orgtheory quiz #2: what’s the world’s oldest firm?
Hey, tough guy! Think you’re “the situation?” Answer me this: what’s the world’s oldest firm?
It’s Hyoshi Ryokan. It’s an inn in Japan. Been running since 718. The previous record holder was Kongo Gumi, a Japanese construction firm, founded in 578 and running till 2006. Here’s a list of other old firms, compiled by b-school prof William O’Hara.
Didn’t get that? You flunk into demography!
Cool link — digging into über-old firms like that would be a really interesting project! (Dissertation, anyone? Probably someone already toiling away.) Identity issues would be fascinating, as well as path-dependence, strategy, etc, etc.
“The Situation” — Fabio, you need a jersey shore-like nickname: The Pack, Ferret Man, War, WDTHTDWOT? OK, I know nothing about the jersey shore nor about creating appropriate nicknames. Here’s a nickname generator: http://www.unlikelywords.com/2009/12/08/jersey-shore-nickname-generator/
tf
January 3, 2010 at 1:24 am
there must be very high mortality for telecoms, film/music studios, and semiconductors as i don’t see any firms from these industries in the list.
gabrielrossman
January 3, 2010 at 1:31 am
TF: I grew up on the Shore. I preceded the Situation.
GR: The industries you mention are all very recent. They haven’t had the chance to get close to being the oldest firms.
fabiorojas
January 3, 2010 at 1:38 am
GR: Maybe the deeper issue is that industry boundaries are rigid. You might expect old firms to swallow firms in new industries, but it doesn’t happen. These firms are family run businesses that stick to their niche.
fabiorojas
January 3, 2010 at 1:46 am
One explanation for longevity/performance — worked through mathematically by Émile Borel and extended into organizational work by Armen Alchian (JPE 1950) — is luck and randomness: with millions of firms/orgs being established, some are bound to stick around by luck.
tf
January 3, 2010 at 2:11 am
Um, Fabio, I thought GR was making a joke. No?
AC
January 3, 2010 at 2:29 am
AC: You wanna keep it real? Bring. It. On.
TF: Let’s calculate it. Let’s say Japanese inns die at 50% every five years. Then, the probability of survival of a Japanese inn from 709 to the present is .5^(1300/5)< 10^-79. So it is highly unlikely that by chance alone one would survive this long assuming a proportional hazard. Even if you adjusted and made firm death inversely proportional to age, I bet it would still be unlikely that chance alone produce Hyoshi Ryokan.
fabiorojas
January 3, 2010 at 2:55 am
This reminds me of those identity problems in Philosophy — whether, e.g., a restaurant that simultaneously changes owner, name, and location is still the same restaurant. What are the conditions for continuity of firm identity through time?
Kieran
January 3, 2010 at 3:52 am
@Kieran: Lots of ‘stanford school’ books and articles later, there’s still nothing definitive. Btw, does it matter at all? I mean, wouldn’t the answer to your question depend on how you define identity? (and did I just step into a tautology?)
sd
January 3, 2010 at 8:51 am
Btw, does it matter at all? I mean, wouldn’t the answer to your question depend on how you define identity?
Saying “Hyoshi Ryokan is the world’s oldest firm” presupposes some standards for what it means for a firm to persist over time. But there are different accounts of how (or whether) a persists in the face of changes in (or the complete replacement of) its parts. Saying “Isn’t it just a matter of definition?” isn’t helpful: why should we think ex ante that there’s no right answer to the problem? This sort of philosophical puzzle is not to everyone’s taste, naturally. (It would be nice if not liking a problem were enough to make it go away, and indeed many social theorists apparently believe themselves in possession of pragmatimagical wands they can wave at hard conceptual questions they dislike, cannot solve, or do not wish to be pinned down on.) But in any event, the straightforwardly empirical question is still there: what, in practice, does it take for us to say x is still the same firm it was in 1950, or 750? Legal charter? Continuity of practice? Name?
Kieran
January 3, 2010 at 2:45 pm
the catholic church doesn’t count?
shakha
January 3, 2010 at 4:08 pm
K; by the continuity of service standard, Ryokan probably counts.
Shakha Good point, the catholic church is viewed as the oldest org, but it’s not a firm. BTW, I know some folks would count the Chinese state as the oldest org, but it’s unclear due to the continuity issues Kieran raised.
fabio
January 3, 2010 at 5:28 pm
Clearly an “Inn” has the advantage of housing the oldest profession.
Omar
January 3, 2010 at 11:11 pm
Which also happens to be a counter-cyclic business. I’ll be here all night.
Omar
January 3, 2010 at 11:12 pm
Make sure to tip your “waitress”.
Kieran
January 4, 2010 at 1:14 am
On the topic of whether the Catholic Church counts as a firm, there’s Woody Allen’s remark about his efforts to deduct his analyst on his income taxes: “I claimed it was a business expense, but the IRS said it was entertainment — so we compromised and called it a religious contribution”.
Kieran
January 4, 2010 at 1:16 am
What, exactly, would be the defining characteristics of a firm before modern corporate structures came into being? Is for-profit status requisite?
While the Catholic Church is not a profit-oriented institution, for much of its history it owned landed which was farmed. Branches operate schools and hospitals, also not for profit but certainly with an eye to staying afloat financially. For much of its history, the Catholic Church through its branches has been the largest single provider of education, health care, and welfare services in the world.
E Bogue
January 4, 2010 at 2:58 am
EB: Good question. Sounds like the firm is defined as a for-profit, privately held non-family business entity. In other words, maybe a family is behind it, but it has to have some sort of service aimed at making profits and is not identical to the family (e.g., there’s a boss and employee status in the group).
Re the church: Maybe you’re picking up on the church as a hybrid form. You are certainly right that the church, like any org in a monetarized economy, must remain afloat. And it also has absorbed profit seeking entities in it’s time. But that’s not quite the same as being completely organized around profit making or commodity production
fabiorojas
January 4, 2010 at 4:42 am
A “non-family” criterion would seem to leave out a lot of entities. The “for-profit” part is quite tricky, too: many entities got by as going concerns long before a modern conception of profit-making (and the accounting methods going along with that) were developed.
Kieran
January 4, 2010 at 3:18 pm
I mean “non-family” as in “they employ non family people for roles in production.” Maybe “market orientation” is better than for-profit, which is a bit modern.
fabiorojas
January 4, 2010 at 8:06 pm
I mean “non-family” as in “they employ non family people for roles in production.”
Yeah, I understand … but them you have the partly commercialized agriculture of a manorial estate, with peasants working the land for the owner? They’re not family, but neither are they properly employees, in part because there is no formally free labor, or necessarily much in the way of a cash economy. I don’t mean to be beating this question to death, btw, it’s just that it seems to bring up interesting Weberian questions about the necessary prerequisites for the emergence of rationalized capitalism, etc.
Kieran
January 4, 2010 at 8:30 pm
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