Partner Content by Global Entrepreneurship Monitor (GEM)
The family is the basic social unit for every person across every culture and country. Nearly all individuals live with families, in one form or another. A new Global Entrepreneurship Monitor report authored by Babson College professors Donna J. Kelley, William B. Gartner and Mathew Allen looks at the family’s contribution to entrepreneurship across the world. Across 48 economies participating in this report, 75% of entrepreneurs indicated that their family was involved in starting their businesses, either as co-managers and/or co-owners. These are family entrepreneurs.
Given that most established businesses are family businesses, one might ask whether most businesses that are started are created through the involvement of families.
The academic consensus is yes (Aldrich and Cliff, 2003), although empirical evidence is limited. The GEM Family Entrepreneurship Report provides insights into family involvement with entrepreneurship and the ownership/operation of businesses after the business creation phase.
The following are select key results from the report:
Rates of Family Involvement in Entrepreneurship
» In East and South Asia, Thailand shows the highest total entrepreneurial activity (TEA) rates in the region, with essentially all entrepreneurs involving family. Japan, Taiwan and China have the lowest proportion of family involvement in the entire sample, accounting for little more than 40% of TEA.
» In Europe and North America, family involvement ranges from 54% in Turkey to 90% in Poland.
» In every participating Latin American and Caribbean economy, over three-fourths of entrepreneurs involve family in their startups.
» In the Middle East and Africa, more than three-fourths of entrepreneurs involve family in the high-TEA economies of Angola, Lebanon, and Sudan.
» The highest necessity motives among family entrepreneurs can be found in two low-income countries: Egypt (50%) and India (46%). On the other hand, Poland, Sweden, Switzerland, Luxembourg, Netherlands and the United States—all high-income economies—report necessity motives of 10% or less among family entrepreneurs.
Forms of Family Involvement in Entrepreneurship
» The most common form of family entrepreneurship is co-management without co-ownership. High proportions of this ownership form, around 85% or more of TEA, prevail in four economies from different regions: Madagascar, Panama, Indonesia, and Poland. Conversely, China reports only 12% co-management without co-ownership.
» The next most prevalent form is co-ownership with co-management. This form characterizes more than one-third of entrepreneurs in Colombia, Uruguay, and the United Arab Emirates, but less than 5% of TEA in the Republic of Korea.
» It is uncommon for entrepreneurs to co-own but not co-manage with family. Many economies (Thailand, Puerto Rico, Bulgaria, United Kingdom, Russian Federation, Cyprus, and France) did not show evidence of this form. The highest level could be seen in Argentina (18%).
Rates of Family Involvement in Established Business Activity
» The proportion of established business ownership involving family in East and South Asia shows similarities to what is observed with TEA. All established business owners in Thailand and 94% in Indonesia indicated they involve family. On the other hand, this accounted for a minority of established business activity in China (30%).
» Neighboring countries in Central Europe (Slovenia, Slovak Republic, Poland and Croatia), as well as Bulgaria, report over 90% of established business ownership involves family.
» In Latin America, family involvement in established business activity is proportionately high in Argentina (92%) and accounts for nearly all established business activity in Panama (99%).
» In the Middle East and Africa, a notable contrast exists in Madagascar and Lebanon, both with established business rates of 22%. In Madagascar, 97% of this activity involves family, but less than 70% involves family in Lebanon.
Forms of Family Involvement in Established Business Activity
» Close to 40% or more of established business activity in every economy involves family as co-managers but not co-owners, with the exception of China, where it accounts for only 9%. Nearly all established business owners in Panama (95%) and Madagascar (94%) have family members managing with them, although they are either sole owners or have non-family partners.
» Established business ownership with both co-ownership and co-management accounts for around 30% of established business activity in Luxembourg, the United Arab Emirates and Canada. In contrast, 4% or less of this form exists in the Republic of Korea, Indonesia, Israel, Panama and Madagascar.
» Family co-ownership without co-management is rare, with no indication of this form in Thailand, Indonesia, Panama, Peru, Guatemala, Israel, Lebanon, Sudan, and the Russian Federation.
Job Creation in Family Entrepreneurship and Established Business Ownership
» Across the 48 economies, 57% of family entrepreneurs, on average, expect that the majority of their employees over the next five years will be family members. Among established business owners, 62% state that the majority of their current employees are family members.
» On average (unweighted) across the 48 economies, nearly 8% of family entrepreneurs have already, in this early stage, employed more than five people in their businesses. Among family established business owners, 20% employ more than five people.
» With regard to job creation expectations, 19.5% of family entrepreneurs expect to hire more than five new employees, while 9.5% of family established business owners make this prediction (unweighted average in 48 economies).
» In economies that have high proportions of family entrepreneurs with more than five current employees, they will also have this level of employment among family established business owners. A similar strong relationship can be seen with growth expectations.
» In economies where there is a relatively high proportion of entrepreneurs and established business owners who currently employ more than five employees, there are also likely to be high expectations for job creation.
Download the full report here. You can also watch the report launch webinar recording featuring Babson Professors Matt Allen and William B Gartner, Tharawat Magazine’s Editor-in-Chief Ramia El Agamy and GEM Executive Director Aileen Ionescu-Somers.