Family values or crony capitalism?

There exists today an increasing interest in the role that family businesses play in economic development and in the stimulation of entrepreneurial values. The interest stems from two interconnected sources: a more general reassessment of the political economy of development, in which institutional strength is seen as a critical determinant of the possibility of successful economic emergence; and second, from the empirical perception that family firms are a central feature of most successful emerging market economies, whether in Asia, the Middle East, or Latin America. But does the proliferation of family firms necessarily mean that they are successful; or do they rather account for the retardation of these economies? Family firms are also in abundant evidence in some very undynamic economies. Two streams of academic literature focus on this problem: analyses of political economy, on the one hand, and of corporate governance, on the other. Political scientists, economists, and lawyers all have something to add to the debate, but mostly their interventions either lack a deeper historical background or rely on largely untenable historical assumptions. The debate about the durability and efficiency of family firms is sometimes cast as an aspect of an institutional transatlantic divide, and sometime as a competition between the United States (with the United Kingdom) and the rest of the world. Sometimes, the story is told as one of the continental European perpetuation of family capitalism as a form of European exceptionalism, or of a political and institutional reluctance to follow the U.S. Path of “modern capitalism.” Alternately, it can also be thought of as a case of American exceptionalism, in which the rest of the world operates on a different model, one based more on the family.