that only allows membership to companies that have been in a family for at least 200 years—currently has 38 members. Fifteen are Italian, 10 are French, four are German, one is Dutch, four are Japanese, one is Belgian, two are Swiss, and one is located in Northern Ireland

According to Barbara Spector, editor-in-chief of Family Business Magazine, the world’s oldest family business (founded in 718) is Houshi Onsen in Komatsu, Japan. Says Spector, “Family enterprises are the backbone of the economy in virtually every nation, and indeed, the world’s oldest family companies have outlasted many national governments.”

The Appeal of Family Brands

Customers frequently perceive family-owned brands as emblems of success and prestige, but this is also because these brands lend themselves to trust. The family name, when used as a brand, serves to reassure the customer. Toyota and Peugeot, for example, have strong brand identities that consumers believe in.

Says Professor Harold James of Princeton University, “Why does Wilkin and Sons—the British jam purveyor—tell you on the underside of the lid, which you can only see when you have bought the product, how many generations they have been in family ownership? This is presumably seen as creating trust, or as a pledge of quality.”

Barbara Spector, for her part, feels that family brands appeal to consumers because they stand for tradition and continuity. “They have a personal identity attached to the name,” she says. “That’s why ad campaigns like ‘S.C. Johnson: A family company’ and the old ads for Wendy’s featuring the late founder, Dave Thomas, have been so successful—and why the newer Wendy’s ads, which veered away from the founder’s vision, have been a bust.”

Passing on the Brand

Founders of family-owned firms tend to be vigorous, innovative individuals. As the creators of new products or markets, they also are prone to view business with long-term vision. But by the second and third generations, their companies may be torn by conflicts between family members, a divergence of individual interests, and a focus on short-term goals. When it comes time to pass the brand to the next generation, the sorts of intrigues and in-fighting reminiscent of a Shakespearean tragedy may come into play.

Thomas Mann’s novel Buddenbrooks traces the rise and fall of a prototypical European family firm. The founder of the family dynasty is relentlessly driven and focused. His son, while capable, proves to be uninspired. The grandson is more focused on his own interests than the firm’s, while the great-grandson’s chief ambition proves to be the dissipation of the family fortune.

According to T.R. Rajan, a management consultant based in Chennai, India, the Buddenbrooks syndrome has its equivalents in many cultures and is seen even outside businesses. “In India,” he says, “we describe the four generation cycle as 'Poor-Miser-Rich-Spendthrift!'”

Nevertheless, Rajan says, many family firms have been highly successful in India. “Barring a few, such as Larsen & Toubro and Infosys,” he explains, “almost all of the business houses that have made great strides in Indian industry are family-managed, in the sense the man at the top is a member of the family that founded the business. And they are very efficiently managed.” Two that come to mind are the Tata Group, founded in 1868, and the global steelmaker Arcelor Mittal.

But even when the family business is successfully passed on to the next generation, there may be a loss of family coherence as the heirs assume control of the company. The corporate culture eventually derives more from the core business than from family ownership. Meanwhile, a brand identity evolves that is quite distinct from that of the family.

And then, as the firm grows, it may become difficult to find within the family the expertise needed to run it. Often a professional manager is brought in. But professional managers are less likely than family members to be passionate about the business. In addition, professional managers must be monitored to ensure they focus on the interests of the company’s owners and not their own.

With the passing of each successive generation, the gap between ownership and management tends to widen, and the idea of selling the company may become more attractive. According to Teresa da Silva Lopes, writing in Global Brands, family businesses excel at creating enduring brands—especially in sectors such as alcoholic beverages and cosmetics—but public companies are better at developing them.

In his book Trust: The Social Virtues and the Creation of Prosperity, Francis Fukuyama describes three forms of economic organization—the family business; the professionally managed corporation; and the state-owned or state–sponsored enterprise. These, he says, have their origins in family and kinship, voluntary associations outside of kinship, and the state.

Fukuyama also notes that societies that have very strong families but relatively weak bonds of social trust—for example, trust among people unrelated to one another—tend to be dominated by small, family-owned and managed businesses. According to Fukuyama, some countries, notably France, Spain, Italy, Taiwan, Hong Kong, Singapore, and the People’s Republic of China, and a number of nations in Latin America, have strong families and a strong state, but relatively little social structure in between the two forces.

Fukuyama contrasts these countries with the US, Germany, and Japan, where large, professionally managed corporations were quick to develop. He argued that these cultures possessed the characteristics required to move beyond the family and into voluntary social groups that were not based on kinship. The world’s best known brands, he noted, tend to come from countries that are good at creating large organizations.

Global Trends

Will globalization lead to more or fewer family-owned brands? Francis Fukuyama’s study is reminiscent of an essay that the British anthropologist Keith Hart wrote nearly a decade earlier. Hart argued that social trust may not be the most efficient basis for economic relationships in societies undergoing major economic change. This is because agreements based on personal trust or formal contracts are subject to stronger sanctions than agreements based on social trust.

Professor Joe Astrachan of Georgia’s Kennesaw State University sees in this analysis a favorable prognosis for family businesses. “When markets break down, government becomes untrustworthy and legal systems [become] lethargic. Family trust becomes more important.” He adds, “Family brands will become more important as they can assure trust across cultures and political regimes. This will be particularly true for products and services designed for health, food and enjoyment.”

But family-owned brands may suffer from their own limitations. Professor Harold James argued in Family Capital that the greatest problem facing family firms is their tendency to think in national rather than global terms. Family firms have often been reluctant to borrow money for business expansion, reflecting a reluctance to share family secrets or see the family’s control of the company watered down. At the same time, taking a privately owned company public, while keeping the majority of shares within the family, may make it difficult to preserve brand identity.

Professor John A. Davis, Faculty Chair, Families in Business Program, at Harvard Business School, says, “Right now, it’s difficult to say how globalization will impact family companies; there are many paths to globalize your business, some straining families and companies more than others. But there is a significant chance that globalization will greatly reduce the number of companies—mostly mid-tier—that can play this new game.”

Barbara Spector, while taking note of such on-going trends as InBev’s recent bid for family-owned Anheuser-Busch, is of the opinion that the strongest family brands will thrive amid global competition. As examples, she cites the success of India’s Tata Group and Arcelor Mittal.

Regardless of the economic futures and fates of family brands, the actual families behind the brands are subject to the same triumphs and tragedies in life—just like families everywhere.

Perhaps that is why consumers—a demographic comprised of parents, children, and cousins—relate to family brands so well.