Perspectives from ISB

Anyone interested in family business successions cannot ignore studying Japanese companies. As per a recent study by a South Korean bank, there are 5,586 companies worldwide that have existed for more than 200 years, of which 3,146 are Japanese. As per estimates there are more than 50,000 Japanese companies that have lasted over 100 years and seven have been around for as much as 1,000 years.

Japan contains eight of the world’s ten longest-running businesses, including the world’s oldest hotels, (Nisiyama Onsen Keiunkan, 705) and (Hoshi Ryokan, 718). The country also houses the world’s oldest sake brewer (Sudo Honke, 1141), religious goods company (Tanaka Iga, 885), flower decoration company (Ikenobo, 15th century), confectionary (Ichimojiya Wasuke, 1000), and, until recently, construction company (Kongo Gumi, 578) — all of which have been verified by the Guinness Book of World Records. The secret behind the success of Japanese firms is twofold.

Adult adoption: For centuries, Japanese business owners have engaged in the practice through which, when there is no son to inherit a business, or when the son is not good enough, an heir is legally adopted. Through a technique called “Mukoyōshi,” a business owner with no male heirs to his company can also legally adopt his daughter’s husband as a ‘second-birth son’. Even in the rare case that a thoroughly vetted male adoptee fails in his leadership role, he can be disinherited, and another heir can be adopted to take his place. This practice makes Japanese family firms more professionally managed than their peers anywhere else.

Isolation: Another argument for the longevity of Japanese firms is the country’s isolationism, specifically in between 1641 to 1853. During this period, Japan’s economy thrived, and the country enjoyed one of the longest stretches of peace in any nation’s history. This assisted in preserving the legacy of local businesses.