The paradox of family firm longevity: 700 years of Frescobaldi

Abstract

We discuss the paradox of family firm longevity using a transaction cost economics (TCE) perspective. Using an analytic narrative approach, we conduct a historical analysis of a 700-year old family firm and develop a process model explaining how high-longevity families economize on forces that threaten their business, i.e. changes in the macroeconomic and institutional contexts at the macro-level, and pressures to prioritize heritage assets and routines at the micro-level. We argue that history, documented and transmitted through generations, informs the practices of high- longevity family firms, which focus on long-term economic value creation. These practices entail, inter alia, entrepreneurial resource orchestration to adapt to contextual changes, building reputation to protect transactions, and implementing distinct mechanisms to economize on individual-level biases.