We provide here a complement to recent work on family business, which
has demonstrated the need to go beyond the generic definition of the
family firm to place personal capitalism in an appropriate institutional,
historical, and cultural framework. By focusing on the nineteenth- and
twentieth-century experiences in Britain, Spain, and Italy, we challenge
the notion that in the nineteenth and twentieth centuries there was
anything so simple as a Mediterranean model for family business. Rather,
we demonstrate the need to consider family businesses in national and
regional contexts if we are to understand their various capabilities and
characteristics. We use similarities and differences in the experiences
and responses of families and firms in the three countries to support
Family firms have commonly been seen as a versatile and successful
entrepreneurial response to market failures during the early stages
[End Page 28]
of industrialization in the eighteenth and nineteenth centuries.
Yet small-scale family businesses remained numerically significant
in some European countries in the twentieth century. In addition,
the continued power of large-scale family firms, despite an assumed
convergence of modern economies toward corporate capitalism, means
that personal capitalism remains an important subject at the dawn of
the twenty-first century.
Family firms make up 75 percent of all firms in Italy, 80 percent of
those in Germany, 76 percent of those in the United Kingdom, and 71
percent of those in Spain. In France 60 percent of the biggest firms
were family owned, while in Italy almost half of the fifty largest
companies were family firms.
It is interesting, however, that, whereas institutional capital
dominates large firms in Britain, in Spain many of the largest family
firms in the capital-intensive industries have vanished. They do remain
in other sectors, especially in food and drink manufacture and trade,
in the construction or building industries, and in some branches of
the chemical industries (pharmaceutical and perfume production).
In Italy family ownership and control is still important in large
corporations, as well as in small and medium-sized firms. It is also
interesting that the recent process of privatization of state-owned
conglomerates has considerably
[End Page 29]
enlarged the section of Italian industrial capitalism "controlled"
by family-owned corporations. Some very dynamic, family-controlled
firms, such as Benetton, Del Vecchio (Luxottica glasses), Riva, and
Lucchini (specialty steels), bought large sections of the formerly
state-controlled concerns in distribution and in the iron and steel
industry. On the other hand, the development of hierarchies inside the
dispersed productive structure of the industrial districts, from which
some larger organizations are emerging, does not in any way challenge
the traditional family ownership form.
Debate regarding the performance of family firms has sometimes pivoted
on unfavorable comparisons, especially in terms of growth and capacity
for innovation, to the American-style corporation.
It can be counterproductive to meet every criticism of family capitalism
with an example of its strength, and it is far more important to place
business in general, and family firms in particular, within a wider
framework accommodating national and sometimes regional characteristics,
with different institutional and cultural settings. Recently researchers
have demonstrated that it is misleading to view "family firm" as
a generic phrase, easily translated across economic and cultural
boundaries. Indeed, the definition of family business may vary
internationally, and the family ownership form may display different
capabilities in specific societies.
Thus, it is important to avoid a rigid definition of family firms that
masks the impact of family members on strategic decisions. Consequently,
although the British definition—a firm of which "a family member
[is] chief executive officer, [and where] there are at least two
generations of family control [but where] a minimum of 5 percent of
voting stock [is held] by the family or trust interest associated with
it"—can be applied to the Spanish examples over the last fifty
years, the significance of a specific level of financial control is
only part of the story.
This is also true in the Italian examples, in which traditionally
family ownership over large corporations is maintained through the
use of holding
[End Page 30]
companies, agreements, cross shareholdings, and the issuing of stocks
carrying multiple voting power. This allows the founders and their
families to raise resources on financial markets while also controlling
the company with only a small fraction of the share capital.
What is crucial is the extent to which a family is able to mold company
decisions through personal influence on leadership succession, sometimes
unfettered by any formal institutional regulation of governance. Although
financial leverage may be critical, we can also link power to societal
attitudes concerning family as much as to the precise level of a
family's stake in a company. In Italy, for instance, we see "outsiders"
fired for failing to give family interests preeminence over economic
considerations and family insiders preferred to outsiders as a matter
of course in several leading Italian businesses. Indeed, we should use
the concept of family business relatively strictly in Italy because,
especially among the largest private groups in the country, families
(which often are defined by relatives' partnerships) usually retain
a significant proportion, often the majority, of the capital and have
their members among the top executives.
Consequently, in the Italian context, family firms really are just that.
Recent research on international differences in family firm behavior
tends to involve two-country comparisons.
This work has revealed a strong relationship between national
institutional, political, and cultural differences and the behavior and
capabilities of family businesses. However, two-country contrasts have
their limits. Explanations of the survival of powerful family businesses
in Italy, but their relative decline in Britain, have demonstrated
that different relationships among banks, industry, and the state
were a vital distinguishing feature between the two countries. Yet
the suspicion could remain, given the continued importance of family
firms throughout the Mediterranean region, that a cultural north-south
divide existed in Europe. By including a second Mediterranean country,
Spain, in the comparison, we can explore the limits of the idea that
"southern European" values transcend national boundaries. Certainly,
nineteenth- and twentieth-century Britain was by no means a model for
governance patterns in northern Europe. This is not a problem, however;
it merely emphasizes the importance of exploring businesses against
their national and local contexts rather than making assumptions about
somewhat vague regional value systems and characteristics.
[End Page 31]
Family firms played a key role in the early industrialization of Britain,
Spain, and Italy and diverged after the Second World War, with a relative
decline in the importance of family capitalism in Britain. This is
not particularly surprising and merely echoes earlier findings. In this
article, however, we not only focus on the differences between Britain and
the two Mediterranean countries but also explore the distinctions between
Italian and Spanish family firms (the result of regional and national
contrasts in social, political, economic, and institutional forces) that
originated in the nineteenth century and continue today. By highlighting
some of the similarities in experience among all three countries, we cast
further doubt on the idea of a north-south divide, emphasizing instead the
complexity of the picture. We begin our analysis in the context of both
transaction cost theory and theories of networks before discussing the
various elements of the informal and formal rules of the game influencing
family business. Consequently, we discuss the role of institutional
forces, including laws on taxation, limited liability, and inheritance,
alongside value systems and training during industrialization. We assess
why, given some remarkable similarities in the experiences of family firms
in the three countries during industrialization, large family businesses
remained far more powerful in Spain and Italy than in Britain. Although
the results were similar in the two Mediterranean countries, we emphasize
that the forces influencing family business power were very different
in Spain and Italy.
Family Firms, Network Values, and Institutions
As a response to external uncertainty, the family firm has increasingly
been interpreted as a network of trust that is, in turn, embedded in a
wider locus of connections often centered on the local business community.
Especially during the early stages of industrialization, but also
in some mature economies, the family and its surrounding community
have frequently been seen as the ideal interface between firm and
market. Thus, although the family might represent an internal market
for managerial labor and a source of market information and of funds
for establishment and expansion, the boundaries of the family business
have usually lain within a larger group with shared culture and values.
