonal and rationalized part of the world system, the strong bonds of marriage and family matter.

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