Published by EH.NET (October 2005)
Doreen Arnoldus, Family, Family Firm and Strategy: Six Dutch Family Firms in the Food Industry, 1880-1970. Amsterdam: Aksant, 2002. 448 pp., ? 36.25 (paperback), ISBN: 90-5260-024-4.
Reviewed for EH.NET by Andrea Colli, Economic History Institute, Bocconi University.
Doreen Arnoldus’s comprehensive book, based on doctoral research undertaken at Amsterdam Free University, concerns the relationship between ownership structure and the formulation of firms’ strategies and behaviors. The definition of “family firm” is addressed in the introductory remarks, which provide a synthetic but comprehensive review of the (never-ending) debate over the efficiency of the family firm as a form of organization and management. Pragmatically, Arnoldus defines the family firm with three elements, i.e. ownership (maybe partial), management/control, and — relevant in the author’s perspective — kinship. These dimensions are the framework utilized to analyze in a diachronic and comparative perspective the history of six case studies of multigenerational Dutch family businesses in the food industry.
The research is based upon primary archival sources and oral materials, both in the families’ and companies’ archives; the quality and quantity of the information is, as the author honestly warns, rather discontinuous. Thanks to the historian’s sensibility, however, the outcome is of high quality. The six cases are contextualized according to three dimensions: geographic, “cultural” (religion is taken into consideration, given its relevance and influence in the late-nineteenth century Netherlands), and “economic” (i.e. the industry, with its dynamics and technologies). Two chapters are then devoted to discussing the issue of succession in the different contexts, in geographic and cultural/institutional terms. In this case, the author makes a considerable comparative effort. The stories she tells are extremely complex and tortuous — the issue of leadership succession, an the way in which the families were able to cope with this fundamental step in the life of a family company have been reconstructed in detail. The stories collected in these chapters constitute an interesting and unique kaleidoscope of examples. Taken together, they give an idea of how complex the issues at stake could be, and how different the (perhaps successful) outcomes were, in terms of performance and results. A number of the firms considered completed, during the period examined, a transition in managerial structure and the progressive separation between ownership and control. The research shows quite clearly, however, that this process was not compulsory. In other cases, in fact, the family was able to successfully manage the dynamics of the firm’s growth, without losing control over general corporate strategies.
Succession apart, another crucial issue for the family firm is the manner in which necessary resources (capital, labor and inputs) are made available. In chapter 5, 6 and 7 the strategies of the six family firms in (respectively) capital, labor, and inputs plus marketing are examined. Particularly interesting is chapter 5, based upon a detailed analysis of the various ways in which financial resources were channeled into the firms, depending on the stage of their development and on the nature of the business itself. The goal of preserving family control balanced against the desire for growth shaped, in most cases, the financial strategies, ranging from ploughed-back profits to debt capital raised through an extensive use of reputation and personal connections with relatives. The family, in this case, confirms its nature as a strategic asset necessary to obtain additional resources. This is true not only in the case of finance, but also in the case of specialized labor (management). In this case, Arnoldus devotes an entire chapter to an extensive discussion of labor management in the six firms — probably a paragraph should have been added here on the training programs of the young members of the families. The family proved to be an effective resource in marketing, too. Branding strategies, conscious and unconscious, are in any case based on an extensive exploitation of the family name, which is perceived as the best guarantee for consumers, as well as a way to differentiate basically undifferentiated products. Lastly, the family was the center of multiple social networks, at the level of the (extended) family, of the local community, and of the industry itself through co-operation among entrepreneurs. The strength of local ties proved to be a powerful asset for nearly a century. In many cases, however, this cohesion proved to be weak in the face of harsh competitive pressures in the new framework of the Seventies. Also in this case, the comparative method allows the author to stress the differences among different social networks and their ability to resist, or not, to the changes in the market.
This is not an “easy” book. It is an extensive, detailed, complex and rich piece of historical research based upon the most important tools in the hands of the historian — the comparative method and the use of a vast array of different sources. The evidence it provides for those interested in the dynamics of family firms is unique, and extremely useful.
Andrea Colli is Associate Professor of Economic History at Bocconi University, Milan, and deputy director of EntEr, the research centre for studies on entrepreneurship and entrepreneurs of the same institution. His publications include The History of Family Business 1850-2000 (Cambridge University Press, 2002).