Passed down through the years, family businesses often flag at the hands of a founder's less talented or motivated descendants. But in Japan, family firms are more typically robust and competitive across the generations. (click below to read more)
A new study points to adult adoptions as the reason. Roughly 98% of adoptions in Japan are of adults, mostly young men. When chosen for their potential to take over a family business, as is often the case, they take on their new family's name and often marry into it. If necessary, biological children are elbowed aside to make way for a more talented outsider. Promising daughters traditionally don't rate.
The system, which the researchers find unparalleled in the developed world, seems to work. The study reports that, in Japan, family firms outperform nonfamily firms—and "adopted heirs' firms outperform blood heirs' firms."
"Adoptive Expectations: Rising Sons in Japanese Family Firms," Vikas Mehrotra, Randall Morck, Jungwook Shim and Yupana Wiwattanakantang, Journal of Financial Economics
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