THE RELATION BETWEEN FAMILY AND ENTERPRISE IN EARLY MODERN JAPAN — THE HOUSE OF SUMITOMO AS A CASE STUDY — Until today family and firm are two closely intertwined concepts in the Japanese business world. Firstly, “management familism,” the idea of the company as a family, is often mentioned as a characteristic of Japanese management in postwar business studies. According to this idiom, the company is a family-like environment, encompassing the worker's life. Employees remain loyal to the company all their lives and work hard to achieve the group goals. Management practices like life- time employment, seniority-based wages, quality-circles and in-com- pany union sustain the feeling of the company as a community of people with a common destiny (ie kyôdôtai). This paternalistic ideology in com- panies, an attempt to create an emotional identification with the firm, is called “familism” or kazokushugi. Western scholarship however, has criticized this company-as-family metaphor. Researchers have pointed out how, from the 1930's on, company management has used the ideol- ogy of familism in order to dismiss government intervention1 or to avoid having to improve working conditions2. Nevertheless, the “familistic” ideal of a benevolent management caring for loyal workers is still very much alive. It is often invoked not only by the direction but also by the employees claiming their rights and full membership of the company- community3. Secondly, “familism” can also be defined as a form of business in which the interests, social position and prestige of the capital owning fam- ily are linked to the prosperity and continuity of the firm4. The family has 1 Rodney CLARK, The Japanese Company, Yale University Press, New Haven and London 1979, p. 47. 2 Andrew GORDON, The Evolution of Labor Relations in Japan: Heavy Industry, 1853-1955, Council on East Asian Studies, Harvard University press, Cambridge 1985. See also Dorinne K. KONDO, Uchi no Kaisha: Company as Family? in Jane BACHNIK and Charles QUINN (Ed.), Situated Meaning: Inside and Outside in Japanese Self, Society, and Language, Princeton University Press, Princeton, New Jersey 1994, p. 173. 3 Ibid. 4 For definitions of familism in Japan and the West, see Akio OKOCHI & Shigeaki YASUOKA, Family Business in the Era of Industrial Growth. Proceedings of the Fuji 190 B. GAENS always been a very efficient instrument for business, as a primary source of capital and reliable partners. Many big enterprises built around clans still exist, although the active role of the family members differs5. The goal of this article is to examine the historical roots of familism in Japanese business. These can be found in the concept of ie, an incorpora- tion of both family and enterprise in early modern merchant houses from the Tokugawa period (1603-1868) on. Next, I will take a look at the ide- ological use of the family-metaphor and the suggestion of continuity in “familistic” management practices such as lifetime employment and seniority. I will focus on the case of Izumiya-Sumitomo6, as they were a typical merchant family since the beginning of the early modern era. Of all the large traditional merchant houses, Mitsui has been studied best and has even been the subject of several books in English7. The Mitsui enter- prise has often been referred to as an ideal type of merchant house orga- nization and centralized family management. However, it is my opinion that the case of Sumitomo is more representative for early modern Japan- ese family management. Whereas Mitsui was a conglomerate of nine Conference (The International Conference on Business History 10), University of Tokyo Press, Tokyo 1984. Leslie HANNAH, From Family Firm to Professional Manage- ment: Structure and performance of Business Enterprise. Akademiai Kiado, Budapest 1982. H.A. MUNTJEWERFF, De spil waar alles om draaide. Opkomst, bloei en neergang van de Tilburgse familie-onderneming Wolspinnerij Pieter van Dooren 1825-1975, Stichting Zuidelijk Historisch Contact, Tilburg 1993, p. 26. 5 In some companies the family's influence in management is still very strong or even increasing (as in Suntory and Toyota) and in others their influence is decreasing or salaried managers have the authority (as in Bridgestone and Yamaha). Matsushita-Pana- sonic is an example of a firm that is coping with an in-company struggle between two fac- tions concerning the role of family members. One faction supports the third generation Matsushita Masayuki, a grandson of founder Matsushita Kônosuke, in his bid to become the next president, while another faction calls for the need to overcome family or dôzoku- controlled management and supports a manager unrelated to the family; see ASAHI SHIM- BUN (Evening Edition), Kazokuteki keiei, dappi e no kakehiki, 19 July 1997. 