How family businesses make a contribution to society and the state

The economic significance of family businesses

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.

Definition

(1)	The majority of decision-making rights is in the possession of the natural person(s) who established the company, or in the possession of the natural person(s) who has/have acquired the share capital of the company, or in the possession of their spouses, parents, child or children’s direct heirs.
(2)	The majority of these decision-making rights are indirect or direct.
(3)	At least one representative of the family or kin is formally involved in the governance of the company.

Listed companies meet the definition of a family business if the person(s) who established or
acquired the company (share capital) or their families or descendants hold at least 25 per cent
of the decision-making rights mandated by their share capital.
 
This definition includes family companies which have not yet gone through the first generational
transfer. It also covers sole proprietors and the self-employed (provided there is a legal entity
which can be transferred).

Comparison of the TOP 500 and the DAX-27

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 companies listed on the DAX include three family businesses: Beiersdorf AG, Henkel AG & Co. KGaA and Merck KGaA. In this study, these three companies were assigned to the group of family businesses. The remaining 27 non-family-controlled DAX companies are referred to as DAX 27 companies in the text. In 2021, the DAX was expanded from 30 to 40 companies, however the number of family businesses in the DAX has not changed as a result. An updated comparison with the TOP 500 family businesses is currently being prepared (as of December 2021).

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).