Abstract
The practice of adopting adults, even if one has biological children, makes Japanese family firms unusually competitive. Our nearly population-wide panel of postwar listed nonfinancial firms shows inherited family firms more important in postwar Japan than generally realized, and also performing well - an unusual finding for a developed economy. Adopted heirs' firms outperform blood heirs' firms, and match or nearly match founder-run listed firms. Both and blood heirs' firms outperform non-family firms. Using family structure variables as instruments, we find heirs causing elevated performance. These findings are consistent with adult adoptees displacing blood heirs in the left tail of the talent distribution, with the adopted son job motivating star managers, and with the threat of displacement inducing blood heirs to invest in human capital, mitigating the so-called Carnegie conjecture that inherited wealth deadens talent.
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