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International Family Enterprise

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Projekti Ihmiset Yrityksille
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"Enabling Internationalization Excellence for Family Enterprises"

IFE, 2017

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On the Importance of Family Enterprises

Some family enterprises do not want to be labeled as family enterprises. The reason for it might be the lack of respect there used to be for this type of firms. Recently, the focus in many societies has been on high-growth firms, which are without doubt important and fascinating stories. However, at the same time, the largest group of firms, the ones growing slower, slowly, or not at all, making more than 95% of the firm population, have achieved much less attention. I think this really needs to be fixed, and there needs to be more focus on firms with slower growth, such as family enterprises.

The family actually is the original economic unit, and from family enterprises are derived all other economic organizations (Schulze & Gedajlovic, 2010). As recently as the start of the 20th century, all businesses were family-owned: the presence of the family in the business was taken for granted, and there was thus no need to label a business as a family business. Later on, this seems to have been forgotten and being a family enterprise became less fancy.

Family enterprises actually form the majority of all firms around the world: about 85% of all the firms in the EU and USA (EFB, 2012) and an even a greater proportion in the developing countries are family-owned. Furthermore, they account for an enormous percentage of the employment, the revenues, and the GDP of most capitalist countries. Hence, these firms really need specific attention and actions from politicians as well as more understanding from consultants and also family entrepreneurs and members could have more understanding of their unique features.

Indeed, family enterprises have for a long time been a neglected group of firms attracting very little attention and appreciation (cf. European Commission, 2015). As of now, their value as a an engine of stability and long-term growth and prosperity, simultaneously acting as natural incubators of an entrepreneurial culture, fostering the next generation of European entrepreneurs, has been finally recognised and tools to help them have been hoped for on a European Commission level.

Family firms have been little present in academic research too. It was only at the start of the present millennium that the merits of family firms start to be re-evaluated in top-tier management journals. Management researchers have tended to be particularly positive about family governance (Schulze & Gedajlovic, 2010). The unification of ownership and management enables the CEO to make opportunistic investments and/or rely on intuition. Hence, family firms have the potential to adapt to changing environments, launch products and enter markets that investor-controlled or managerially-led firms are unable to address (Dyer & Whetten, 2006). In adverse economic conditions, family firms have been found to sustain more profitable businesses than firms with other ownership structures (Sirmon & Hitt, 2003). Furthermore, although it was long thought that large multinational corporations had an overwhelming position in international business, it has recently been recognized that substantial numbers of entrepreneurial and family firms are active in the international arena (Casillas & Acedo, 2005).

There is no doubt family enterprise might be the most important form of organization, at least when the history is taken into consideration. In this research project, we want to enable internationalization excellence for family enterprises. Please start following our blog (we will be sharing e.g. fresh managerial take aways suitable for family enterprises  in our monthly blog texts) and our accounts in Facebook and Instagram.

Proud of family enterprises and honoured for the chance to study and help them!

Yours sincerely,

Tanja Leppäaho and the research team

Casillas, J.C. & Acedo, F.J. 2005. Internationalisation of Spanish family SMEs: an analysis of family involvement. International Journal of Globalisation and Small Business 1 (2), 134-151.

Dyer, W.G. & Whetten, D.A. 2006. Family firms and social responsibility: preliminary evidence from the S&P 500. Entrepreneurship Theory and Practice 30, 785-802.

EFB, European Family Businesses (2012). Family Business Statistics.

European Commission (2015). Information on family businesses in Europe.

Schulze, W.S. & Gedajlovic, E.R. 2010. Whither Family Business. Journal of Management Studies 47 (2), 191-204.

Sirmon, D.G. & Hitt, M.A. 2003. Managing resources: Linking unique resources, management, and wealth creation in family firms. Entrepreneurship Theory and Practice 27 (4), 339-358