Omar Bennett
Family-owned businesses are economic powerhouses that drive local, national, and global economies. They are the most frequently encountered ownership model in the world, and their impact on the global economy is tremendous. Family-owned businesses contribute more than half of the world's GDP and account for over 65% of its employment. In the US, family-owned businesses account for 54% of the GDP and generate 59% of the country's employment, accounting for 83.3 million jobs. However, the study of family businesses as an academic discipline is still in its early stages, and a universally agreed-upon definition of what constitutes a family business is lacking, making it challenging to measure their precise economic impact.
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What You'll Learn
- Family businesses account for 54% of US GDP and 35% of Fortune 500 companies
- Family businesses generate jobs and entrepreneurship, accounting for 59% of US employment
- Family businesses are the most common ownership model, constituting 90% of global enterprises
- Family businesses are stable and prosperous, especially in Europe, and contribute to social change
- Family businesses are innovative and adaptable, providing an enduring economic foundation worldwide
Family businesses account for 54% of US GDP and 35% of Fortune 500 companies
Family-owned businesses are economic powerhouses that drive local, national, and global economies. They are the most frequently encountered ownership model in the world, and their impact on the global economy is tremendous. Family businesses account for 54% of US GDP and 35% of Fortune 500 companies. There are 32.4 million family-owned businesses in the US, which generate 59% of the country's employment and account for 83.3 million jobs. They generate $7.7 trillion in GDP, with some sources citing a figure as high as $14.5 trillion.
Family-owned businesses are the backbone of the American economy. They comprise 90% of all business enterprises in North America. The greatest part of America's wealth lies with family-owned businesses. Many well-known brands stem from family-owned businesses, such as Walmart, owned by the Waltons, and Volkswagen, owned by the Porsche family.
Family businesses are important to the European economy, too, as they are the backbone of its economy. Between 65% and 80% of all European companies are family-owned, and they contribute, on average, more than 40–50% of all jobs in the European Union. In Germany, mid-sized firms ("Mittelstand") are predominantly family-owned and account for the country's largest percentage of economic output. They also employ most of the nation's workers. In South Korea, family-owned conglomerates such as Hyundai, Samsung, and Daewoo have played major roles in fuelling the nation's post-1950s growth.
In India, family firms generate 79% of the country's GDP and represent some of its largest and smallest companies. India is home to 15 of the world's 500 largest family enterprises. Family-owned businesses in the world's growth economies are at the forefront of their commercial development, regardless of size.
The study of family businesses is still in its early stages as an academic discipline, and there is a significant challenge in agreeing upon a standardised definition of what constitutes a family business. This makes it difficult to measure their economic impact accurately. However, it is clear that family-owned businesses have driven job creation and entrepreneurship over history. They are less likely to lay off employees regardless of financial performance, and they are able to positively affect resource inventory and usage, apply a long-term perspective, have fewer HR problems, and drive new entrepreneurial activity.
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Family businesses generate jobs and entrepreneurship, accounting for 59% of US employment
Family-owned businesses are the backbone of the American economy, accounting for 59% of US employment and 83.3 million jobs. They generate $7.7 trillion in GDP, with 32.4 million family businesses in the United States. Family-owned businesses are economic powerhouses that drive local, national, and global economies.
The study of family businesses is still in its early stages, and there is no universally agreed-upon definition of what constitutes a family business. This makes it challenging to measure their precise economic impact. However, it is clear that family businesses play a significant role in the US economy and beyond. They are the most frequently encountered ownership model globally, and their impact on the world economy is immense.
Family businesses are known for their ability to innovate and adapt to changing market conditions, making them a resilient and enduring economic force. They also contribute to social and environmental change, with the potential to advance global sustainability agendas and inclusive practices. The long-term perspective of family businesses allows for unique strategic positioning and a lower likelihood of layoffs, even during financial downturns.
The success and longevity of family businesses can be attributed to several factors. One key factor is the sense of connection and identity that owners and their family members feel with the business. This emotional investment often translates into strong ethical standards and a positive impact on resource inventory and usage. Additionally, the involvement of multiple generations in the business improves the environment for innovation and ensures the continuation of the family's values and wealth.
In conclusion, family businesses generate jobs and entrepreneurship, accounting for a significant portion of US employment. Their economic impact extends beyond job creation, influencing global prosperity and driving social and environmental progress. The unique characteristics and dynamics of family-owned businesses contribute to their success and lasting impact on the economy.
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Family businesses are the most common ownership model, constituting 90% of global enterprises
In the United States, family-owned businesses account for 54% of the country's gross domestic product (GDP) and generate 59% of its employment, equating to 83.3 million jobs. The 32.4 million family-owned businesses in the US contribute $7.7 trillion in GDP, with well-known companies such as Walmart, Berkshire Hathaway, and Cargill being among the largest family-owned enterprises.
Family-owned businesses are also prevalent in Europe, with Germany's "Mittelstand" (mid-sized firms) being predominantly family-owned and contributing significantly to the country's economic output and employment. In South Korea, family-owned conglomerates like Hyundai, Samsung, and Daewoo have been pivotal in the nation's post-1950s growth.
