Interviews

Learning from the world's oldest businesses on how to survive – keep it in the family

5 min read

22 September 2015

With Japan being home to the world's most oldest businesses, we took a look at how the firms managed to stand the test of time. The answer: by carrying on the family name.

The oldest running hotel, according to the Guinness Book of World Records, is Keiunkan Inn, which has existed since the year 705. The second-oldest is another Japanese hot-springs hotel, named Hoshi Ryokan, which was founded in 718.

But it isn’t just the world’s two oldest hotels: Sudo Honke is the world’s oldest sake brewer, which has been around since 1141, while the oldest construction business in the world was Kongo Gumi, which built temples, and had been doing so for 14 centuries. 

David Weinstein, professor of the Japanese economy at Columbia University, is of the belief that Japanese businesses have managed to last due to the right of primogeniture. Because the eldest son inherited all of a patriarch’s wealth, companies in Japan could be passed on entirely to a single member of the family.

The Keiunkan Inn has been continuously maintained by the same family for 52 generations. It was suggested that staff working there weren’t interested in reaching the top of the heap, as in ordinary companies.

There are even some staff whose families have held the same post for generations, passing it from parent to child to grandchild,” said Wow News. “All the same, the staff are committed and courteous, earning wages for themselves and their families. They put their all into offering a spirit of service that stems from a shared desire to protect the inn. This unflagging commitment and hospitality is drawing attention from the hotel industries worldwide.”

On the other hand, Kongo Gumi specialised in Buddhist temple construction and lasted over 14,000 years. The temple builder was in operation under the founders’ descendants since 578 AD, but succumbed to excess debt in 2006 and was acquired by Takamatsu Corporation. The Kongo Gumi name survives as a subsidiary of this construction group. 

According to Bloomberg, Kongo Gumi “boasted some internal positives that enabled it to survive for centuries”. Its last president, Masakazu Kongo, was the 40th member of the family to lead the company. He cited the company’s flexibility in selecting leaders as a key factor in its longevity. Rather than always handing reins to the oldest son, Kongo chose the son who best exhibited the health, responsibility, and talent for the job. Furthermore, it wasn’t always a son. The 38th Kongo to lead the company was Masakazu’s grandmother.

“Another factor that contributed to Kongo Gumi’s extended existence was the practice of sons-in-law taking the family name when they joined the family firm,” Bloomberg revealed. “This common Japanese practice allowed the company to continue under the same name, even when there were no sons in a given generation.”

Even though primogeniture faded with the 20th century, owners still often pass their companies on to a single heir. In 2011, more than 90 per cent of the 81,000 individuals adopted in Japan were adults. Further research shows that firms run by adopted heirs outperformed those run by “blood” heirs, while both adopted and blood heirs outperformed non-family firms.

The proof is in the pudding: Most of Japan’s oldest companies are family-owned.

Weinstein pointed to the example of Sumitomo and Mitsui, both centuries-old, which merged to become SMBC – Japan’s second-largest bank. Perhaps most famously is Nintendo, which started out as a playing-card maker in the 1800s and transformed into an iconic consumer electronics company while remaining a family business.

Hugh Whittaker of the University of Oxford’s Nissan Institute suggested that such businesses strike a delicate balance between continuation and innovation. 

“The logic of doing business in Japan is a logic of commitment rather than a logic of choice,” Whittaker said, stressing that owners privilege longevity over the present moment. Family-owned enterprises are always going to have a lot more persistence. It continues in the same sense that the name continues.”