Such family-centric networks are
[End Page 32]
not simply historical anachronisms. Large, relatively stable groupings
are an important characteristic of many twentieth-century developing
economies, especially in Latin America and Asia.
The notion that family firms are embedded within social networks of
trust implies that shared values and attitudes influence both family
and business behavior. This approach lies at the heart of recent work
on family business, where informal rules of the game underpin external
networks with other firms and with other organizations, most particularly
the state. Moreover, international comparisons reveal significant
differences in behavior between firms in nations with divergent cultures
and various types of family relationships.
The impact of these forces also applies to the internal arrangement
of firms, where social norms relating both to family behavior and to
the aspirations of individual business leaders may shape strategies
such as leadership succession that may themselves be internationally
distinctive. Succession strategies, embedded deeply in a defined
culture, are a good starting point for discussing the differences
among family firms in various institutional environments. In risky
environments the family has provided "protection against the economic
consequences of uncertain adverse events," especially in the sphere of
management and the choice of future leaders. Where the objectives of
family and firm are united, close networks of trust have the advantage
of ensuring a combination of incentives, effective monitoring, and
loyalty to protect against the danger of managerial impropriety.
If insiders are typically preferred to outsiders, in family firms the
process of securing generational transition is fraught with conflict and
may be the most traumatic internal shock facing a business, as well as
the crucial issue facing all family firms.
[End Page 33]
the Buddenbrooks syndrome is given little credence, evidence does suggest
that persistent insider succession (over several generations) may give
a firm an inward- rather than an outward-looking business culture.
This occurs in part because, if the cultural norms of the host society
influence the external behavior of family firms, there are inextricable
links between the culture of individual family firms and the hopes
and aspirations of the founders or their successors. Because of the
intimate ties of the culture of any business to its leaders, changes
at the head can influence business culture and a firm's internal
and external relationships and the way these change through time:
"For the entrepreneur, the business is essentially an extension
of himself. . . . And if he is concerned about what happens to his
business after he passes on, that concern usually takes the form of
thinking of the kind of monument he will leave behind."
By reinforcing business culture, insider succession may provide the
foundation for long-term strategies by reducing transaction costs. Yet, if
business leaders have gleaned training and experience within the firm or
family circle, this may restrict the firm's ability to respond to external
challenges or alter internal organization. Training and experience within
the firm should be balanced against an outgoing business leader's network
of contacts, which may be commercial, financial, or knowledge-based,
and which represent an element of the firm's intangible assets.
It is ironic that the process is so conflict-ridden, because one of
the principal aims of insider succession in family firms is to reduce
uncertainty by maintaining family control. Although by no means the
only factor determining survival or prosperity in family businesses,
the tumultuous nature of generational transition has been identified as
one of the principal reasons why family firms are often short-lived.
Even a casual reading of the specialist literature on family firm
management, much of it relating to American and British firms, confirms
the view that the passage of a business from a founder to his or her
successor is likely to involve difficulty.
[End Page 34]
the form and intensity of such conflict and the ways to remedy it are
likely to vary internationally. Moreover, the difficulties of securing
an orderly succession are far greater during times of economic hardship
than in prosperous periods. The realization of the need for training for
succession and the form that this training takes are also likely to vary
among countries. Attitudes toward education and the relationship between
education and business also mold succession strategies. The combination
of these forces, along with differences in attitudes toward the family,
affect the boundaries, capabilities, and internal behavior of family
firms in different countries and even in the same country. They make
anything so simple as a north-south divide in the evolution of personal
capitalism highly questionable.
Sources of Convergence and Divergence in Family Firm Behavior
Personal capitalism became synonymous with European business from
the industrial revolution to the twentieth century. The evolution of
family firms in the late eighteenth and early nineteenth centuries
was inseparable from the deeply uncertain economic environment, the
institutional background, the attitudes toward the family and its members,
and the culture of the local business community. These forces influenced
the shapes and capabilities of firms, their financing, and the way they
managed labor in most sectors of the economy. Although some important
and anticipated similarities of experience emerged in Britain, Italy,
and Spain, family firm behavior varied considerably, especially during
the later phases of industrialization. Local and national customs,
attitudes, and laws, as well as differences in economic, social,
and political circumstances influenced the evolution of strategies of
leadership succession and variations in the relative political power of
families in the three countries.
The legal framework for companies represents one of the institutional
underpinnings of family business and is part of the formalized "rules
of the game." One of the most distinctive features of British company
law was the Bubble Act of 1720, which outlawed the joint-stock company
and, more specifically, limited liability. Yet, if the Bubble Act of
1720 contributed to the popularity of the private partnership in British
business, the partnership's very fluidity and flexibility, combined with
the ingenuity of the legal profession in skirting round the act's more
restrictive clauses, made the form attractive
[End Page 35]
throughout the economy for over a hundred years. Long after the repeal of
the Bubble Act in 1825, manufacturers, retailers, and merchants favored
the partnership as a method of management and finance that truly united
ownership with control.
Unlimited liability became inseparable from the culture of family
firms in Britain for much of the nineteenth century.
It provided a guard against speculation and led to the assumption that
the majority of those who became partners, and hence had a financial
stake in the firm, would be active and drawn from close family,
personal connections, or others with shared values and outlook. Faith
in this device, for the security of private business, led to vehement
opposition to attempts to change the law of partnership in the 1830s,
a decade after the repeal of the Bubble Act. These attitudes remained
strong among many prominent businesspeople right up to the company
law reforms of 1856 and 1862. Consequently, it was not until the
1880s that the popularity of the partnership began to wane to any
significant degree, and even then, only a small proportion of firms
became public companies. Most were merely converted family partnerships
where ownership and control remained united.
Because the family firm was a response to market failure during the
early stages of industrialization, it comes as no surprise that in the
eighteenth century and for much of the nineteenth family partnerships
also proliferated in most branches of manufacturing, commerce, and
finance in Italy and Spain. Joint-stock companies were normally confined
to public utilities and to other ventures where financial requirements
What is rather more surprising is that the legacy of the Bubble Act
for British business seems to have been exaggerated as a reason for
the slow divorce of ownership from control and as the institutional
force distinguishing British from Continental business.
Even without equivalent experience,
[End Page 36]
business owners in Spain and Italy were also reluctant to limit
liability by using joint-stock companies. In Spain, for example,
entrepreneurial family partnerships, based on unlimited liability,
remained the norm until after 1950, despite a series of legislative
measures facilitating incorporation, measures which began in 1829 and
continued with subsequent laws in 1848, 1865, and 1885. Only in finance
and transport was limited liability popular in the nineteenth century.