The impact of family businesses is particularly notable in India, where they generate 79% of the country's GDP and represent some of its largest and smallest companies. India is home to 15 of the world's top 500 family enterprises, including Reliance Industries, the 10th largest globally.
Family businesses have unique characteristics that contribute to their success. They tend to have a long-term perspective, fostering entrepreneurial activity and innovation. Families also have a strong sense of connection and identity with their businesses, influencing their ethical standards and strategic decisions. The transition of ownership to the next generation is a critical aspect of family businesses, with approximately 30% of family-owned businesses passing to the second generation, 12% to the third, and only 3% reaching the fourth generation or beyond.
The study of family businesses as an academic discipline is still evolving, and a universally agreed-upon definition of what constitutes a family business is lacking. However, definitions generally fall into two categories: structural definitions, focusing on ownership or management arrangements, and process definitions, emphasizing the level of family involvement in decision-making.
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Family businesses are stable and prosperous, especially in Europe, and contribute to social change
Family-owned businesses are the backbone of the economy, not just in the US but also in Europe and globally. They are the most frequently encountered ownership model in the world, and their impact on the global economy is tremendous. Family-owned businesses make up 90% of global enterprises, and in the US, they constitute 90% of all business enterprises.
In Europe, family-owned businesses have become synonymous with perpetual stability and prosperity, regardless of the economic climate. Germany's "Mittelstand" (mid-sized firms) are predominantly family-owned businesses, accounting for the country's largest percentage of economic output and employing most of the nation's workers. Europe maintains the largest share of family firms of any region. According to European Family Businesses (2017), there are over 276,000 family-owned businesses in the Netherlands. Between 65% and 80% of all European companies are family-owned, and they contribute more than 40-50% of all jobs in the European Union.
Family-owned businesses are also the primary drivers of social and environmental change, with a universal impact. They could play a pivotal role in advancing global sustainability agendas, ESG investing strategies, and inclusionary practices that could redefine success metrics. Their ability to innovate through complex market uncertainties and evolve in shifting business ecosystems makes them an enduring economic foundation for most of the world's nations.
Family-owned businesses also contribute to the continuity of values across generations. The mean age of family control in the family's core company is 60.2 years, and more than 30% of all family-owned businesses make the transition to the second generation. Only about 12% of family-owned businesses remain viable into the third generation, and a mere 3% operate at the fourth-generation level and beyond. However, the tenure of leadership in a family enterprise is four to five times longer than in non-family firms.
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Family businesses are innovative and adaptable, providing an enduring economic foundation worldwide
Family businesses are a vital part of the global economy, and their adaptability and innovative spirit contribute significantly to their enduring success. While the exact percentage of the economy constituted by family businesses is challenging to pinpoint due to varying definitions and a lack of standardised criteria, it is evident that they form a substantial portion. In the United States, for instance, family businesses account for 54% of the gross domestic product and generate 59% of employment, translating to 83.3 million jobs.
Family enterprises are known for their adaptability and ability to navigate changing market demands. Their structure, with fewer stakeholders and rigid processes, enables quick decision-making and a nimble approach to innovation. This adaptability was highlighted in a study by De Massis et al. (2015a, 2015b), who found that family firms' existing organisational structures allowed them to be responsive to critical needs and adapt swiftly to project requirements. This agility is further enhanced when more generations of the owning family are actively involved in the business, fostering an environment conducive to innovation.
The success of family businesses can also be attributed to their long-term perspective and strong sense of connection to the company. This long-term outlook allows for unique strategic positioning and investments in projects that may not yield immediate returns. Additionally, the desire to preserve the business for future generations can foster a culture of innovation. For instance, Herr's Potato Chips, a small player in an industry dominated by giants, leverages its agility and focus on unique products to introduce 5-10 new snacks annually, continuously expanding its product line.
The unique management structure of family businesses also contributes to their adaptability and innovation. In family enterprises, management and ownership often overlap, facilitating swift decision-making and efficient resource allocation. This structure is evident in Enterprise Rent-a-Car, the world's largest rental car company, which is owned and operated by the Taylor family. Their innovation extends beyond their business model to their human resources practices, attracting college graduates with incentive compensation and providing upward mobility.
Family businesses provide a solid economic foundation worldwide, and their adaptability and innovation are key factors in their resilience and success. Their long-term vision, coupled with a sense of ownership and connection, fosters an environment conducive to strategic risk-taking and unique product development. While the exact percentage of their contribution to the economy may vary, family businesses undoubtedly play a pivotal role in driving local, national, and global economies.
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Frequently asked questions
Family businesses in the US contribute to about 54% to 64% of the country's GDP. They also account for 83.3 million jobs, or 59% of the country's employment.
Family businesses make up 65% to 80% of all European companies and contribute more than 40% to 50% of all jobs in the European Union.
Family businesses generate 79% of India's GDP and represent some of the country's largest and smallest companies.
Family-owned businesses make up 90% of global enterprises and contribute more than 50% of global GDP. They also account for over 65% of global employment.
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