However, the author points out several weaknesses of the "family capitalism." The first is that one of its main strengths, the alignment of ownership and management, can become a weakness when control passes to the next generation. Second, family-owned firms also seem to lose caution as they get bigger. When they become too big to rely on a single bank, resorting to syndicated loans, their many bankers tend to monitor them less closely.
Sunday, October 4, 2009
Dynasty and durability. European family firms in the recession
This article talks about family businesses, which are a common for the European model. Family-owned or closely held firms dominate Germany in particular. Of the 1,000 biggest German companies, only 170 are listed. System under which they exist reflects the principle of long-term consequences. The author states that family businesses survived the two world wars mainly due to their long-term orientation.
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This article made me wonder what Shumpeter's perspective on this issue would be. Specifically the line that says that although they own the company that are not the creators. He would probably argue that family businesses hurt economic creativity.
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