COLORADO SPRINGS, Colo. — The impact of family businesses on the global economy cannot be understated. Huge multinational corporations like Ford Motor Co. and Wal-Mart — both family businesses — record hundreds of billions of dollars in annual revenue and employ millions globally.
Family businesses like these account for the majority of gross domestic product production, too. According to the Family Firm Institute, “an estimated 70 percent to 90 percent of global GDP annually is created by family businesses.”
These businesses have certainly left an indelible mark on the world, but there’s a different twist to family businesses in emerging markets, a July 2014 Campden Wealth report finds.
Family businesses in emerging markets in Asia, Africa and the Middle East have a greater tenacity to prioritize strategic business growth over wealth accumulation, creating jobs among local populations and improving the lives of surrounding communities through altruism, according to the report.
Fostering community and promoting regional, intra-regional and international trade are key trends of family businesses that diversify where and to whom they sell their products and services. As a result, many family businesses, particularly those in Africa, help narrow the gap in trade between regional economies.
This, in turn, leads to greater growth for the communities in which the businesses operate.
But, why aren’t family businesses falling to the temptations of nepotism and ultimately failing? For many, the goal of a family business is to look first to the future and think about sustainability.
Andrew Porter, director of research at Campden Wealth, said that family-owned businesses want future generations to succeed.
“Business families adopt a variety of approaches in preparing the next generation for succession, from apprenticeship to business school, which encourages industry exposure outside the business or even entrepreneurial initiatives,” Porter said.
Porter’s arguments stand up to logic, but a separate PricewaterhouseCoopers report offers a different explanation. A 2012/2013 family business survey by the London-based professional services network found that over 90 percent of family businesses in South Africa have procedures in place to deal with family disputes.
Many family businesses in the country and elsewhere in emerging markets bring in external management to emphasize the importance of future success for family businesses, the report added.
The evidence thus far on the success of family businesses in emerging markets is emerging, but the underlying reality of their accomplishment is important. These family businesses experience tremendous success in distributing their growth internally and to their surrounding communities, offering hope of economic empowerment to communities in developing countries.
– Joseph McAdams