Hans Sjögren

Family Dynasties in the Nordic Business World

The evolution of Nordic dynasties in business life illustrates the diverse pathways through which firms have faced the challenge of technological and institutional change since the Industrial Revolution. However, we lack a systematic and synthesized presentation of this. I wish to finish two English publications to explain how the unit of the commitment of the family has been used to exploit resources and guarantee the survival of businesses, i.e. the importance of Nordic family dynasties in the transformation of the market economy. The case will show that family dynasties are not just products of market imperfections: they start, grow and sustain in well-governed and highly industrialized countries. The controlling family seems to be a hub of competence backed by long-term active leadership and a supportive state. Their strategies reflect certain cultural identities. Fearing a losing trust, reputation and economic values forces the family to make implicit contracts with the welfare state, including philanthropy, environmental interests and sustainable growth. Since an analysis of family dynasties stretches over various disciplines the approach has to be multidisciplinary. I will present a theoretical framework that are sufficiently wide to encompass broad questions, while, at the same time, test analytical concepts that are sufficiently precise to guide us through the empirical material to general conclusions. The study will show how specific the Nordic case is, globally.
Final report

The project has shown that the Nordic region has more large family firms than most other countries, taking into account the number of inhabitants and the size of the economy. These family dynasties brought free market economies to the region during the Industrial Revolution, leading the way to export breakthroughs and growing prosperity. The dynasties rebuilt the countries when the rural areas were dynamos of growth and they drew their sustenance from entrepreneurship outside the urban centres. The new and vibrant dynasties that emerged in the wake of the world wars helped the old ones create jobs and wealth in many expanding industries. The dynasties have enriched the Nordic countries, and the way that family-owned businesses pursue their activities has had a direct impact on society's economic fortunes. If their brand of capitalism is properly nurtured, it is the heart that pumps blood into the veins of the greater community.

Why have so many large, successful family-owned businesses emerged in the Nordic countries? And what is the reason that firms whose owners remained anonymous have been unable to survive or grow as rapidly over the long run? The short answer to the first question is that public policy has permitted private fortunes to accumulate within the country ever since the heyday of market liberalism during the Industrial Revolution. Neither government regulations nor attempts by the labour movement to restrict private ownership have fundamentally altered that calculation. As of 2016, 1% of the population held an estimated 25% of Swedish wealth, as opposed to 16.5% in Spain, which also houses many family-owned businesses. The Swedish government has clearly accepted asymmetrical asset accumulation.

The simple answer to the second question is that market economies rooted in family-owned businesses appeal to both reason and emotion in a way that ultimately benefits most entrepreneurs. The blood band evokes an extraordinary level of commitment. As rationally as these businesses may be run, the decision-making process is also informed by feeling. But personal, demonstrative impulses must be reined in such that the competitive instinct is reignited in each generation and everyone involved can make a clear-eyed assessment as to the individuals who possess the wherewithal to take over once the time has come to pass on the baton. Establishing a proper balance generates a credible narrative that people can create an incubator of wealth that will survive into the distant future and offer stimulating challenges to new generations. The narrative is a source of not only fascination, encouragement and paradigms, but self-esteem and intangible rewards for having performed the arduous tasks that such businesses demand. The philosophy of value creation that dynasties articulate and uphold have been linked to the Protestant ethic – work is a calling, income is to be saved and reinvested, and moderation is to reign supreme in every other sphere of life.
 
The initial triumphs of family dynasties are based on temporary monopolies born of an invention. A single ground-breaking innovation in one sector is typically sufficient to nurture the growth of a far-flung empire. Such innovations are subsequently upgraded, refined with new technologies and disseminated to many different industries. Survival in the market also requires ongoing entrepreneurship characterised by constant renewal on the part of employees as well (intrapreneurship). A breakthrough marks a departure from accepted institutional ground rules and industry practice in a more visionary way then businesses without conspicuous owners can hope for. The founders persuasively communicate their aspirations – employees are told why the business proceeds in a specific manner while customers learn that the products and services are associated with an overarching concept and corporate culture. Personal leadership opens the door to many sources of identification that serve as a gravitational force in the market.

By throwing down the gauntlet to the status quo and engaging in private risk-taking, family-owned businesses cultivate a greenhouse in which ownership can strike root and grow. The need to reshape market conditions dictates that they become lobbyists or establish close ties with elected officials and public policymakers. The dynasties forge new markets, rewarding the economy with an ever-widening pool of jobs. Their status as major employers and bulwark of the labour market has cast them into the maelstrom of politics. If they play the part of obedient capitalists who contribute to national prosperity, special tax benefits and other regulatory advantages come their way. Owners join the establishment and amass political capital with both policymakers and the public as they strive to promote their brand on the behalf of both themselves and their business. The elements of the society contract between private capitalists and the supportive state need to be further investigated, and analyzed in an international comparative context. 

Grant administrator
Linköpings universitet
Reference number
SAB16-0781:1
Amount
SEK 726,000
Funding
RJ Sabbatical
Subject
Economic History
Year
2016