In Italy joint-stock companies were covered by statute in 1865. Even
before the unification of the country in 1861, a few examples of
joint-stock companies were active in the peninsula, and they were under
the close public control required by the almost universal Napoleonic
Nevertheless, joint-stock companies remained a rarity, restricted
to the industries of the second industrial revolution. They began
proliferating during the late nineteenth- century industrial
takeoff, which was followed by a reform of commercial legislation
in 1882. Limited liability was, from the start, concentrated in
transport, insurance, mining, and, to a small extent, iron-smelting
industries. Some interesting but exceptional initiatives occurred
in the textile sector before the First World War. At the beginning
of the 1870s, for instance, only ten years after the unification of
Italy, the Lanificio Rossi was founded in a small town near Venice. It
was to become the largest joint-stock company in Italy in terms of
capital. This company began in the early nineteenth century as a family
company, owned and managed by the Rossi family. After the transformation
of the enterprise into a joint-stock company, drawing finance mainly
from across Lombardy, Alessandro Rossi remained the owner and the sole
manager of the company. The Rossi firm was, however, an exception in
an industry dominated at every level by small individual workshops or
It would seem, therefore, that although the company law framework did
create important rules of the game for family firm behavior, it was by
no means the only force determining when and how ownership and control
should be divorced. Rather, the key in all three
[End Page 37]
countries lay partly in the financial requirements of particular
Even then, the shift to limited liability joint-stock companies need not
reflect a shift in governance and may be closely associated with the
persistent role of the family. In addition, in the uncertain world of
early industrialization, unlimited liability was attractive in Spain and
Italy, as in Britain, precisely because it could deter speculation. This
is not to suggest that the legal framework is irrelevant in shaping
national business behavior. Instead, these findings demonstrate the
importance of placing the rules of the game in the context of the
Company law is but one dimension of the institutional framework within
which business operates. We should consider it alongside other elements
of the legal system, most particularly inheritance law. The interplay
between these two elements may have important implications for patterns
of ownership and control, as well as for the supply of entrepreneurs to
family firms. The use of the joint-stock company, while facilitating
business expansion, also could ease inheritance difficulties. The
precise relationship between inheritance and the ownership and control of
joint-stock companies is partly linked to whether partible inheritance
or primogeniture prevailed. In Britain, therefore, where primogeniture
was sometimes practiced, though by no means universally, joint-stock
status created the basis for an income flow for younger siblings and
family connections. The case should not be taken too far, however, for,
as Roy Church has demonstrated, the evidence that family business owners
in the late nineteenth and early twentieth centuries treated their
businesses merely as income streams to support family hangers-on is,
at best, ambiguous.
In Italy the Napoleonic legal code stipulated a system of partible
inheritance, but in practice the norm was primogeniture, and the law's
prescriptions were adapted to business needs. The technique was to
divide the whole assets of the family (adding the value of the shares
to other assets and properties) among all the heirs but to give one
of them control over the business, including all the manufacturing or
commercial activity. This solution was common among the families involved
in textiles and metalworking, especially during the first phase of the
country's industrialization. For instance, cotton entrepreneurs
[End Page 38]
often decided to transform their previously family-owned businesses
into joint-stock companies to manage inheritance problems. In doing so
they gave the majority of the voting stocks to those among the heirs
who were entitled to run the company in the future.
A single Spanish system of inheritance did not exist. Rather,
primogeniture and partible inheritance customs coexisted in Spain,
with different patterns predominating in particular regions. In
Catalonia primogeniture was the norm during the earliest stages of
industrialization, and the system created a ready supply of entrepreneurs
for business, particularly from among those younger sons who did not
inherit but who received monetary compensations from their parents. In
several Catalan textile and metallurgical firms, primogeniture often
led to a concentration of family wealth and power, greater longevity of
firms, and relatively easy leadership succession from the last third of
the nineteenth century. In contrast, in Spanish regions where Castilian
customs of partible inheritance prevailed (in central and southern
Spain), agro-industrial family firms tended to be short-lived because
of the relative dispersion of family wealth and power.
During the incorporation wave of the first decades of the twentieth
century, large family firms in which different generations coexisted
faced the specific problem of how to support numerous potential
managers within the firm. A frequent solution, both in regions
practicing primogeniture and in those practicing partible inheritance,
was to transform the large family firms into joint-stock family holding
companies that secured incomes across the family. This step also had
the advantage of reducing succession conflicts and avoided the loss
of managerial control.
Large, dynamic family firms in both Italy and the Netherlands were
also managed in this way, with the family controlling preferential
voting shares in the administrative council.
33[End Page 39]
Women and Inheritance
Female inheritance patterns, the status of women's property, and women's
changing roles in business are also crucial to family firm behavior and
often varied internationally. Women directly and indirectly were vital
sources of finance and contacts, and in all three countries marriage
was an important way to reduce business transaction costs by extending
the family network of trust.
However, differences in the legal and cultural status of women in the
three countries, along with changes in women's status over time, had
implications for family firm behavior and ultimately for leadership
In Britain in the early nineteenth century, the legal status of married
women with respect to business and property was such that, under common
law, women existed only under the protection of their husbands. This meant
that, although they were often de facto "partners" in business, they had
no legal right to the capital of the firm or to other property. Yet, in a
world where the interests of firm and family were so closely intertwined,
the hidden financial roles of women should not be underestimated,
for marriage and business were inseparable in this period. In those
families practicing partible inheritance rather than primogeniture,
marriages between cousins could often counteract the dilution of family
wealth and also strengthen and extend networks of contact. Alternatively,
marriage outside the immediate family group could bring with it additional
sources of finance and contacts, while the establishment of trusts could
enhance family and female security. Numerous examples exist of women who
as widows inherited and developed ongoing businesses. These companies,
such as Twinings, were especially concentrated in the shopkeeping and food
and drink sectors, but they were also found in commerce and manufacturing.
In early modern Spain strong regional differences led to a variety of
cultural practices regarding women's inheritance rights, and those
[End Page 40]
practices influenced family firm strategies, especially leadership
succession. In Castille the practice of partible inheritance could
protect the welfare of women and children in the short run. However,
the resulting wealth division could lead to family poverty and
bankruptcy. Research on elite families in eighteenth-century Cádiz
suggests that a common way around this problem was to finance the social
promotion of some men with outstanding political or military careers that
brought extra income. Alongside this was the practice of sending some
daughters to nunneries to avoid further divisions of wealth. Widowhood
was the most common reason that women went into business. Significant
numbers of women ran workshops and mercantile companies, although often
only until a male relative could take over. Long-distance travel by male
business owners, especially in mercantile firms, sometimes required
women to replace them during their long absences from home. This was
especially true in sixteenth-century Seville and in eighteenth-century
Málaga, Cádiz, and México City.
