Family businesses are the most widespread type of company in Germany: more than 90 percent of all companies in Germany are family-owned. They account for 58 percent of all jobs and are a stabilising factor for the employment market in times of economic downturn. These are the results of studies commissioned by the Foundation for Family Businesses.
A high number of large family businesses with international operations is a hallmark of the German economy: 33 percent of all companies with 250–499 employees, and 31 percent of those with more than 500 employees, are family businesses. Many of them are international market leaders in their particular technological niches, e.g. in the mechanical engineering and automotive industries.
Family businesses are not defined by a certain size as regards workforce or revenue. They can be found in almost all branches of industry and do not have to have any particular legal form. So what exactly is a family business?
For the purposes of analyses and surveys there are, roughly speaking, two ways of defining family businesses and distinguishing them from non-family businesses.
Both of these definitions are used in the series of studies “The economic significance of family businesses”, which the Centre for European Economic Research (ZEW) has been conducting for the Foundation for Family Businesses since 2009.
The Foundation for Family Businesses itself generally uses the following definition:
A company of any size is a family business if
Listed companies fit the definition of a family business if the person who founded the company or acquired its share capital, or their family or descendants, hold 25 percent of the decision-making rights due to their stake in the company.
This definition also includes family businesses where the first handover of control to the next generation has not yet taken place, as well as sole proprietors and the self-employed (provided a legal entity exists that could be transferred to another person).
In order to identify possible differences in the growth and development of family businesses as opposed to non-family businesses, the Centre for European Economic Research (ZEW) regularly compares the 500 largest family businesses (TOP 500) with the DAX-listed companies in its series of studies “The economic significance of family businesses”.
The 30 DAX-listed companies include two family businesses: Henkel AG & Co. KGaA, and Merck KGaA. In this study, these three companies were assigned to the group of family businesses.
Between 2007 and 2016, Germany’s 500 largest family businesses expanded their employment in Germany by 23 percent to 2.54 million people. In contrast, the 27 DAX companies that are not family businesses were only able to increase employment by 4 percent – to 1.55 million. Measured in revenue as well, the top 500 family businesses outpaced the 27 DAX companies, increasing their group-wide sales by 36 percent between 2007 and 2016. The 27 DAX companies increased their sales by only 29 percent.
Worldwide, the TOP 500 created more than one million new jobs between 2007 and 2016. What is more, family businesses achieve more constant growth. The growth rate of the TOP 500 family businesses averaged 2.7 percent, compared with just over 1.7 percent at the DAX-listed companies analysed in the study.
The key results of the study are also shown in our interactive chart (German).