ESCP ALUMNI MAGAZINE - #189 - MARS/AVRIL 2020 - 23

DOSSIER  ❙  Une affaire de familles  

Learning from European
family firms: corporate
diplomacy can help
improve longevity
Professor Francesco Rattalino and his co-authors - Luciano Ciravegna (King's College), Liena Kano
and Alain Verbeke (Haskayne School of Business) - recently published an article about Corporate
Diplomacy and Family Firm Longevity in Entrepreneurship Theory and Practice.

Few family firms survive for
more than three generations.
Most of the world's oldest surviving
organizations (excluding educational
institutions, governments, and religious institutions) such as Frescobaldi,
an Italian firm that has been producing wine for over 700 years, are in
fact family firms. This extreme variation in family firm lifespans presents
a family firm longevity paradox, which
we attempted to explain in our study by
building upon a new conceptual lens,
informed by transaction cost economics
but augmented with corporate diplomacy thinking.
The family business longevity largely
depends on the ability to overcome
economizing challenges brought about
by bifurcation bias (BB), both in their

business transactions and broader transactions with the macro-level environment. This is because some family firms
command a unique governance mechanism, namely superior social capital, and
are able to sustain this tool in the long
term and transmit it transgenerationally.
Yet, few family firms successfully utilize
this governance mechanism facilitating
long-term survival because of dysfunctional BB, which prevents them from
effectively developing and deploying
their social capital outside of the context
of affective, family-based ties.

Lessons to be learned
from long‐lived European
family firms
We explored how family firms can
address these challenges by taking

on board insight from the international relations literature, more specifically research on corporate diplomacy.
Corporate diplomacy can be described
as a set of processes whereby corporations achieve recognition as value-creating partners in broader society.
In France, Mellerio, the oldest jewellery producer, developed stakeholder
relationships in multiple countries and
with different groups, through personal
involvement of its family employees.
This long-lasting effort helped the firm
survive dramatic macro-level shifts,
including the French Revolution.
To achieve longevity, it is also important to foster mutual engagement
between non-family employees, who
are invested in the vision, mission, and
value of the firm, and the family, which
is committed to non-family employees
as long-term members of the team.
Family firms have an intrinsic governance advantage in terms of their
so-called bonding social capital, to the
extent that this involves family ties.
Long-lived family businesses are
those able to complement intrinsic
governance strengths in the realm
of family-based ties, with corporate
diplomacy processes that augment the
firm's broader bonding and bridging
social capital, in support of efficient transactions.
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ESCP Alumni Magazine numéro 189  ❙  MARS/AVRIL 2020

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ESCP ALUMNI MAGAZINE - #189 - MARS/AVRIL 2020

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