In most Spanish regions, however, the men who received the capital ran
the business. The income from land or buildings or some other source of
permanent rents supported women. This practice remained the norm well
into the twentieth century in large family firms. For instance, the two
founders of the wine company González and Byass began planning
for succession in the mid-nineteenth century, and in 1870 they brought
in two Byass sons and two González sons as new partners. The
Spanish partner, Manuel María González Angel, gave two
hundred barrels of the best and most expensive wine to his two eldest
daughters as their inheritance but withdrew all their other rights
to income from the company. Sometimes intermarriage could strengthen
businesses, as did the link between Gordon's, the sherry exporters,
and González and Byass. In 1877 the eldest González son,
Pedro Nolasco, married into the Gordon family at the same time that he
succeeded his father as head of González and Byass.
In Castilian regions progressively patriarchal Spanish civil law
systematically eroded women's inheritance rights.
This did not mean that women were never involved in management; rather,
[End Page 41]
a hidden resource, and their participation often went unrecorded. Recent
research shows that in some Catalonian family metalworking firms,
such as Codina of Capellades and Roca Radiadores in Manlleu, the
founder's wife or daughter played fundamental executive roles in
accountancy and in technical production during the early stages of
the firm's development. In Italy, although there is evidence of female
entrepreneurship, usually to manage a transition period after the death
of the founder and before the first male son came of age, women generally
had no direct role in business and lost any rights upon marriage.
Although evidence of women in business in Italy is elusive, examples can
be found of Italian women playing prominent roles in an enterprise's
survival. An excellent example is Irene Rubini, the daughter of an
important textile and iron industry entrepreneur, Giuseppe Rubini,
from Lake Como in Lombardy. Together with her brother Giulio, she was
expected to inherit her father's share, but she was not expected to run
the business. In 1863 she married Enrico Falck, the only son of Georges
Henry Falck, an Alsatian engineer hired by her father to run the iron
plants in Dongo, near the northern part of the lake. The marriage had
lasted fifteen years when in 1878 Enrico, who had set up a flourishing
ironworks in Lecco (located on the eastern side of the lake), suddenly
died, leaving Irene alone with three children. Because Giorgio Enrico
Falck, the couple's only son (and the future founder of one of the most
important steelworks in the country), was too young to run the business,
Irene took over the role of entrepreneur, helped by her brother Giulio,
who also acted as a tutor for her three children. Irene was fully involved
in the day-to-day management of the firm until 1887, when Giorgio Enrico
came of age. He became the sole owner and manager of the firm after
his sister Luigia married Costante Redaelli, another important local
entrepreneur and merchant in iron and steel.
The Informal Rules of the Game:
Community and Religion
Social and economic conditions, combined with poor communications, meant
the embedding of family partnerships in local business communities in
all three countries during the early period of industrialization. The
choices of successors by family firm owners reinforced
[End Page 42]
this state of affairs, often embracing both the local business community
and religious groupings. How much this was a way to greater business
stability, perhaps combating both external uncertainty and the conflicts
within the immediate family, is unclear. Whatever the motive, the result
was the same, with business strategies entwined with the values and
aspirations of the local community. Indeed, in Britain the Test Acts
seriously constrained the opportunities for religious nonconformists,
while in traditional professions shared beliefs provided a coherent
basis of collective trust in business.
The Quakers represented one important nonconformist network in
Britain, as did the Unitarians, and the role of Jews in London's
trade and banking communities is well documented. Yet, if minority
groups were overrepresented among successful family businesses
in Britain, nonconformity by no means dominated British business
networks. Irrespective of which denomination held sway in a city,
the general acceptance of codes of conduct and shared attitudes by
a community could provide a powerful force for collective activity
The role of locality and of minority groups in business was every bit as
important in nineteenth-century Spain and Italy as it had been during
the British industrial revolution. In Spain localized entrepreneurial
networks formed the foundation of wide-ranging commercial links that
extended well beyond individual regions. This was especially the case
in the Catalan textile industry, with products sold throughout Spain.
Spanish colonial and ex-colonial urban centers created external networks
for Catalan, Basque, French, Italian, and Irish groups. These immigrant
groups formed very strong business networks whose overseas contacts
gave them an international orientation. Their marriage and residence
strategies reinforced networks based on their common geographical and
cultural origins. Irish merchants such as Michael Hore, Lawrence Lee,
and Joseph Warnes came to Cádiz in the early eighteenth century
to escape religious wars at home, and they became well integrated
into the commercial communities of their adoptive cities. Operating
in the colonial trade and using their Irish connections, they created
localized business networks that extended to other Spanish cities,
such as Málaga, or
[End Page 43]
to the Canary Islands. This led to the exchange of capital, information,
and strategic support among very distant cities within Spanish
In Italy, another Catholic country, ethnic minorities operating in local
business communities played a significant role in building family firm
networks. A good example is the Jewish community in Milan, which built
up an impressive range of entrepreneurial activities in finance and
banking. Similarly, the northern textile districts often pivoted around
nonconformist religious groups.
In northern Italy, from the first half of the nineteenth
century, foreign (mainly Swiss) entrepreneurs dominated the cotton
industry. Attracted by low labor costs and a growing consumer market,
they came to Piedmont and Lombardy. Recent research has shown that
these networks of entrepreneurial families were extremely dense and
cohesive. These traits stemmed from the closed communities effectively
created by the families' Protestant religion; trust became a strategic
asset, especially for firms active in banking and financial services.
This description is particularly true of the Protestant community in
Milan. From the beginning of the nineteenth century, a growing number
of foreign entrepreneurs migrated there from Switzerland and Germany,
settling in Lombardy to manufacture textiles. The network included
the Kramer family (from Frankfurt), who were active in the cotton
industry; the Mylius family (also from Frankfurt), who were involved
in banking and the commerce of textiles; and the Vonviller family
(from St. Gallen, Switzerland), operating in the same sectors as the
Kramers and Myliuses, and in many others as well. Common language,
geographic origin, and nonconformist religion united this social
network. The network proved strategic in some important manufacturing
initiatives in which high levels of trust reduced uncertainty. Wealthy
nonconformist entrepreneurs were the primary providers of capital for
Elvetica, founded in Milan in 1850 mainly to produce spare parts and
machinery for the silk industry, and the company's work force shared
the same reformed religion and Swiss origins.
It would be easy to assume that the key religious difference likely to
affect family firms across Europe was whether they were in predominantly
Catholic or Protestant countries. Indeed, the north-south
[End Page 44]
distinction could be defined roughly in religious terms. However, despite
the predominance of Catholicism in Italy and Spain and of Anglicanism in
Britain, clearly marked similarities in the roles of community-based and
religious groupings developed in all three countries. These similarities
suggest that the significant issue was the embedding of family businesses
within a network, linked by intermarriage, of shared values, often
(but not exclusively) minority values. It was this interconnection and
its accompanying benefits of trust and knowledge that were significant,
rather than subscription to any particular religious creed.
