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7 - Enterprisemodels:

freestanding firms versus family pyramids

Published online by Cambridge University Press:  05 March 2014

Larry Neal
Affiliation:
University of Illinois, Urbana-Champaign
Jeffrey G. Williamson
Affiliation:
Harvard University, Massachusetts
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Summary

Business enterprises are organized very differently in different countries, and neoclassical economics is built around only one such model. Both historically and across modern economies, business groups are usually organized as pyramids. A family firm controls a first tier of listed companies by holding a dominant equity block in each. Business groups figure prominently in economic history, especially in late industrializers. Japan, an industrial power by the 1920s, was the first non-Western country to industrialize successfully. Large family-controlled business groups may well possess a genuine economic advantage over freestanding professionally run firms in low-income economies. Large pyramidal business groups persist in some highly developed economies. Their controlling families strive to be seen as good citizens, and are often keen to cooperate with popular governments. A high-income economy's Big Push commencement exercise can be traumatic for the graduating class of business group controlling shareholders.
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Publisher: Cambridge University Press
Print publication year: 2014

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