Special Report on Family Business in The Economist: What You Need to Know

family-business_office-picFar from declining, family firms will remain an important feature of global capitalism for the foreseeable future, argues Adrian Wooldridge.“

So begins a recent special report on family businesses published by The Economist.

The introduction to this report recalls the “starring role“ family companies have played in the development of capitalism, citing the inherent advantage of the “two most important ingredients of growth, trust and loyalty,“ and instrumental families we all recognize: the Rothschilds, Fords, and Versaces to name a few.

Recognizing that this kind of historic and economic impact of major family companies has been well documented, the report makes the case that the influence and impact of family companies is still one of the most important forces for economic growth around the world today. The Economist seems to agree with a concept David Landes first laid out in his book, Dynasties, asserting: “You could write a respectable history of capitalism through the lens of family histories. You could write an equally respectable survey of the state of modern capitalism by telling the story of a dozen family firms.“

Further, the Economist writes:

“This special report will argue that family companies are likely to remain a significant feature of global capitalism for the foreseeable future, thanks to a combination of two factors. Family companies in general are getting better at managing themselves: they are learning how to minimise their weaknesses while capitalising on their strengths. At the same time the centre of the modern economy is shifting to parts of the world—most notably Asia—where family companies remain dominant.“

Why is this significant for the families and businesses we serve here at Family Business Matters?

We want to help your family business continue to grow and succeed in the modern economy. We want […]

Top Ten Family Business Facts | Fact #1: Economies Around the World Depend on Family Businesses

Economies around the world depend on family businessesDid you know that the success and growth of your family business matters to many people? In fact, your country’s economy may depend on it.

Statistics show that family businesses are predominant throughout the world (López de Silanes, La Porta, & Shleifer, 1999) and contribute the most to the growth of worldwide economies. For more details, read Family Firm Institute’s Global Data Points article.

A recent study by Memili et al. (2015) examines the impact of the prevalence of Family Small and Medium-Sized Enterprises (SMEs) on economic growth at the state level in the USA. It suggests that the proportion of Family Small and Medium-Sized Enterprises (SMEs) will have an inverted U-shaped relationship with economic growth. Stated differently, there is an optimum level of Family Small and Medium-Sized Enterprises (SMEs) in a local economy. Up to that point, which is about 42.8 % of the Small and Medium-Sized Enterprises (SMEs) population, an increasing proportion of family firms have a positive influence on economic growth. However, beyond that point, more and more family firms in the economy appear to reduce economic growth.

Lesson #1: A balanced combination of family and non-family Small and Medium-Sized Enterprises (SMEs) is more conducive for maximizing economic growth than either type of business. Therefore, your family business plays an active part in promoting your country’s economy.

To review the full Top Ten Family Business Facts by Rania Labaki and to access a list of original resources, please visit our Family Business Facts page.

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