The Family Business Model Is Still Feasible.

When Asia Economic crisis When it came to Korea in 1997, many commentators argued that the country's problems were partly caused by the power of chaebol. The so-called chaebol, family controlled large conglomerates. At that time, the biggest chaebol in Korea were: Samsung, Hyundai, LG and Daewoo. These groups are said to have been involved in too many industries; their close relationship with the government has given them the privilege of obtaining cheap money; their corporate governance arrangements are opaque.

Critics point out that South Korea urgently needs to reform these companies and bring their management into line with the United States and the United Kingdom.

The Asian crisis has really hurt South Korea. Some reforms were implemented, and some chaebol broke down, the most notable of which was Daewoo. But the better managed group has made adjustments based on the new environment, including increasing the shareholding ratio of foreign investors, and is still playing a leading role in the Korean economy. The ownership of Korean industry is not much different from that before the crisis. Samsung Group is still controlled by the Li family, LG is controlled by the family of the clan, the modern group is controlled by the Zheng family, and the SK group is controlled by the Cui family.

How long will this situation last? Westerners generally believe that emerging market As companies rise in the world arena, they will need to enhance their attractiveness to foreign investors, especially Anglo American investors. These include: they specialize in reducing the number of industries, weakening the role of founders' families, and decentralization of shareholding. But as Samsung, Tata (Tata) and other companies have proved, family control and diversification are not contradictory to the successful defeat of competitors, even in the most demanding markets.

In addition, over the past three years, the attractiveness of British and American corporate governance seems to have weakened. Is it in this field that the developed industrial countries need to learn from emerging markets instead of the other?

Although the scale and strength of chaebol are outstanding, the industrial structure of many developing countries is similar. The family groups, such as Tata and Birla in India, Ko and Sabanci in Turkey, and Carso controlled by Carlos Silimu (Carlos Slim) in Mexico, are all strong driving factors for the domestic economy and are becoming more and more active overseas. Their subordinate operation companies, such as Tata Motors or Tata Steel, are legally independent entities, often listed on the local stock exchanges, but will also be linked to the holding families through cross shareholdings and mutual directors. In this sense, they are quite different from the General Electric and other American conglomerates. The latter owns all the control of the subordinate companies and the ownership structure is decentralized.

　　 Family group The reason for this is partly because they have made up for the missing or underdeveloped economic system. Han Taiyun (Tarun Khanna) and Yishay Yafeh have explained this in the new important research document published by University of Oxford press (Oxford University Press), the Oxford enterprise group manual (The Oxford Handbook of Oxford). If a country's public capital market is small or nonexistent, it is necessary for enterprise owners to raise funds from inside and invest the remaining funds in other businesses that they can directly control. If a country's legal system is unreliable and lacks trust in business relations, owners can reduce risks by placing family members in key positions. They can also develop the internal labor market. As Randall Morck points out in the Handbook of Oxford business group, family groups allow talents to flow between enterprises without relying on the external labor market full of fake certificates. "In such countries, the best business schools may be the tables of the powerful family," writes mock.

Not all groups will go to the international stage. But in the manuscript written by Mauro Guillen, it is pointed out that those groups going to the international arena will often benefit from encouraging their own enterprises to go out, and at the same time inhibiting the policy mechanism of foreign multinationals' inward investment. Under such conditions, enterprising people (sometimes supported by the government) can integrate the resources and skills needed to enter the new industry -- carry out feasibility studies, obtain licenses, arrange financing schemes, acquire foreign technology, recruit and train employees. To some extent, these are common skills that can be applied to other industries.

The key question is whether the effectiveness of such a structure will decline or even become counter productive as the country further integrates itself into the world economy. The danger is that large groups may manipulate the market in a way that is conducive to their own development and disrupt the rise of professional firms.

Take Korea as an example. Hicheon Kim pointed out that the Korean Internet market was mainly developed by chaebol, while in the United States, companies such as Amason (Amazon) and Google (Google) abound, and chaebol's financial resources, distribution channels and brands gave them advantages. To prevent such a result, the government must introduce a strong competition policy and establish a financial system that allows start-ups to easily obtain capital.

But even if the arena is completely fair, family groups will not necessarily be replaced by companies built in the Anglo American model. There is a serious defect in British and American Corporate Governance: lack of relevant owners who will ensure long-term health of the company as a goal above all else. The controlling family can make up for this defect. There are many examples in Europe and America (see chart), such as Wallenbergs of Sweden and Keswicks of Jardine Matheson. These examples show that this structure can also work well in the western financial system.

Of course, family control has disadvantages. One is the so-called Carnegie effect (Carnegie effect): that is, the next generation's capability may not be as good as that of the enterprise. Another disadvantage is that there may be a succession of successors, just like what India's Reliance group has recently shown. In addition, there have been some cases of controlling family sacrifices for small shareholders in Europe. But it is also good to have a strong family shareholder, especially stability and devotion, and always look at business management with vigilance.

Today, the family that dominates the emerging market is not as enduring as the Valentine or the West family. But if a family can decide whether to enter or leave an industry with a pragmatic attitude, or to be lucky enough to give birth to children who have the ability to inherit their father's business, or to hire family members of insight, the family may survive and prove that the alternatives of the British American model exist.