From Communism to Capitalism – How Family Firms Transformed Poland

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Capitalism that is driven by private enterprise and self-balancing markets, as world history shows, has evolved over centuries and has been flexible enough to fit various cultural systems. Centrally controlled economies were established in Eastern Europe and in parts of Asia as a brutal political experiment in the late 1940s. At the foundation of this economic system lay the suppression of private enterprise and the exile of capital owners. For almost half a century industrial private property was banned in all Eastern European states, yet in some countries, including Hungary and Poland, small craftsmanship and small plot farming were tolerated.

Even if initially nobody said it: freeing entrepreneurial initiatives and granting legal guarantees to private property meant restoring the basic preconditions for capitalism. When in 1989 the first post-communist government declared the freedom of economic life, thousands of Poles launched their enterprises investing their savings and borrowings in start-ups. Soon the number of private enterprises increased almost from zero to 0.5m entities and in the late 1990s, it reached 2,5 m registered firms which, for obvious reasons, predominantly were small and very small. The number of firms in Poland oscillates around 3 million, creating a relatively dense entrepreneurial tissue.

Initially, most of these newly founded enterprises were active in retail and wholesale trade. They have dominated this sector easily as the government policy dismantled the large state-owned internal and foreign trade companies. Small trade firms were facilitated by the privatisation of real estate in urban centers and other localities.

After a period of rapid expansion of the private sector, the beginning of the 21st century brought a time of qualitative growth and differentiation of private business activities with larger privately founded companies active in all areas of the economy.

Poland and its family firms

It is not an exaggeration to say that family firms have been crucial in the successful rebirth of Polish capitalism, although this fact has not been widely recognised. In fact, in a traditional society such as that of Poland, the family is the main source of financial and manpower support for almost all entrepreneurial activities. Thus, if 97% of all existing businesses are small firms created by entrepreneurs with the support of their families, they are in effect, family firms. Being de facto family firms, the Polish private enterprises have learned to recognise themselves as such. If in 2001 just 13% of small firms defined themselves as family firms. By now this percentage approaches 40%, being still smaller than the EU average with 71% of small firms calling themselves family firms.

The growing visibility of family firms in Poland has three drivers: Firstly, some large privately owned companies (like Fakro of the Florek family, Koral of the Koral family or Wisniowski of the Wisniowski family), have started to identify their family legacy which has encouraged others to follow suit. Secondly, the passage of time has forced the founders to prepare the enterprises for the succession of management and ownership and these circumstances have required taking into consideration the relationship between family and enterprise. Thirdly, the Polish government supports awareness programs aimed to encourage entrepreneurs to anticipate their retirement or exit in such a way as to preserve the public value of the company. The combination of these factors provides an increasing visibility to the reality of family firms in Poland.

The number of family firms in Poland and their economic weight is largely a matter of definition, but one can say, following the estimates of Lukasz Sulkowski that “family businesses are about 50% of all business entities, and that they generate about 40% of GDP, generating about 50% of all workplaces”.

The importance of family firms becomes apparent when one looks at the leading businesses in all sectors of the economy, except in energy production. For instance, Comarch – the leading software engineering firm is a property of the founder Janusz Filipiak and his family, Mokate – a leader in the production of cocoa and coffee drinks is the business of Mokrysz family; ES-System K – the fast growing refrigeration equipment producer was founded and is controlled by the Konsor family; Inglot cosmetics was launched and is developed by the Inglot family; Inpost – the biggest independent nationwide postal service provider was found by the Brzóska family; the largest producer of windows in plastics Oknoplast, was created and developed by the Placek family. And these are only a few of many examples.

If small family firms are omnipresent, the new and important economic phenomenon in Poland are medium- and large-sized family-owned companies. Their performance has become an important consideration to the country’s economy. These companies have acquired some scale, organisational complexity, became professionalised in management and are capable of becoming important players in larger business operations. Some of them, like for instance Buma Construction Group and Inglot, have smoothly passed through the succession of management and ownership although hit by the sudden deaths their founders and main shareholders.

In one generation the principles and the main actors of the Polish economy have been entirely reversed and the country has moved from the central command and impersonal state ownership to the market rules with family-faced identity capital.