Preparation for Leadership Succession
The informal and formal rules of the game were clearly important
dimensions of the business environment in the eighteenth and nineteenth
centuries in all three countries. However, the effects on firms of the
lengthening shadow of the founder through the process of succession
and the choice and training of future business leaders are also
significant. Within family networks there resided a considerable depth
of skill and knowledge, reinforced through time to form the basis of
individual firms' or groups of firms' competitive advantages. This
situation accorded succession strategies considerable importance, for
they hinged on the training of potential future leaders, often within the
firm. Succession arrangements in all three countries were somewhat ad
hoc, yet failures in succession planning could lead to the involvement
of management consultants whose reports might influence the prevailing
culture of a family business and indeed of the entire family. That said,
consultants' reports were often so controversial that they were rejected,
leaving the firm no alternative but to "go public" and alter the financial
basis of the company.
Local business communities became the reservoir of skill and knowledge
in Britain, Spain, and Italy. In nineteenth-century Lancashire,
the classic industrial district, there is ample evidence of the way
in which business knowledge evolved within families and localities,
giving each distinctive characteristics. Moreover, formal technical and
higher education also developed within Lancashire towns, closely linked
to the needs and business profile of the community during the nineteenth
century. In Spain and Italy local business communities gave priority to
formal business education earlier in the
[End Page 45]
process of industrialization than did those in Britain, perhaps
reflecting the priority accorded by local and national governments in
countries that were generally later industrializers to catching up with
other nations. In Spain, although knowledge and training for merchants
was often acquired through personal contacts within the family firm or
those of relations, local technical colleges and engineering schools
were set up to train businessmen and to finance trips abroad. By 1850
the Barcelona Junta de Comercio, founded and managed by local Catalan
entrepreneurs, pioneered professional training in engineering, design,
trade, and commerce.
In Italy, too, localized systems of production provided traditional
on-the-job training, a model clearly linked to the handicraft traditions
embedded in the history of Italian manufacturing districts. From the
second half of the nineteenth century, however, and occasionally
earlier, a growing number of technical schools provided a more
sophisticated and systematic education. Usually these institutions,
such as the Setificio in Como and the Aldini-Valeriani in Bologna,
which specialized in mechanics, were founded and managed through the
support of local entrepreneurs.
Where Italy and Spain differed from Britain was in the provision of
managerial education. In Britain, although management schools were
not established until the 1960s, the bachelor of commerce degree with
its emphasis on accountancy did evolve before 1939 in a number of
institutions, including the universities of Liverpool and Manchester.
In both Spain and Italy the first two decades of the twentieth
century saw the founding of formal, private institutions teaching
professional and new management methods to members of well-known
family firms. These new commercial and business schools spread in
the industrialized northern regions of Italy and Spain. They taught
managerial processes and ideas that were especially useful for the
large firms of the first and second industrial revolutions. However,
though business schools in the United States and Britain were associated
with the shift toward managerial companies, in Spain and Italy they
actually reinforced personal capitalism, largely because these schools
were not financed by the state. Networks of family firms supported
modern business schools in northern Italy and Spain, and the schools
reflected the needs of large family firms rather than the promotion
of a shift to corporate enterprise.
[End Page 46]
In Italy the most important of these schools was Bocconi, founded in
1902 as an Institute for Commercial Education. Ferdinando Bocconi,
an entrepreneur pioneer of large-scale distribution and founder of the
first Italian chain of department stores (lately transformed into La
Rinascente), initially endowed it. From the very first, Bocconi was a link
between the academic world and industry. By providing advanced education
in economics, accounting law, commerce, and organization, it made an
invaluable contribution to the improvement of human capital needs. In
general, Bocconi's students were drawn from wealthy entrepreneurial
families, a trend that created a new well-educated cohort of family
managers and entrepreneurs. From the early 1880s onward, Milan had been a
center of technical and scientific education, and Bocconi built on that
tradition. Bocconi provided a model for similar developments in Spain
a decade or so later. In 1916 the Universidad Comercial de Deusto was
founded in Bilbao to meet the needs created by the commercial techniques
of the shipbuilding and iron and steel industries. In the 1950s, the
founding of other new business schools in Madrid and Barcelona, under
private and public initiative, served to professionalize the management
of Spanish firms in old and new economic sectors.
This evidence of relatively sophisticated community-based technical
and business education at an early stage in the industrialization of
both Italy and Spain is at odds with common perceptions about European
industrialization. The assumption is that, of the peripheral nations,
the Nordic rather than the Mediterranean countries invested in education.
Clearly, the idea of a north-south divide in terms of business knowledge
transfer and improvement is not sustainable. Instead, the evidence for
Italy and Spain reinforces the idea of the close relationship between
such education and the economic needs of particular localities rather
than specific national characteristics.
Dynasty and Concentration of Power
High eighteenth- and nineteenth-century bankruptcy and failure rates
suggest that most firms in all three countries were short-lived in this
[End Page 47]
period; given the high proportion of small firms, this finding is
entirely predictable. Yet in each country, large, long-lived, elite
firms emerged, and from these it is possible to derive some insights
into leadership succession and the relative power of family firms in
the economic system. In nineteenth-century Britain, dynastic tendencies
existed in a range of industrial sectors, including cotton, iron and
steel, coal, and hosiery. Although some firms were large, they did
not dominate their sectors, nor were groups of them able to exert any
significant political power. Even in the most economically powerful
industries, such as cotton, iron, and steel, the collective leverage
of individual families or family groups was limited in the nineteenth
and early twentieth centuries. Only among the financial "aristocrats"
of London, including families such as the Rothschilds and the Barings,
was there sufficient social cohesion with those in government to
influence policy significantly.
In Spain, on the other hand, dynastic power emerged in a number of
industrial and commercial sectors. Some of the best-known families in
the dynamic industrial sectors of the nineteenth century include the
Bonaplatas, the Corominas, the Echevarrietas, the Larrínagas,
the Rivières, the Rocas, and the Miquel y Costas Hnos. Dynasties
were especially common where firms were connected with expanding or
very dynamic international markets, such as the sherry export trade
of González and Byass, the domestic-oriented wheat trade of the
López Dórigas, and textile production.
Dynasties developed in textiles, metalworking, and the
commodities trade, none of which were especially capital-intensive
sectors. In Italy, too, large and powerful family groups, which
became self-reinforcing through time, evolved in heavy and staple
industries. Dynasties emerged in capital-intensive sectors and included
firms such as Fiat, Pirelli, and Olivetti; there were also some large
firms in the iron and steel industry
[End Page 48]
and in textiles. Rossi and Marzotton, for example, are in the woolen
industry; Crespi Cantoni, Caprotti, and DeAngeli, in the cotton industry.
The relationships among finance, succession policies, and control in all
three countries from the late nineteenth century until the Second World
War were intimate and symbiotic. In Britain, Spain, and Italy, therefore,
most limited companies on the eve of the First World War remained private
and were little more than converted partnerships. Among public companies,
too, families making flotations ensured that they held equity, with its
attendant voting rights, so that the divorce between ownership and control
was distinctly limited, even in public companies. By 1919 in Britain, 55
percent of the top two hundred companies had family board members. The
trend of confirming family control in public corporations rose during
the interwar period, especially in brewing, shipbuilding, and food.