6 The history of Sumitomo as a zaibatsu after Japan's modernization is fairly well- studied. However, its pre-modern background has been less examined, largely due to the limited access to original Tokugawa period materials. Outlines of Sumitomo's history can be found in the following works: SAKUDO Yôtarô, Sumitomo zaibatsu, Kyôikusha Rekishi Shinsho, Tokyo 1979; MIYAMOTO Mataji, SAKUDO Yôtarô (ed.), Sumitomo no keieishi teki kenkyû, Jikkyôsha, Tokyo 1979; YASUOKA Shigeaki, Zaibatsu no keieishi, Gendai Kyôiku Bunko, Tokyo 1990; Hidemasa MORIKAWA, Zaibatsu. The Rise and Fall of Fam- ily Enterprise Groups in Japan, University of Tokyo Press, Tokyo 1992; MORIKAWA Hidemasa, Nihon zaibatsushi, Kyôiku Rekishi Shinsho, Tokyo 1987. 7 E.g., Oland D. RUSSELL, The House of Mitsui, Little, Brown and Company, Boston 1939; John G. ROBERTS, Mitsui. Three Centuries of Japanese Business, Weatherhill, New York 1973. THE RELATION BETWEEN FAMILY AND ENTERPRISE 191 (later eleven) owner-families who invested in a central joint-stock com- pany (the ômotokata), Sumitomo was an example of an enterprise ruled by one household or ie. The role of the family in the Sumitomo enterprise First I will illustrate how Sumitomo evolved from an owner-con- trolled firm to a managerial enterprise, ruled by salaried managers. Sum- itomo's pre-modern history can be roughly divided into three periods, 1600-1700, 1700-1780, and 1780-1894. Masatomo (1585-1652), a Nehan-sect priest who had a book and medicine shop in Kyoto, is traditionally credited to be the founding father (kaso) of what later came to be the Izumiya-Sumitomo house. It is, however, Masatomo's brother-in-law Soga Riemon who is the founder of its business (gyôso). He owned a hardware shop named Izu- miya and his business really took off when he acquired the Nambanbuki, a new technique to extract silver from copper. Riemon's son Ribei (later called Tomomochi) was later adopted by Masatomo and thus became head of the ie. In 1623 he moved the Izumiya business from Kyoto to Osaka, Japan's commercial center at the time. Commercial activities expanded and the house branched out in copper export, international trade, financing and rice dealing for retainers of the Shogunate (fudasashi), and money changing. With third generation Tomonobu as household head (called tôshu during the Tokugawa period), branch shops in Edo were set up. By the end of the seventeenth century the Sumitomo enterprise produced one third of Japanese copper. The family also became Bakufu-appointed (goyô) copper traders after their acquisi- tion of the Besshi mines. The household head was the leader of the ie as well as the manager of the enterprise. As the firm grew, more authority necessarily had to be delegated to employees, but they were not given too much autonomy. During this period the ie (usually translated as ‘house’ or ‘household’) formed the active core of business. Since the beginning of the seven- teenth century the ie was the basic unit of Japanese society. It formed an institutionalized household, a corporate body, with the aim of ensuring prosperity and perpetuity8. Although succession of the household head 8 For an analysis of the ie concept as a cultural and social metaphor see MITO Tadashi, Ie no ronri, 2 vols., Bunshidô, Tokyo 1991, and Ie to shite no Nihon shakai, Yûbunkaku, Tokyo 1994, by the same author. In many Japanese scholarly works, an important role 192 B. GAENS was ideally reserved to the eldest son, it could also easily be assumed by another son or even a non-kin successor, like a servant or an employee, adopted into the ie through marriage with a daughter. Adoption was also a strategy to secure the continuation of the main house (honke) if the head and his wife remained childless. Non-succeeding family members were supposed to leave the house and form branch families (bunke). An employee could be given permission to form a non-kin branch (bekke) after a considerable number of years and start his own business, but he had to take the explicite vow not to interfere with the honke enterprise. Inheritance was customarily divided among all sons until roughly the first half of the eighteenth century. Although the primary weight remained on the succession of the main house, each son was given the chance to set up a branch house. For example, in 1662 the second head Tomomochi was succeeded by his eldest son Tomonobu, who as heir to the main business of Izumiya received sixty percent of the profits of the copper trade. His younger brother Tomosada received forty percent, which he used to start an independent bunke and a money exchange business in Osaka9. The second period (1700-1780) witnessed the centralization of the family business and the enactment of house codes. During the economi- cally unstable period following the Genroku era (1688-1703), the inte- gration of the corporation became a necessity due to a number of causes. After the Kyôhô reforms by shôgun Yoshimune, the Bakufu government refused to accept litigation brought against daimyo who had borrowed money from merchants and declined to pay it back.