Adoptive expectations: Rising sons in Japanese family firms

We find inherited family firms more important in postwar Japan than generally realized, and also performing well on average. Non-consanguineous heir-run firms outperform blood heirsʹ firms, and roughly match founder-run listed firms, while blood heirs surpass professional managers at running family firms. Further, succession events suggest that adopted heirs “cause” elevated performance. We suggest that heir-run firms do well because non-consanguineous heirs displace the least talented blood heirs, the non-consanguineous heir “job” motivates professional managers, and the threat of displacement encourages blood heirsʹ effort and human capital accumulation, mitigating the “Carnegie conjecture” that inherited wealth deadens talent.