Joint-stock status allowed families to deal with inheritance issues;
the judicious holding of voting shares ensured that families maintained
control of their firms. This pattern was also found in Spain, where
there was little evidence to suggest that ownership and control were
separated before the Second World War. In fact, the 1951 Spanish law
on limited liability, which reformed the 1885 legislation, allowed
family firms to adopt the limited form (Sociedad Anónima,
or S.A.) but also stated that separation of ownership and control
was not strictly necessary. Families could even write private legal
agreements to avoid free circulation of shares outside the company,
"due to the old tradition observed in some Spanish regions which creates
limited liability firms for modest entrepreneurial purposes." In the
1950s and 1960s Spanish lawyers deplored the legal difficulties that
arose when family and business were so intimately related.
Yet if Britain and Spain were similar in the way firms were controlled
and financed until 1945, Italy was unusual, because the financial
[End Page 49]
underpinnings of business, intertwined as they were with the state,
greatly increased the concentration of power and the political leverage
of heavy industry in much the same way that they did in Germany before
the Second World War. This was especially true in capital-intensive
sectors, such as iron and steel, which family-controlled joint-stock
companies largely dominated. The reinforcement of family power in these
sectors stemmed from the emergence in the 1890s of universal banks
patterned after the German model. The banks' representatives often
sat on company boards beside family members, taking responsibility for
management only in an emergency, but freeing families from financial
This pattern continued during the interwar period, when ties with
the state were strengthened. Dominant families and individuals
ran capital-intensive industries alongside state-owned firms after
the formation of the Istituto di Ricostruzione Industriale (IRI)
in 1933. The IRI was a public-owned holding company controlling a
considerable section of the Italian big business in capital-intensive
industries, and the state increasingly emerged beside IRI as an
"entrepreneur" in Italy. Against the close relationship between the
state and heavy industry, the power of entrepreneurial dynasties was
so great that a few families (the Agnellis, the Pirellis, the Falcks,
and others) were remarkably like medieval feudal lords. They literally
dominated and ruled entire industries in which the corporations they
controlled maintained a stable monopolistic or oligopolistic position.
The system created industrial groups controlled by financial holdings
also partially or totally in the hands of the same group of families.
Family Firms after 1945
Only after the Second World War was there a marked decline in the
significance of family business in western Europe, apart from the
Mediterranean countries. Then it becomes possible to identify most of the
deviations in family firm behavior and succession strategy as springing
from a combination of institutional and cultural differences. However, the
cumulative impact of the past undermined more than the power of British
family firms. Major changes—both financial and legal—from
the 1940s onward also had a major impact. For example, "the 1950s marked
the beginning of a period of change
[End Page 50]
which culminated, by the end of the 1960s, in a corporate economy
dominated by institutional investors and where, although family firms
remained numerous, the role and relative power of large family businesses
was much diminished."
Changing educational and employment opportunities in the 1950s made
reliance on the family firm for support less of an imperative, while
the trend toward corporate enterprise saw a shift toward the use
professional managers, although insider succession remained the norm.
In both Spain and Italy, by contrast, alterations in educational
opportunities reinforced rather than undermined family succession by
improving the formal education of insider successors. Especially in large
Spanish family firms, such as González and Byass in the 1960s
and the Rocas in the 1970s, professional managers became involved in the
top management, but, more generally, education as part of the training
for succession became a crucial element of familial meritocracy. In
the Basque Country and in Catalonia, big family firms supported and
participated actively in the foundation of business schools such as the
Escuela Superior de Técnica Empresaria (ESTE, San Sebastián,
1956), Instituto de Estudios Superiores de la Empresa (IESE, Barcelona,
1958), and Escuela Superior de Administración y Dirección
de Empresa (ESADE, Barcelona, 1958). The executive managers of big firms
in the most important economic sectors in each region (iron and steel,
shipbuilding, logistics, construction, textiles, and chemical industries)
could learn about management and organization while building their
Biographies of entrepreneurs in these regions and sectors show that
after the 1950s the senior managers of large family firms (usually family
members) earned higher degrees either in Spain or overseas.
In science-based sectors, this professionalization of family
management was often a requirement, and failure to achieve a degree of
specialization often meant low levels of internal power in the family
firm and control of less valued activities, such as administration
of the firm's fixed patrimony. During the 1970s and 1980s improved
educational opportunities, combined with new attitudes toward women's
role in the labor market, led to a redefining of the family in Spain
and prompted the inclusion of female family members in executive
positions. This was especially true in a few well-known large firms
in the food and drink industries, such as Codorniú,
[End Page 51]
González and Byass, and Calvo. More rarely, it occurred in
capital-intensive firms, such as Codina and Roca Radiadores in Catalonia
in the iron and steel industries.
The reinforcement of family control was especially pronounced in Italy
in the postwar period, certainly until the 1980s. Indeed, familialism was
so embedded in Italian business culture that from the 1950s to the 1970s
even professional managers were almost entirely subject to the family
will. Although there was a considerable improvement in the managerial
culture among Italian family firms, we still find a familialistic climate
inside the most important corporations, with few exceptions. Among the
most dynamic, internationalized Italian corporations, including Benetton,
Barilla, Ferrero, and Pininfarina, insiders are still preferred over
outsiders in key strategic managerial positions, although this bias is
never openly admitted. As a result, families own and manage nearly all
the leading firms, and inheritance patterns still determine transmission
of top positions.
The prolonged survival of powerful family firms was a feature of both
Spanish and Italian business development, even in the recent past,
although the forces at work were not always identical. In Spain,
and especially among northern Spanish families, wealth has remained
sufficiently concentrated for businesses to exert considerable political
power in ways simply not available to British firms. This power comes
into especially sharp focus when viewed in the context of inheritance
taxes. In Britain the inheritance tax fundamentally and permanently
altered family firm behavior. In 1949, for instance, a sharp rise in
death duties to a top rate of 80 percent, part of the Labour government
reforms to redistribute income, encouraged some firms to abandon family
control. The Economic Intelligence Unit estimated in a 1951 report that,
faced with the prospect of increased death duties, 17 percent of firms
took some form of anticipatory action, many choosing to go public.
If this legislation undermined the financial viability of many family
businesses, the 1948 Companies Act helped to shift the balance of power
in British business toward finance capital and the business corporation.
