Family Capitalism: Wendels, Haniels, Falcks, and the Continental European Model (review)

In recent years, revising or amending Alfred D. Chandler's thesis on the rise of large-scale business enterprises has become an industry unto itself. A decade ago, the most significant challenges to Chandler's visible hand appeared to come from those who espoused both the contemporary and the historical virtues of flexible specialization. More recently, it appears that advocates of the family firm have begun to stake their claim to a part of Chandler's sizable inheritance. However, just as the introduction of flexibility into the historical literature reflected a particular economic conjuncture of the late 1980s and early 1990s, so, it might be argued, does this new academic flight to embrace family firms. After a decade of insider-trading scandals, the manifest corruption and malfeasance rampant among corporate officers, and the collapse of the dot-com bubble, the family firm now appears to offer not only the prospect of long-term stability but also a measure of protection from the shark-ridden waters of publicly traded stock companies.

Harold James's immensely detailed comparative history of three European iron-producing dynasties—the Wendels of France, the Haniels of Germany, and the Falcks of Italy—is largely constructed as one such attack upon the Chandler thesis. In part, this is unfortunate because it leads the author to sacrifice several opportunities to more broadly conceive of the issues raised by the long-term survival and adaptation of family firms under capitalism to pursue his prey. Moreover, to this end, the qualifications that Chandler included in his evaluation of the fate of family firms, most notably, that large-scale industries requiring less-sophisticated technology, such as food-packaging and distribution, offered much more amenable environments for the survival of family firms, are wholly ignored. Ironically, the most successful of the family firms analyzed in this book, Haniel survived in large part because it left the iron and steel industry relatively early and realized significant growth through part-ownership in the wholesale discount chain Metro Cash & Carry.

Nevertheless, this is a valuable book that has much to offer. Rather than focus on the rise of managerial capitalism, James successfully analyzes the complex relationship between finance, entrepreneurship, and the state. Indeed, the role of banking, capital markets, and finance in the economic development of Western Europe is perhaps the central theme of the book. The fact that three family firms are chosen for this study is almost incidental to the more general value of this book. Their fate, in many ways, was inextricably linked to the legal constraints, state policy choices, and economic networks through which capital was mobilized in the nineteenth and twentieth centuries.

In contrast to most British or American firms, these three firms shared a unique continental European historical experience. This experience was marked by repeated bouts of political instability stretching from the French Revolution and Napoleon through the revolutions of 1848, the devastation of two world wars, and postwar reconstruction. The disruptions caused by these political changes were further compounded at different times by economic dislocation, depression, or intense international competition.

Under these circumstances, James argues, the family firm came to play a more pronounced role in continental Europe than elsewhere, primarily because it provided an alternative way to manage risk. Indeed, it is James's contention that family firms generally are "uniquely resilient" (p. 340) institutions because during periods of economic downturns they are able to mobilize capital through less formal financial networks. Furthermore, family firms tend to emphasize the importance of securing moderate returns over the long-term rather than exceptional returns immediately. Thus, Ernest-Antoine Seillière, head of the Wendel family enterprises through the 1990s, explained that "We are patient during bad years. This is a strength for businesses like Hermès, Peugeot, Michelin, or Wendel. With us, we don't talk dough; we talk projects" (p. 330).

Still, family firms entertained their own set...