Family Enterprises—Shaping Societies More Than Ever

NOV-DEC 2016|BY DR. PETER VOGEL
Family-controlled enterprises are among the most important institutions around the world. Estimations say that at least two-third of all enterprises worldwide are family-controlled enterprises.

These family enterprises account for 50-80% of jobs in the majority of countries worldwide (European Family Businesses, 2012) and combined create more than 70% of the world’s GDP (FFI, 2016).

Why are family-controlled enterprises so successful? There are many reasons, but here are a few key points. They…

… take a more long-term strategic perspective

… have very high bars for capital expenditures

… are less likely to raise debt

… oftentimes have a superior corporate culture and manage to retain their employees

… are quite resilient to economic fluctuations due to financial buffers which they create during good economic times

… have entrepreneurial founders who instill their entrepreneurial drive and vision in the next generation

… oftentimes have a highly diversified portfolio

The economic and societal impact of family enterprises is tremendous and has, until recently, been underestimated. A study conducted by the Tharawat magazine found that family-controlled businesses show higher profitability in the long run, are less likely to lay people off in times of economic crisis and are more likely to give charitably to their community (e.g., in the form of foundations or the support of art and culture in a region). Hence, one can conclude that family-controlled businesses are an essential cornerstone to the economy and society.

Reference:

  • European Family Businesses. Family Business Statistics. 2012.
  • FFI (Family Firm Institute). Global Data Points. 2016.
  • Tharawat Magazine. The Economic Impact of Family Businesses. Issue 22. 2014.

Dr. Peter Vogel (www.petervogel.org), Entrepreneur, Director Custom Programs at the Executive School of the University of St. Gallen, and Associate Partner of the Cambridge Family Enterprise Group.  Follow Peter on Twitter: @pevogel

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