In A Nutshell
Research into family businesses has shown that handing off to an heir is generally a bad idea. Having the same name only goes so far, and businesses tend to do better with a talented outsider.That’s an inconvenient fact in Japan, where passing businesses to a family heir is deeply important and rooted in culture. To get around this, leaders of companies will legally adopt promising young men—it’s a very patriarchal system and women are rarely involved—and make them their scion. This practice accounted for 98 percent of all adoptions that took place in Japan in 2004, mostly of men in their twenties.
The Whole Bushel
There is a name for the idea that familial heirs are bad for business. It’s called the Carnegie thesis, named for the 19th-century steel tycoon who came up with the idea. He gave most of his wealth to charity before he died. Research has shown this idea holds up in practice in most of the world. Firms in the United States that pass to a family member typically take a hit of up to 20 percent in profitability and share price. Other rich, developed nations are the same.
Japan is a key exception. Many Japanese firms have remained under a single family for generations and flourished. Suzuki and Toyota are well-known examples. Japanese culture has developed a novel way to overcome the problem of their families lacking a suitable heir—find an heir and make him part of the family through adoption. Of course, it’s impossible to tell who’ll do until adulthood, so 90 percent of people adopted in Japan are men aged 25–30.
It’s generally preferred if, on top of the adoption, the new family member marries a daughter from his new family. That way he is both a son and a son-in-law, a setup that would be illegal in many other countries. If the family finds someone they’d like to adopt, they’ll introduce him to their daughter in hopes they hit it off. If all goes well, then marriage and adoption take place. There is a term specifically for someone who is both adopted and married into the family: muko yôshi.
Legally, you need only be a day older than the person you adopt. If the person you want to adopt is already married, you simply adopt his wife as well, and those single men hoping to get ahead can turn to agencies set up specifically to organize marriages with daughters of businessmen looking for an heir.