The Power of Family Capitalism During the Pahlavi Period, 1940s-1970s

The main objective of this paper is to analyze the key features of family firms in Iran that contributed towards their success in the 1940s-1970s. The paper will set out to probe the power of seven leading family firms, namely the Ladjevardi and Ladjevardian families (Behshahr Industrial Group), Barkhordar brothers (Pars Electric Company), Irvani family (Melli Industrial Group), Khayami brothers (Iran National Company), Arjomand brothers (Arj Industrial Group), Khosrowshahi family (Minoo Industrial Group), and Khosrowshahi brothers (Tolidaroo Industrial Company). The evidence of recent case studies on these family firms indicates that they were at the heart of Iranian private sector and played a significant role in the development of Iranian capitalism. The paper claims that not only were they suited to the early stages of Iranian business in the 1940s, they would also have survived in the following steps of the development of Iranian capitalism, had it not been for the confiscation of their wealth by the revolutionary state in 1979.
The paper argues that they provided trust among their members and made loyalty of their managers to the head of family. The latter feature helped them to resolve the greatest problem of the growing companies, known as agency problem. The paper discusses the way they reduced the potential conflict of interest between the owners and professional managers. In order to explore this feature, the paper will pay particular attention to their internal dynamics and their "familyness", which each of family firm developed a unique method and a distinctive way of utilizing it. In addition, the paper will discuss how the family features of these companies was one of the most successful components of industrialisation strategy in Iran during 1963-1968. The paper will also explain why these companies were in harmony with this strategy. However, the paper will also analyze the reasons why the structure of these family firms prevented the establishment of a powerful and independent interest group: Iran Chamber of Commerce.
The development the Iranian economy in the 1970s could not push family companies to the margins of the economy and they remained at the heart of business by holding on to the most prominent businesses. Finally, the paper will discuss how the family business - as the real engine of Iran's private sector - drove the country towards a type of capitalism different to that of the West.