This outcome is in sharp contrast to the impact of similar legislation
in Spain. There, the transition to democracy during the 1970s led to a
number of economic reforms designed to bring economic convergence with
the rest of Europe in both macro- and (by implication)
[End Page 52]
microeconomic terms. These included significant tax reforms, because
trade and industry historically had contributed little to state revenues
in Spain. In 1977 and 1978 new taxes on entrepreneurial wealth and
profits were introduced, and death duties were increased to help
finance the transition to democracy and counteract the inflationary
spiral initiated by the 1974 oil crisis. The combined impact of economic
crisis and increased taxation on family businesses was fast and drastic:
bankruptcies, especially among family firms, began to multiply during
In Britain family business owners mustered no effective or noticeable
response to rising death duties, which had rapidly undermined the power
of families and contributed to the shift to financial capitalism. It
is hard to see how they could have responded effectively, given
the historical limitations of the business lobby in Britain and the
relatively dispersed nature of family ownership.
In Spain the Francoist regime had preserved and reinforced family
ownership and management, particularly in economic sectors in which
the public holding company Instituto Nacional de Industria (INI),
created in 1941, had no major interests. The greater relative power and
organization of family businesses in sectors in which private interests
prevailed helps to explain why in Spain, in contrast to Britain, large
family firms transformed outrage into effective political action and
bolstered the position of personal capitalism in the late 1980s. In 1991,
with the support of the Catalan government, the Instituto de la Empresa
Familiar was formed. It included the 104 largest Spanish family firms
(around 20 percent of Spanish family businesses) and lobbied Madrid for
a reversal of the legislation of 1977 and 1978. During the late 1990s
and at the beginning of the twenty-first century, this institute (with
similar initiatives taking place in Europe and in the United States)
did much to reinforce networks between big family firms, at the national
and international levels, and political decision centers. The lobby
has progressively secured significant legal reductions in death duties,
profit taxes, and inheritance taxes. These reductions have contributed
to the survival and transition of family firms, effectively reversing
the trend away from family control and succession in Spanish business.
In Italy, on the other hand, there have been no changes in death
[End Page 53]
to those found in Britain and Spain. Instead, historically close ties
and reciprocity between the state and family business, especially in
capital-intensive sectors, has meant that the state has not significantly
increased the tax burden associated with family succession.
It might be thought that the shift in the governance of western European
business that began in Britain in the 1950s, in Spain in the 1970s,
and in Italy in the 1980s (at least among large-scale firms, though not
among small and medium-sized businesses) would have had repercussions for
leadership succession. We might anticipate that the divorce of ownership
from control would wrest power from those controlling the management of
firms, increase the power of the shareholders, and reduce the importance
of insider succession. Stakeholders would then be in a position to
challenge the leadership of a company and lobby in favor of outsiders,
if performance declined. At least initially, several forces may have
diluted this tendency, even in Britain. First, share ownership alone is
not the best indicator of control; what is crucial is the distribution
of shares of differing categories. The family could sustain control of
strategy by retaining a minimum of 5 percent of the voting stock.
In Spain, too, share ownership is not a good indicator of
control. Indeed, since the 1970s "family control" has resided in a group
tied by kinship or marriage that has "operative control irrespective
of share ownership."
Second, even with a true divorce of ownership from control in Britain in
the 1950s, individual shareholders held very limited power, and there
were no rules regarding a quorum for the annual general meeting. The
increasing role of "finance capital" and the trend toward financial
interlocks with industrial and other companies placed institutional
shareholders in a position in which they could influence strategy
generally and leadership succession in particular.
We need more research to establish how far and in which ways financiers
influenced the choice of leadership in British business in the 1960s
and 1970s. In the 1950s, however, one of the catalysts that encouraged
a change in ownership of firms is likely to have indirectly reduced the
role of financiers. The sharp rise in death duties in 1949 was a potent,
though by no means the only, force leading family firms to go public. The
Estate Duties Investment Trust (EDITH) was established in 1952 to provide
financial help to companies facing the prospect of possible liquidation
because of the higher duties. Unlike the merchant banks and securities
houses, such as the Charterhouse Group, Neville Industrial Securities,
Minster Trust, Birmingham
[End Page 54]
Industrial Trust, and Singer and Frielander, all of which would
purchase the shares of firms facing death duties, EDITH did not require
board representation. It was, accordingly, popular with family firms,
indirectly reinforcing insider succession and the power of individual
The impact of finance capital in the Spanish economy has grown rapidly
since the mid-1980s, after the reversal of much Francoist legislation
concerning banking and foreign investment and particularly after Spain's
integration into the European Community, when foreign institutional
investors increased their participation in Spanish firms.
In Italy in recent years, finance capital has become increasingly
important without significantly undermining the power of families and
family succession, largely because, although in Italy institutional
investors began to operate in the 1980s, the regulation of collusion
and illegal practices—or the equivalent of the Cadbury
Code for British corporate governance—did not occur until
1998. Conversely, foreign institutional investors have agreed to buy
a substantial stake in firms, leaving control and management with
the founders and their relatives. This is quite common, especially
among new, promising midsized firms operating in international niche
markets. Such enterprises are currently expanding and very profitable,
so there is no reason for institutional investors to interfere in
Even though there were significant differences in the relative power of
family firms in Britain after 1945 compared to those in Mediterranean
countries, it is fair to observe that after the Second World War
insider succession remained a characteristic in all three countries in
family businesses, blurring the impact of any divorce of ownership from
control. Moreover, in some cases what amounted to family managerialism
in corporate enterprises emerged.
Insider succession took on a number of guises in large manufacturing
corporations. At one extreme were the large family-controlled
corporations such as the British Wedgwood, Cadburys, Pilkingtons, and
Tate and Lyle, and the Spanish Rivières (until 1978), Rocas, and
González Byass, where successive generations of a founding family
retained strategic control after the Second World War. In Britain, for
instance, Tate and Lyle drew successive chairs from the two families,
whose members continued to dominate the board until the 1960s. In less
[End Page 55]
obvious family corporations, however, "managerial families" emerged
who lacked any significant financial stake but whose members dominated
and sometimes plotted succession. For example, Sir Walter Benton Jones
followed his father to United Steel, and Sir Allen George Clarke made
provision for his son to succeed him at Plessey's in the 1950s. At the
General Electric Apparatus Company, on the other hand, Hugo Hirst made
formal succession plans concerning who was to succeed him as chair and
succeed Max Railing as CEO. Their successors were to be drawn from among
the existing "ruling" families and were, respectively, Max's brother and
Hirst's brother-in-law, an uncomfortable and indeed, for the company,
unfortunate compromise between the two families.
In the British cases, insider succession exacerbated existing industrial
difficulties by reinforcing an inward-looking culture in poorly performing
firms. Similar succession-related difficulties occurred in the Spanish
industrial firm of Rivière in the late 1970s, when the fourth
and the fifth generations clashed because of the lack of acceptance
of a central authority. External professional consultants were hired,
and members attended the best management courses at IESE on how to
deal with family succession problems. Theory and counseling were not
effectively put into practice, however, and individualist solutions
blocked decision-making processes during a financial and industrial
crisis, thus leading to the end of a century-old family firm.
