Image source; Pixabay via PexelsThe family business is the most frequently encountered ownership model in the world and their impact on the global economy is considered to be significant. Despite their great number, the academic and business community have yet to define uniformly what exactly constitutes a family business. The long-running debate has never garnered conclusive results. When defined as businesses that are majority-owned by a single family’s members, it is estimated that the total economic impact of family businesses to global GDP is over 70%. Discovering the additional means by which families contribute is the main purpose of the following overview that was created by consulting over 40 studies and including countries from all continents.

What we know about the economic impact of family businesses

Before diving into the facts and figures, let us review what is commonly known about family businesses and the contributions they make to their respective economies:1. Family businesses show higher profitability in the long run. 2. Family businesses are less likely to lay people off and more likely to hire despite the possibility of an economic downturn. 3. Family businesses are more likely to give charitably to their respective communities and engage in extensive philanthropic activities. 4. Family businesses have a more long-term strategic outlook due to their main motivation consisting of creating a legacy for generations to come. 5. Family businesses are less likely to raise debt and are widely deemed financially prudent.In spite of these promising qualities, it is also known that merely 30% of family firms make it to the 2nd generation and only a third because of that survive to the 3rd generation. Usually, family conflict is the impetus of this disappointing statistic. However, another factor may come into play. The institutional environment family businesses operate within may not always recognise their importance and do not provide much support. Therefore, while family businesses undoubtedly have an impact on the economy at large, the question is often raised of whether economic institutions are engaging enough to safeguard the survival of family-owned companies.

2014-05-01-family-business-global-overview3Measuring Impact - A Numbers Game

While the virtues of family business are often lauded, how much of their economic impact is duly measured? To fully grasp the sway these enterprises have on the world’s bottom line it is important to gather the figures available. The lack of a unified definition of what constitutes a family business however, makes this task increasingly difficult. For the sake of this article, a family business will be considered a company that is controlled and majority-owned by members of the same family. It is not possible to adjust all statistics to this definition, but for the most part national data will allow for such a business We have collected statistics based around the following indicators allowing for analysis that points to family businesses having a considerable impact on their respective economies:1. Percentage of family businesses in the private sector. (Fig. 1) 2. Percentage of workforce employment by family businesses. (Fig. 2) 3. Percentage of family business contribution to national GDP. (Fig. 3)By looking at these numbers we can begin to understand not only the importance of family businesses within their national economies, but also how crucial their survival is for the stability of various nations.

2014-05-01-family-business-global-overview1Importance by sector and size

The impact of family businesses can also be considered by economic sector. In the Netherlands for instance, the highest concentration of family-owned businesses can be found in agriculture. This constant for the Dutch can be found repeated in many other economies around the world. Another key pattern to consider is the high concentration of family ownership found among small and medium-sized enterprises in real economy sectors such as agriculture, manufacturing and construction. Among small and medium-sized companies, the percentages of family businesses can reach as high as 98% and the employment rate for family-owned SMEs is typically more than 65%.

Global gaps

There are considerable parts of the world where the role of family businesses is largely undocumented. Key regions such as Africa, the Middle East and large parts of Asia have long gone unstudied. The difficulty that results from having no accurate data on the role of family businesses in these economies in turn leads to a lack of understanding on how family businesses can expand their roles in supporting their economies and what aid can be provided by government institutions to enable their sustainability.

2014-05-01-family-business-global-overview4Better impact for the future

The bearing of family businesses on national economies is undeniable, however this influence is not uniformly documented. More efforts should be directed towards studying the contribution of family businesses in order to establish the proper institutional frameworks to support their longevity.Tharawat Magazine, Issue 22, 2014Sources:1) A BACKBONE FOR BAHRAIN, Campden FB, 20072) Financing challenges facing Bahrani Businesses, KMPG, 20143) Family-owned businesses - the backbone of India's economy, KMPG, 20134) Family Businesses at the Forefront of Global Change, IMD, 20115) Father-Daughter Succession in Family Business: A Cross-Cultural Perspective, Dr Daphne Halkias, Professor Celina Smith, 20126) CII Family Business Network India Chapter, CII7) The Family Business: Statistics, Profiles and Peculiarities, Business Focus of Manilla Bulletin, 20148) Family Business in Singapore Case Studies, CPA Australia & KMPG, 20139) The longevity of family firms in Japan, KMPG, 201410) Factors Dominating the Continuity and Declining of Family Businesses, International Journal of Academia Research in Business and Social Sciences, 201413) Family businesses in Pakistan share corporate governance stories, CIPE, 201114) Family Managed Businesses in India - The Opportunites And The Challenges, Center for Family Managed Business (FMB)15) Supporting Iraq's move to market economy, Swedish International Development Cooperation Agency, 201216) Intergenerational Survival of Family Businesses: Factors Affecting the Succession Success of Family Owned Businesses in Malawi, European Journal of Business and Management, 201317) Philippines' elite swallow country's new wealth, Inquirer Business, 201318) In Search of Good Governance for Asian Family Listed Companies: A Case Study on Hong Kong, Hong Kong Baptist University, 200719) In Japan, importance of family business opens up opportunities, Marketplace, 201220) Handbook of Family BUsiness and Family Business Consultation, Florence Whiteman Kaslow, 201221) Investigacion, Exaudi22) La Empresa Familiar En Chile Y El Impacto De La Cultura Latina, IDDE23) Empresas Familiares en Mexico, KMPG, 201324) Empresas Familares, Universidad de Malaga, 200925) Empresas Familiares: Lo primero es el negocio, KMPG, 201226) 5 claves para alagar la vida de tu empresa familiar, Forbes Mexico, 201327) Dia Internacional de la Empresa Familiar28) Importancia de las empresas familiares, Grandes Pymes, 201029) Pesquisa do Sebrae mostra que as empresas familares sao 90% do total, Ojornalde Hoje, 201230) Importancia economica da empresa familiar, Universidade de Passo Fundo, 200931) Empresas familiares geram 50% dos empregos no Brasil, CIC, 200732) Familias Empresarias en Chile: sus caracteristicas y aporte al pais, ESE Business School, 201233) Famiempresas: fuente importante de la economia colombiana, Cultura, 200834) Son el soporte de la economia, El Colombiano35) Empresas que generan mas riqueza son familiares, Consecomercio, 201236) El 90% de las empresas en el Peru son de tipo familiar, La Republica, 201337) El 79% del empleo en el Peru es informal, Peru21, 201438) Celebran Dia Internacional de la Empresa Familiar, infoNegocios, 201139) Empresas familiares: la discusion intergeneracional en los negocios, 5dias, 201340) Empresas Familiares en Ecuador, ESPA, 201141) Todo queda en familia, Vistazo42) Las empresas en Ecuador son familiares, El Comercio, 200743) Las empresas familiares representan el 90% de las companias costarricenses, lainformacion, 201344) Potencial Transgeneracional de una Empresa Familiar Puertorriquena a Traves de su Capacidad de Innovacion, UCA, 201345) Empresas familiares pueden afrontar la crisis con exito, Listin Diario, 200846) Empresas familiares y sus retos ante la crisis global, Blog Dominicano, 2010