All in the Family

MUNICH – Big economic crises often cause iconic companies to falter. Rupert Murdoch’s media empire is a model of the modern global enterprise. A particularly dynamic and innovative business model came from outside and took over central aspects of British and then American public life. That model is now threatened by the fallout from the scandal that started with phone hacking in Murdoch’s British press operations.

The Murdoch experience is a microcosm of how modern globalization works. Murdoch always looked like a foreign intrusion into British life. It was not just that he was Australian; he also brought new ideas.

In particular, the application of digital technology, introduced after a ferocious struggle with the powerful print unions, brought substantial cost savings and allowed a new era of journalism. Even more importantly, Murdoch represented a concept of family business that is common in many parts of the world, but relatively rare in Britain and the United States.

Family capitalism in the continental European model uses relatively little capital to achieve maximum control. It frequently depends on very complex corporate structures, with multiple layers of holding companies, as well as privileged shares that can guarantee the continuation of control.