Why publicly listed family-controlled firms grow faster

The bulk of the public groups covered involved companies of Anglo-Saxon origin (US, UK, Canada, Australia and New Zealand; 43%), followed by continental Europe (39%), Asia (12.5%) and the rest of the world (5.5%). The largest single batch of companies – some 22% – were from the US. More than half the overall sample were in industry, consumer goods, or the consumer services sector (57%), with the rest covering basic materials, healthcare, oil and gas, technology and communications and utilities.  

Having developed a model of family firm growth, this was then tested across different settings, providing relative and absolute firm growth proxies using net sales and total assets to account for the diversity in growth measurements. Additionally, an overall index of country-level governance was adopted, based on World Bank indicators, along with individual dimensions of the index to capture the heterogeneity of institutional environments. A variety of more sophisticated filters and techniques were also harnessed to avoid anomalies and reinforce the robustness of the findings.  

The conclusions  

The analysis showed that family firms on average grew 2% more than non-family firms, supporting the “transgenerational” approach.  

The research also revealed that a positive country-level institutional environment of democratic freedom, government effectiveness, corruption control and political stability provided an extra growth boost. Facing political instability or legal uncertainty, family owners in such environments might be inclined to cash in. Neither today’s Lebanon, for example, or eastern Ukraine, to take but two examples, would appear ideal for longer term investment planning. Likewise, political or legal uncertainty in Russia, China or even Turkey might deter even tycoons from taking the plunge. By contrast, the research showed that stable conditions, including trust in the rule of law, encouraged longer term thinking, reflected in even higher growth rates of close to 3% for private companies in such circumstances 

Some limitations 

The authors recognized that, while fascinating, the study would have been even more rewarding had it covered entirely private companies. Both recent academic research and regular media reports suggest purely private companies regularly achieve superior growth because of a focus – some might say obsession – with the long term. Many such private owners – take Swiss luxury watchmakers or private banks – speak proudly about thinking in terms of generations, not years. Acknowledging the interest, the authors note such an extension of their work was prevented by the lack of suitable data.  

They also encourage colleagues to investigate comparing organic versus acquisitive growth at family companies, or growth rates among small- and medium-sized enterprises at different stages of their development. And they note that growth rates could be affected by the personal characteristics and backgrounds of family and non-family managers (education, age and professional experience, for example), as well as governance qualities such as executive pay, the composition of the board and its functioning.  

One recent study has argued that involving non-family members in management increases family members’ prioritization of economic goals, including growth. Other research suggests incentivised pay matters more for the productivity of family than nonfamily firms – though this is disputed by others, with some business academics suggesting incentive-based pay matter less for the innovation performance of family firms, thereby potentially constraining their growth.  

Whatever the reality, it is clear family companies offer a rich opportunity for further study around the world.  

This article is based on Family Business Growth Around the World, by Ivan Miroshnychenko, Alfredo De Massis, Danny Miller and Roberto Barontini. The research was first published in Entrepreneurship Theory and Practice 2021 Vol 45(4) pp 682-708 (doi.org/10.1177/1042258720913028).