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

Posted on September 5, 2012 by David

By Harold James
Belknap Harvard, 2006
446 pages, $39.95

Family businesses and their intertwinements with European states and markets are examined in Family Capitalism: Wendels, Haniels, Falcks, and the Continental European Model, by Harold James, professor of history and international affairs at Princeton University. The author compares and contrasts the development of three family businesses, one French (Wendel), one German (Haniel), and one Italian (Falck), from their origins in the late 18th century to the present day. For the first 150 years of this era, coal, iron, and steel formed the backbone of national economies as well as military power, and these families were at the nexus of business and politics. The Wendel family, in particular, with its major operations situated in Lorraine, found their business tossed back and forth between France and Germany six times between 1870 and 1945!

In his introduction, James underlines the ongoing importance of family businesses to capitalism. The rest of the book is organized into five phases, or “ages,” in the development of these enterprises: those of the individual, the corporation, “organizationalism,” the postwar miracle, and globalization. Within each of these ages, James traces the history of each family enterprise, weaving together the economic and political conditions that they encountered. This makes for a complex narrative construction, and, as the cast of characters grows in each family, it can be difficult to keep track of who is who. Fortunately, this does not interfere with the author’s central themes.

James finds no evidence for the so-called modernization model. As proposed by Alfred Chandler in The Visible Hand: The Managerial Revolution in American Business (1977), this model views the family firm as an early childlike stage in an organization’s life that will eventually give rise to a multidivisional public company managed by a technocratic elite. Instead, we should think of the family firm as capitalism’s “default condition,” the institution to which it reverts when states stumble and markets fail. As the author shows in the histories of all three families, the crises that accompany such events also create family solidarity, quelling more fractious elements at a time when organizational cohesion and focus are most important. Certainly there are constraints on the kinds of businesses in which families may be most comfortable — generally growth industries without very high capital requirements — but there are also businesses in which the commitment and tradition that a family brings to a firm resonate with customers who want a relationship, not just a transaction.

Bookmark the permalink.