Familiebedrijven Tilburg University

How important are family businesses to the Dutch economy?

Fact Check 5min. Annemeike Tan

Questions about societal issues? Our experts are happy to answer them. Alumnus Harm van Kemenade, marketing director of the Van Kemenade family firm in paving operations, sent in the following two questions: how important are family businesses to the Dutch economy and are they more stable than listed companies? Joyce Kox responds. She is a PhD student at the Tilburg Institute for Family Businesses and the Department of Management of the Tilburg School of Economics and Management.

‘To business in the Netherlands family firms are crucial, because they generate many jobs and a great deal of economic activity. An early 2018 count by Statistics Netherlands (CBS) numbered Dutch family businesses at approximately 273,000; together they generated 2.46 million jobs and EUR 403 billion in turnover. In terms of jobs and turnover, they deliver about a quarter of the pie. So it’s safe to say that family firms are a mainstay of the Dutch economy and of the Dutch corporate sector. But are they more stable than listed companies? It is claimed that family firms do better than non-family firms, in part because of their long-term vision and the family’s connectedness to the firm. Yet it is also claimed that family firms are actually rather risk-averse, because the family invest a sizeable amount of equity in their business, not to mention their hearts and souls, which allegedly curbs innovation and performance. What does science say about this?’

The scientific perspective

‘Family firm performance is a hotly debated issue in the research community. For example, while researchers in the US have found that large, public family firms outperform non-family businesses, other studies suggest that non-family firms do better or that there is, in fact, no difference. When several studies have targeted a particular issue, often a meta-analysis is performed. By combining and analyzing the results of a large number of studies, this method aims to arrive at a more precise conclusion. Two out the three meta-analyses of family firm performance conclude that family firms do slightly better than non-family businesses, especially among large and listed companies. In other words, viewed as a group, family businesses do better on average, but that does not mean that every individual family firm automatically does better. A frequently cited major advantage of family businesses is that their long-term vision and family commitment de-emphasize quick profits. None of the meta-analyses confirmed the idea that smaller and private family firms outperformed non-family businesses.’

Joyce Kox

The relationship between the family and the company system resembles a marriage

Joyce Kox

PhD student at the Tilburg Institute for Family Businesses and the Department of Management of the Tilburg School of Economics and Management

Competitive advantage?

‘What is clear, then, is that being a family business does not automatically give the company a competitive advantage. Research results show that the relationship between family firm and performance is less clear-cut. Both family firms and non-family firms have advantages and disadvantages. What matters is to find out under which circumstances the positive elements prevail and the negative elements are minimized. One factor that impacts on the functioning of a firm is ‘generation’ or ‘type of influence’. In other words, to a family it is important to manage their influence on and within the company well. Examples abound of family conflicts and failed business successions, to name but a few issues, that brought about the collapse of the company. Then again, certain family firms have been at the forefront of their respective industries for decades. The relationship between the family and the company system resembles a marriage. If all goes well, the two ‘partners’ complement each other, but arrangements must be in place for when things go awry.’

Spotlighting differences between family firms

‘Comparing family and non-family businesses might be easily construed as implying that all family businesses are alike, and that is clearly not the case. So to more fully understand family businesses, we will also need to study how family businesses differ from each other. One key aspect that is frequently overlooked is the family behind the firm. For example, every family has its own values, norms, and communication routines. And it is the family that makes every family firm unique. Family and firm overlap, and how the firm fares consequently also depends on the family behind it.’

Harm

Our family values certainly carry over into the firm

Harm van Kemenade

Alumnus accounting and marketing director of the Van Kemenade family firm in paving operations

Harm van Kemenade comments:

'Ours is a third-generation family firm and I certainly recognize Joyce’s observations, especially the point about investing our hearts and souls in the company. That entails an awareness of the tension between having to take risks as a business and risking our parents’ livelihood. We’re always looking to balance those interests.'

'Our family values certainly carry over into the firm. As a company, we have been in business for almost sixty years, and the company and our colleagues have become part of our family. That also means we often expect the same commitment and values from our colleagues as we do from family. As the firm grew, I noticed that this would lead to frictions more often, because not everyone shares the same values and norms. And yet, this also often generates change for the better, which ensures we adhere to our values, while at the same time enabling us to innovate and stay ahead to maintain our service.'

Literature
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