Study on Family Businesses

The Family Firm Institute, a global association of researchers and advisers, conducted a three year study on family owned businesses. The investigators reviewed a 1987 study that found only 30% of family companies survive to the second generations, and only 13% make it to the third generation. However, the researchers at the Family Firm Institute discovered that previous studies (including the 1987 study) did not adequately address the importance that risk taking and innovation have on a family business’ longevity and entrepreneurship.

The three year study found that almost 90% of the families studied owned multiple businesses. The researchers determined that the end of one of the family’s businesses did not necessarily put an end to the other family businesses, indicating that even successful family businesses have “failures” in their history. The study indicated that the family, not the firm, is the key wealth creation vehicle in a family business. Additionally, the researchers found that advisers and owners of a family business should focus on the sustainability of the family wealth and not on the longevity of a particular family venture.  

See Barbara Spector, Family Business Longevity Examined in a New Light, Family Business (Autumn 2011).  

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.