‘Family-owned businesses have better survival rates’

Better awareness and education can increase survival rates of family businesses, according to Paolo Morosetti of Boconni University.

Better awareness and education on family businesses are expected to increase their survival rate, according to Paolo Morosetti, senior lecturer, Entrepreneurship and Family Business, Boconni University, Italy.

Mr. Morosetti, who visited the Darbari Elders Home, a community sustainability initiative of Ekki Water Technologies in Coimbatore recently, told The Hindu that research and studies on family businesses took off in the 1970s and 80s and the findings of these studies are now being applied to businesses.

Legal frameworks for family businesses were “extremely important” and several countries had such legal contours, covering areas such as governance and current and future ownership. These ensured that the focus was on the business.

Mr. Morosetti emphasised that in order for entrepreneurs to pass on their businesses to their children, they should focus on innovation to keep the family united, provide guidance and support to the next generation, and establish internal funds to create opportunities for future generations. This approach would alleviate the pressure of succession. He stated that family businesses prioritise ownership rather than the size of the business. The challenge lies not only in succession but also in attracting new family talent. Successful businesses that reach the third generation have established effective governance for the organisation.

The next generation should be brought in early and there should be continuous dialogue with them to incorporate their views into the business. Some businesses had the capacity to self-fund in order to scale up. However, if the business was capital-intensive, it faced problems, he added.

Every country has successful family businesses. The longevity of businesses was unique to family-run enterprises in Japan. In north European countries, large families were able to manage their businesses. In Italy, family businesses were largely in the sectors of food, fashion, and beverages. In the US, 80 % of companies were family-owned. In India, the concept of sustainability and social responsibility was strong in family businesses, he said.