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Family businesses might come to dominate the business world

In the ever-evolving economic landscape, family businesses may often be seen as standing as unassuming beacons of resilience and endurance

By: EBR - Posted: Monday, February 12, 2024

The family business works. Contrary to a fairly widespread popular perception of family business as economically marginal, over 50% of U.S. GDP comes from family businesses.
The family business works. Contrary to a fairly widespread popular perception of family business as economically marginal, over 50% of U.S. GDP comes from family businesses.

by Radu Magdin*

In the ever-evolving economic landscape, family businesses may often be seen as standing as unassuming beacons of resilience and endurance. Despite not always commanding the same attention as their public counterparts, they hold a trove of invaluable lessons for the wider business community because these businesses, which can range from the local grocer to vast multinational corporations, embody the principles of long-term sustainability and fostering lasting relationships.

While family businesses may not always occupy the limelight, their influence on the wider business community can be profound, as demonstrated in the recently launched report authored by me and my colleagues at Smartlink Communications, with the support of Banca Transilvania. Embracing the lessons they implicitly impair can empower businesses of all sizes to navigate the complex and ever-changing world of commerce with a blend of tradition and innovation, values and adaptability, relationships, and continuity.

That, in turn, allows family businesses to lend a few tips to the wider business world and I summarised them in fourpotentially seminal insights.

The family business works. Contrary to a fairly widespread popular perception of family business as economically marginal, over 50% of U.S. GDP comes from family businesses. It is often more abroad – by some estimates, a few South Korean families control almost 75% of South Korean GDP.

People trust family business. While to a declining degree, surveys suggest that people trust family businesses more than both state-owned enterprises or publicly held multinationals. In other words, simply being perceived as a family business might come with its own public relations benefit and while it would be close to spurious to see this as an explanatory variable, it might very well inform a company’s next public relations campaign.

Family business yields better returns. Perhaps in a counter-intuitive manner, publicly listed companies where a family retains a significant share of the business may actually deliver better returns on the equity market than publicly listed companies, at least where large companies are concerned. It remains to be determined why this is the case, but the statistical advantage seems to be very much there, and investors might take that into account.

Family business dominates emerging markets. As emerging markets come to play an increasingly important role in global markets, so do the family businesses that dominate them. Already, family businesses represent the vast majority of large businesses in Southeast Asia, a majority of large businesses in India, Eastern Europe, the Middle East, and Latin America. As these regions gain relative prominence, the global business landscape may come to be increasingly dominated not by the publicly listed companies that we have come to associate with it but by family business.

Global family businesses have been an integral part of the economic landscape for centuries – and will, at the very least, be so in the future. In fact, there is every indication that family business might actually come to dominate the business world. As such, family businesses stand ready to offer a few lessons to businesses in general: quaintness as PR tools can pay off, family ties are a core economic force as strong as any, and, not least, the future may very well be dominated by traditional family companies.

*CEO Smartlink Communications, EU Affairs and Global Operations

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