These problems also affected two of Italy's most prominent family
corporations, Fiat and Pirelli. The succeeding generations in these
firms were probably no less able than their predecessors, but they
entered top managerial positions with less experience and, above all,
in a very difficult period. Similarly, the case of Olivetti illustrates
a major failure in the management of succession. After the death of
Adriano, the very able son of the founder, Adriano's son Roberto was
not able to keep the family united and to convince them to pursue the
promising but new and risky business of computing. After a period of
serious financial difficulties, a group of investors led by Mediobanca
rescued Olivetti and sold its computing activities to General Electric.
The prevalence of internal succession in all three countries was perfectly
predictable, but research has shown that, although insider succession
may be important to secure some continuity, it is unlikely
[End Page 56]
to have a particularly revitalizing effect on firms, whether successors
are family members or those who have gained their business experience
exclusively within the firm. "Insiders" may become "embedded in
organizational inertia" so that change, especially structural and
strategic change, will occur more rapidly with an outsider.
Yet we should not take this argument too far; although insider
succession may pose a problem in large firms, in small- and medium-sized
firms in, for instance, Italy's dynamic industrial districts, insider
succession based on training and a tacit knowledge of skills has
contributed to competitive advantage.
Indeed, such skill and training become important externalities within
industrial districts, while the knowledge embedded within families is
an important intangible asset of individual companies.
Family business was clearly important to the industrialization of Britain,
Spain, and Italy, with firms evolving in remarkably similar ways to
compensate for market failure and uncertainty during the eighteenth and
nineteenth centuries. What is striking, however, when one compares the
twentieth-century experiences of family businesses internationally, is
the impact of different historical, cultural, and institutional forces
and the implications they have for the power of families within both their
businesses and their respective economies. In Britain, although families
remain important in small- and medium- sized businesses, institutional
and social changes have undermined the power of large family firms in
ways that were not replicated in either Spain or Italy even at the end
of the twentieth century. Although insider succession remained the norm
in British business in the 1950s, the impact of institutional investors
increasingly counterbalanced family power despite changing ownership
In Spain and Italy, on the other hand, at least until the late
1970s a changing environment served to reinforce the power of the family
and to dilute the impact of outside influences on the management of
family businesses. In turn, family succession bolstered and was bolstered
by the political power of family firms. Profound political, economic,
and cultural changes that took place in Spain in the 1970s
[End Page 57]
must account for the relatively new ownership and management patterns
that emerged. In Spain, the last two decades of the twentieth
century witnessed an increase of corporatism and finance capital and
a decrease in the number and the informal political power of large
family firms. Familialism has been and is still quite important among
middle-sized and small firms in Spain since the 1980s, but large
family firms are transforming their leadership succession strategies
in a peculiar and distinctive way. Outsiders and finance capital are
increasingly influential, as has been the case in Britain since the
Second World War, while at the same time connections between firms and
national and regional political decision centers have been forged as
in Italy, though in a more institutionalized and less personalized way.
The persistence of the political and economic power of family firms
in Spain and Italy, in contrast to their relative impotence in Britain
since 1945, is our most notable finding. There are a number of reasons
for this phenomenon. First, in Britain the state-devised norms and rules
(including tax changes and limited liability) restricted or at least
reduced the attractions of family firm succession far earlier than was the
case in Spain and Italy. Second, neither Spain nor Italy experienced the
same transformation of financial markets that occurred in Britain after
1945. Neither of these factors, however, fully explains the persistence of
the political-economic power base linked to the family firm in both Italy
and Spain. The crucial historical factor ultimately distinguishing these
two Mediterranean countries from Britain is the existence in Spain and
Italy of a weak central state and strong, regionally focused families. In
Italy, for instance, the family firm embedded in its locality remained
prevalent and dominant because of political compromise. Unlike those
in Britain and, for different reasons, in the United States, regions
in Italy have more political power than the central state. In Spain,
too, although family firms lost many long-standing privileges following
Franco's death, networks of large family firms effectively regrouped
and maintained their power with a strong regional base.
The persistence of family firms' political and economic power in Spain and
Italy as contrasted with their relative impotence in Britain surprises
no one and reflects the stereotypical north-south divide in business
behavior. Yet researchers have given very little attention to explaining
divergences in family firm strategies and power between Mediterranean
countries or analyzing them within a broad historical or comparative
framework. We clearly demonstrate that the most noticeable divergences
among all three countries (not just between north and south) occurred
after 1945. We also show that institutional factors, most especially
the role of the state and legislation, had fundamental
[End Page 58]
effects on the evolution and needs of entrepreneurial networks in each
national framework. Finally, we point out the error of differentiating
between northern and southern patterns of family firm behavior. The
United Kingdom clearly differed from other northern European economies,
and Italian and Spanish large family firms behaved in particular and
sometimes contrasting ways, demonstrating no distinctive Mediterranean
is assistant professor of economic history at Università
Bocconi, Milan. Contact information: Istituto di Storia Economica,
Università Bocconi, via Sarfatti 25, 20136 Milano, Italy. E-mail:
is assistant professor in the Departament d'Història i
Institucions Econòmiques, Universitat de Barcelona. Contact
information: Departament d'Historia i Institucions Econòmiques,
Universitat de Barcelona, Diagonal 696, 08034, Barcelona, Spain. E-mail:
Mary B. Rose
is senior lecturer in business history at Lancaster University. Contact
information: Department of Economics, Management School, Lancaster
University, Lancaster LA1 4YX, U.K. E-mail: email@example.com.
Paloma Fernández Pérez has benefitted from the financial
support of the Spanish CICYT through research project grants PN98-1265
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Family Business: Its Governance for Sustainability (Basingstoke,
U.K., 1998), 10; Paloma Fernández Pérez, "La empresa
familiar y el síndrome de Buddenbrook en la España
contemporánea: el caso Rivière (1860-1979)," in Doctor
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The Culture and Evolution of Family Firms in Britain and Italy in the
Nineteenth and Twentieth Centuries," Scandinavian Economic History
Review 47 (Winter 1999): 24-47.
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1971): 346-52; Louis B. Barnes and Simon A. Hershon, "Transferring
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(July-Aug. 1976): 387-95; Martin Daunton, "Inheritance and Succession in
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30 (Oct. 1988): 269-86; Mary B. Rose, "Beyond Buddenbrooks: The Family
Firm and the Management of Succession in Nineteenth Century Britain," in
Entrepreneurship, Networks, and Modern Business, ed. Jonathan Brown
and Mary B. Rose (Manchester, U.K., 1993), 127-43; Philip Scranton, "Build
a Firm, Start Another: The Bromleys and Family Firm Entrepreneurship
in the Philadelphia Region," Business History 35 (Oct. 1993):
115-41; Fernández Pérez, "La empresa familiar."
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Amatori and Colli, Impresa e industria, 37, 117, 120.
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