Many wealthy merchants in the Edo period subscribed to the ideology emphasizing “family survival” as their management goal and made family precepts summarizing business principles toward this to pass on to their descendants. Many studies, till date, on the management of long-lived companies, including the family precepts of their ancestors, have attempted to identify their reasons for longevity and apply the learning to modern corporate governance. However, there is little research on how the ideology was generated and established. In this study, we apply the finite-term overlapping generation model to discuss how a merchant in each generation managed their inheritance to maximize their utility. In the model, we assume that wealthy merchants’ utility depends on their consumption and their progeny’s utility, and introduce a new parameter representing the degree of empathy the predecessor has toward their successor. Family precepts must have been elaborated to assure wealthy merchants' optimal mechanism of inheritance. Our result suggests that family precepts are key to determining the extent and duration of a merchant family's prosperity. In conclusion, if wealthy merchants establish family precepts that are steadily passed on to their descendants, the ideology emphasizing “family survival” and a commitment to frugality and thrift, the family will last long and prosper. Our results reinforce the conclusion of previous studies that family precepts had a significant role in the family's survival and the development of its human resources.
JEL Classification N85・D90