Families own and manage the majority of businesses worldwide, according to new family entrepreneurship data. Seventy-five percent of entrepreneurs and 81% of established business owners co-own and/or co-manage their businesses with family members. Additionally, 62% of established business owners state that the majority of their current employees are members of their family.
These are among the findings of the first 2019/2020 Global Entrepreneurship Monitor (GEM) Family Entrepreneurship Report, produced and released by Babson College.
“Family business scholars and practitioners have long argued that discussions of entrepreneurship should include family entrepreneurship,” said Babson Associate Professor Matt Allen, co-author of the report and Faculty Director for the Institute for Family Entrepreneurship at Babson College. “This report shows us that discussions of entrepreneurship are, in fact, discussions of family entrepreneurship.”
“From a policy standpoint, these findings also underscore how critical it is that policymakers support the entrepreneurial leadership and ambitions of families, especially as they continue to face the negative business consequences of COVID-19, and are such a driving force behind business and job creation worldwide,” said Allen.
Babson’s Institute for Family Entrepreneurship (IFE) is an example of the College’s continued commitment to family entrepreneurs. Of IFE’s many programs, its unique Family Entrepreneurship Amplifier course engages students and their families early in their Babson career in order to develop entrepreneurial competencies to develop and sustain entrepreneurship from one generation to another.
“Our strategic approach is to support the families of the entrepreneurs that we work with, to bring them into the conversation, and to help them develop knowledge and skills,” said Lauri Union, executive director of IFE. “When we help families strengthen their relationships and how they function, we effectively prepare them to act entrepreneurially together.”
Rates of Family Involvement in Entrepreneurship
- In East and South Asia, Thailand shows the highest total entrepreneurial activity (TEA) with all established entrepreneurs involving family.
- In Europe and North America, family involvement ranges from 54% in Turkey to 90% in Poland.
o In every participating Latin American and Caribbean economy, over three-fourths of entrepreneurs involve family in their start-ups.
- The highest necessity motives among family entrepreneurs can be found in two low-income countries: Egypt (50%) and India (46%). On the other hand, Poland, Sweden, Switzerland, Luxembourg, Netherlands, and the United States—all high-income economies—report necessity motives of 10% or less among family entrepreneurs.
Forms of Family Involvement in Entrepreneurship
- The most common form of family entrepreneurship is co-management without co-ownership. Four economies from different regions show 85% or more TEA in this ownership form. Conversely, China reports only 12% co-management without co-ownership.
- It is uncommon for entrepreneurs to co-own but not co-manage with family. Many economies (Thailand, Puerto Rico, Bulgaria, United Kingdom, Russian Federation, Cyprus, and France) did not show evidence of this form. The highest level could be seen in Argentina (18%).
Rates of Family Involvement in Established Business Activity
- Neighbouring countries in Central Europe (Slovenia, Slovak Republic, Poland, and Croatia), as well as Bulgaria, report over 90% of established business ownership involves family.
- In Latin America, family involvement in established business activity is proportionately high in Argentina (92%) and accounts for nearly all established business activity in Panama (99%).
Forms of Family Involvement in Established Business Activity
- Close to 40% or more of established business activity in every economy involves family as co-managers but not co-owners, with the exception of China, where it accounts for only 9%. Nearly all established business owners in Panama (95%) and Madagascar (94%) have family members managing with them, although they are either sole owners or have non-family partners.
- Established business ownership with both co-ownership and co-management accounts for around 30% of established business activity in Luxembourg, the United Arab Emirates, and Canada. In contrast, 4% or less of this form exists in the Republic of Korea, Indonesia, Israel, Panama, and Madagascar.
Job Creation in Family Entrepreneurship and Established Business Ownership
- Across the 48 economies, 57% of family entrepreneurs, on average, expect that most of their employees over the next five years will be family members.
- On average (unweighted) across the 48 economies, nearly 8% of family entrepreneurs have already, in this early stage, employed more than five people in their businesses. Among family established business owners, 20% employ more than five people.