Why Japan Has Oldest Most Companies In The World?

In a world where the average lifespan of a company is less than 20 years, there is a country that defies the statistics.

Japan is home to most of the old companies in the world. Some of them have operated for more than a thousand years.  

But what makes the country such an old business superpower? Let’s take a look.  

Japan has more than 33 thousand companies that are more than 100 years old, Over 40% of the world’s total. Around 140 have existed for more than 500 years and at least 19 say they have operated for more than a thousand years.  

There are some secrets behind this. 

FIELD OF BUSINESS

 One of the main reasons why there are so many old Japanese companies is the kind of business they are in. Usually, they are in areas of the economy that are connected to the lives of the communities they are based in. Many of them produce products that have cultural importance like Taiko drums, paper lanterns, dolls, brushes. Having this cultural attachment with the community gives them a continuous endorsement of tradition and endless consumers, making it harder for them to fail.  

An example is Tsuen Tea Kyoto. Tea is a very important part of Japanese culture and has a special meaning in pretty much every household. Or the construction company Kongo Gumi, which builds temples and shrines and it’s believed to be founded in the year five hundred and seventy-eight. All these companies profit from cultural traditions.  

Activities that do not depend solely on how well the economy goes. This characteristic gives them a higher chance of longevity. 

FAMILY BUSINESS

  

Another common feature of these companies is that they are mainly family-owned businesses.

And that means they share some other common characteristics.  

Most of them operate according to what Japanese people call 'kakun' which means family precepts.  

Different from a normal company, which is supposed to maximize profit, scale up the size, market share and growth, these businesses operate on different priorities. They don’t aim to just make a profit, but also to care for their community and, most importantly,carry on existing.  

Each generation has the responsibility to pass the business to the next. And giving up is not an option. Continuing the family business is a matter of pride and must be done no matter what.  

So that these companies have a very high aversion to risks. And that’s not because the fear of losing control of the business but also due to the many past crises that Japan has endured.  

That's why they often have very large cash reserves. Historically, family ties played a much more important role in keeping this business flow.

ADULT ADOPTION

 To avoid companies being inherited by less talented offspring, Japan has solved the situation with a very peculiar law.  

If a business owner did not trust his firstborn son to take the helm, he can adopt a son and run the business. 

Japan is famous for having a very low birth rate.

One-child families are very common. And although daughters are allowed to inherit the business and there are successful Japanese businesswomen, The country still has a mostly male-centered culture.  

But this is not a problem for families with only daughters when it comes to passing the family companies on. 

Thanks to the adoption law, owners without a son planning their retirement can also look to their daughters' potential husbands to take the company’s helm.  

This way, the company will stay in the family's control. This kind of adoption is known in Japan as Mukoyoshi and some estimate that they represent more than 90% of the around 80 thousand adoptions per year in the country. 

Sometimes even families with biological sons will opt for the practice if they believe that nature has not been so good to their heir. 

Suzuki Motors, the famous car maker, is one of the family businesses that took advantage of the practice. Osamu Suzuki, the long-term company’s president who retired in February 2021, was a 'Mukoyoshi'. He was the fourth adopted son in a run to lead the company.  

Under his tenure, Suzuki became a powerhouse and enjoyed decades of growth and success.  

As this example shows, choosing a son for his ability to run the family business can be a successful strategy. 

GEOGRAPHY AND HISTORY  

Japan is an Island. This geographical characteristic meant for a long time, that the country was isolated from neighbors and therefore needed to be self-sustainable. 

This created a very fertile case for companies to develop and prosper among its very long history.  

This became especially true from the beginning of the 17th century, when Japan largely sealed itself off from the outside world in an isolationist foreign policy that lasted centuries and was known as 'Sakoku'. During this time, foreigners weren’t allowed in and Japanese people were not allowed out. These policies provided a stable business environment.

By 1870, Japan became the first non-western, non-Christian country to industrialize. During this period, Japan already had well-developed agriculture and urban populations that were considered sophisticated for the time.  

This old and strong economy was a fertile scenario for businesses.

With a strong internal market and inside movement of people, companies were able to establish themselves early on.  

Besides all these points, we need to mention that a company surviving through millennials  has probably more to do with circumstances than any specific ideas or measures.  

But the fact that a lot of them are concentrated in Japan, proves that somehow cultural, economic and geographical characteristics have played a role in business longevity.  

It's also important to point out that not all the thousand-year-old Japanese companies can trace their origins back to their founding. For many, there is no real proof of their history and one cannot confirm with facts what happened in all this time.  

But their timelines are generally accepted by the government, historians and scholars. And as I said, they all have many things in common.