A 30-year analysis of Japanese family businesses identifies four practices behind their resilience: turning values into decisions, evolving without losing their purpose, protecting long-term capital, and preparing for succession well in advance.
In 1945, a bombing raid destroyed Toraya’s main factory in Tokyo. Japan was still at war, and sugar shortages soon followed—a critical raw material for a company producing traditional sweets. The company rebuilt the factory and continued operating.
Eight decades later, Toraya is still doing much the same as it did then. Founded in Kyoto in the early 16th century, the company now has three factories, about 80 outlets in Japan, and a boutique in Paris. It has survived wars, earthquakes, political upheaval, and radical shifts in consumer habits.
Its history serves as the starting point for research published by Harvard Business Review that raises a particularly relevant question in a period of economic and technological uncertainty: Why are some companies able to endure across multiple generations of crises while others disappear?
Researchers Claudio Fernández-Aráoz, Masahiro Kotosaka, Yasushi Maruyama, and Gregory Nagel analyzed the performance from 1994 to 2024 of 59 large publicly traded Japanese family businesses and compared them with non-family companies in Japan, as well as large family-owned and non-family companies in the United States, Germany, and Canada.
The conclusion challenges one of the standard preoccupations of corporate management. The longevity of these companies does not appear to rest on an extraordinary ability to predict what will happen, but rather on having built organizations prepared to act when the future is impossible to foresee.
Four disciplines for navigating uncertainty
The authors identify four practices common among Japan’s most resilient companies. The first is to translate the company’s philosophy into everyday decisions, so that values cease to be merely a corporate statement and become a genuine criterion for deciding on investments, technologies, appointments, or partnerships.
Hosoo offers one example. This Kyoto textile house was founded in 1688 and works within the Nishijin weaving tradition. Its principle of placing beauty first shapes, according to the research, both the technologies it adopts and the collaborations it accepts.
That philosophy does not mean preserving the business unchanged. Indeed, the second characteristic identified is the ability to use tradition as a starting point for change.
Toraya opened a store in Paris in 1980 and adapted some of its products using local ingredients, while continuing to make sweets inspired by designs preserved for centuries. Hosoo underwent an even deeper transformation when the kimono market collapsed. By 2008, its workshop had been reduced to three artisans. The company then developed a 150-centimeter loom and brought Nishijin weaving into new fields and international collaborations.
The lesson lies less in preserving specific products than in distinguishing what forms part of a company’s identity from what can be changed so that identity continues to make sense in another market.
Patience also shows up in the numbers
The third discipline identified by the researchers is financial. The Japanese family businesses studied showed a greater willingness to sustain investments whose returns may take decades to materialize, alongside relatively conservative balance sheets.
Suntory entered Japan’s beer market in the early 1960s and maintained the business through decades of losses. According to the study, it took 45 years for that division to post its first profit.
This is not simply a matter of accepting losses indefinitely. The logic described by the authors is that of so-called patient capital: sustaining investments considered strategic while also protecting the company’s ability to survive.
Financial data support that caution. Over the 30 years analyzed, Japanese family businesses had the lowest level of leverage among all groups studied across the four countries. The median was 16%, compared with 29% for comparable U.S. companies.
Debt can improve financial efficiency under certain circumstances, but it introduces a different kind of risk when the business horizon is no longer measured in fiscal years or decades and begins to be viewed in generations.
Preparing the successor’s successor
The fourth characteristic emerges at one of the most delicate moments for any family business: the leadership transition.
The companies analyzed tend to prepare succession plans far in advance. In some cases, they consider not only who will be the next chief executive, but also who might take the role afterward.
The process also does not necessarily mean handing management to another family member. The research describes organizations that have evolved from strictly family-based governance toward structures guided primarily by the company’s philosophy.
The data show that around leadership changes, the operating performance of the Japanese companies studied tends to deteriorate less and with less volatility than at comparable U.S. businesses.
The time horizon thus changes how a decision is understood. An investment that appears difficult to justify over a three- or four-year term may take on a different logic when the organization is focused on preserving the business for future generations.
A 1,400-year-old company also shows what can go wrong
Japan also provides a counterexample. Kongō Gumi was founded in 578 and specialized for centuries in temple construction. It came to be regarded as the world’s oldest continuously operating family business.
After nearly 14 centuries, the company expanded into general construction segments such as housing and office buildings, relying on debt to finance that expansion. It thus entered markets where it competed primarily on price and did not enjoy the advantage it had accumulated over centuries in religious construction.
When demand for temples declined in the late 1990s, its debt burden reduced its ability to absorb the blow. Kongō Gumi lost its independence in 2006 and became part of the Takamatsu Construction group, although it remains in operation today.
The case is relevant because it adds an important qualification to the idea of corporate longevity. A history spanning centuries does not guarantee future survival. The same organizations that have endured wars, regime changes, and economic transformations can put themselves at risk when they abandon the disciplines that made such resilience possible.
Thinking beyond the next business cycle
The period selected by the researchers is no coincidence. Between 1994 and 2024, Japanese companies had to operate in a particularly challenging economy, marked by long periods of price stagnation and profound demographic aging.
Despite that environment, the analysis concludes that Japanese family businesses matched or outperformed comparable companies in the United States, Germany, and Canada while taking substantially less risk.
The findings
