Family business in Japan

The family business is playing an important role to contribute the growth of economy even in nowadays economy. It had occupied the 60% of private sector output, 54% sales and 40% GDP in 1993 of U.S. and family business is taken up approximate half of whole business company currently. In addition, it also provides more employment opportunities for society, and it is an essential factor for economy.

However, there are some difference between family business and public companies. The public companies are able to raise their capital through their equity shareholders and borrowing from banks. It is more easily to acquire the borrowing form bank because they are providing the transparent documentation for public. On the other hands, family business is hardly to raise their capital by borrowing, because they are almost closed environments in order to protect their family secrets, and the transparent documentation is not required for family businesses. Therefore, lenders are hardly to accept their borrowing, and in order to acquire the borrowing, the agency problems will be involved in family business. The family business consider their own wealth and needs rather than investor, as result the investors’ loss trusting to family business and their wealth. What’s more, family business is also involved the relationship problem and conflict during their business operating.

According to Wall Street Journal, it points out that the family firms become more popular in Japan than the other countries. In Japan, family firms are holding a strongly competitive across the generations. The family inherited problems are often occurred in the Japanese family business.

It is more considerable issue about who is able to become the next generation successor. The general consideration will be concerned the oldest, most educated and most appropriate. Actually, in the Japanese tradition, the achievement is more important than anything others, therefore, Japanese family firms are using the family structure variables as instruments to elevated the performance of sons of leaders. Base on this concept, the factor of age can be kicked out to consideration. The measure to decide which son will be inheritor is that the owner will provide a suitable job to their sons and arrange a star manger to train them. During the work, the owner and manager will judge their behaviors, capacity and talent. The judgment is not only highlight the capacity and talent for the business contribution, but also the ethic behaviors are an important factor to impact the inherited decision, because of Japanese tradition. Therefore, the family business in Japan will chose the most appropriate son to be their inheritor.

And the other interesting thing is that, due to the tradition of Japan, it is usually not accept to choose their daughters to be inherited. Assuming a business owner do not have son, but owner has many daughters. People are possible to marry the owner’s daughter to achieve the qualification to be their business inheritor.