Bertrand Schoar (2006) - The Role Of Family In Family Firms
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|The Role Of Family In Family Firms
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- Bertrand, M., Schoar, A., (2006), "The role of family in family firms", Journal of Economic Perspectives 20, 73-96. pdf
History is replete with examples of spectacular ascents of family businesses. The Rothschilds, for example, not only amassed the greatest concentration of private wealth the Western world has ever seen, they are also credited with changing the fate of history by financing monarchs and kings-one of their most famous bets being the support for Wellington's armies, which ultimately led to the defeat of Napoleon at Waterloo. At the height of their power, a French journalist reportedly said in 1841: "There is but one power in Europe and that is Rothschild" (Ferguson, 1998). Yet there are also numerous accounts of family businesses brought down by bitter feuds among family members, disappointed expectations between generations, and tragic sagas of later generations unable to manage their wealth. One of the more spectacular examples in U.S. history is the Vanderbilt fortune. Cornelius Vanderbilt created a fortune in shipping and railroads. He is reported to have been as driven and ingenious as a businessman can be. However, only 50 years after his death, several of his direct descendants were penniless. John Kenneth Galbraith (as quoted in Vanderbilt, 1989), "said that several generations of Vanderbilts showed both the talent for acquiring money and the dispensing of it in unmatched volume, adding that they dispensed of their wealth for frequent and unparalleled self gratification and very often did it with a forthright stupidity."