No heir to run the company? Why adult ‘adoption’ is big business in Japan

Family firms in Japan often rely on adult adoptees to help retain dynastic control. Finding a match has become an industry in itself

Tokyo

Like many men in Japan, Tsunemaru Tanaka is looking for a wife. Unlike some, he is prepared to sacrifice his name to get one. If all goes well in 2013, he'll find a bride, her prosperous family will adopt him and he'll take their family name. In an ideal world, he'll run their business too. "I think I have a lot of skills to offer the right family," he says.

The 19th-century industrialist Andrew Carnegie famously said that inherited wealth "deadens talents and energies. Business research generally supports the Carnegie thesis: companies controlled by heirs underperform their professionalised competitors. Except, apparently, in Japan.

Japan boasts the world's oldest family-run businesses, the Hoshi Guest House, founded in 717. And the construction company Kongo Gumi was operated for a record-breaking 1,400 years by a succession of heirs until it was taken over in 2006. Many family firms – car-maker Suzuki, Matsui Securities, and giant brewery Suntory – break the rule of steady dynastic decline, or what is sometimes cruelly dubbed the "idiot-son syndrome".

So how do Japanese firms do it? The answer, apparently, is adoption.Last year more than 81,000 people were adopted in Japan, one of the highest rates in the world. Remarkably, more than 90 per cent of those adopted were adults.

The practice of adopting men in their 20s and 30s is used to rescue biologically ill-fated families and ensure a business heir, says Vikas Mehrotra, of the University of Alberta, the lead author of a new paper on the Japanese phenomenon of adult adoptions. "We haven't come across this custom in any other part of the world," he says.

Though the phenomenon has been previously documented, its impact on economic competitiveness has not. Dr Mehrotra's paper finds not only inherited family control still common in Japanese business, but says family firms are "puzzlingly competitive", outperforming otherwise similar professionally managed companies. "These results are highly robust and… suggest family control 'causes' good performance rather than the converse."

Finding suitable heirs, however, is not as simple as it once was. Japan's sliding birthrate has created many one-child families, and while daughters can manage the company back office, the face out front in this still chauvinistic country must be male, says Chieko Date. She is one of dozens of marriage consultants who bring together ambitious young men and the marriageable daughters of business families. Ms Date is proud of her record. "We bring happiness to both sides," she says.

If the meetings go well, the men agree to drop their own surname and be adopted by their new bride's family, becoming both the head of the family and its business. Ms Date's consultancy claims to have brokered 600 of these marriages – known as "mukoyoshi" – over the past decade. "We believe that this cannot be just a business transaction," she says. If the couples don't like each other, the marriage and the business will fail.

Ms Date screens the men carefully, going only for "top-class" candidates. "I've talked to 20,000 men over the past decade and successfully brokered hundreds of marriages, and I haven't heard of a single divorce," she adds. Just in case, the families of prospective wives will often do a deep background check on their future adoptees, to make sure they don't come loaded with debt, and they're not gay.

Remarkably, some families will bypass a biological son for an adoptee if they feel that nature has shortchanged them – a practice that occurs with "some regularity" says Dr Mehrotra.

Could Japan's unique remedy offer lessons to its prickly neighbour China? It seems unlikely. Chinese businessmen who have come across the practice find it "uncivilised".

Family fortunes: Business dynasties

Toyota

Established in 1937 by Kiichiro Toyoda, above, as a spin-off from his father's weaving company. In 2009, Akio Toyoda, Kiichiro's grandson, pictured, took over as president of the company, which employs 300,734 people worldwide.

Suntory

Founded in 1899 by Shinjiro Torii, below, the brewing giant famous for its whisky is still 90-per-cent owned by the founding family.

Suzuki

Michio Suzuki set up the Suzuki Loom Works during a silk boom in 1909. It is now the ninth largest car-maker in the world. The CEO, Osamu Suzuki, is the fourth adopted son to run the company.

Matsui Securities

A financial company providing online securities trading services, set up in 1931. The company's fourth president, Michio Matsui, was adopted into the family, but this meant ditching his own name.

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