Family Firms Perform Better Than Other Businesses

Armen Hareyan's picture
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Family Business Success

A study published in the current issue of Family Business Review is one of the first to investigate the competitiveness and stability of family businesses. Author Jim Lee finds that family firms tend to experience higher employment and revenue growth over time and are overall more profitable than nonfamily businesses.

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The average profit margin for family firms was ten percent, two percent higher than nonfamily companies. "Holding other things constant, family firms are likely to grow faster and be more profitable," Dr. Lee explains.

Family businesses are the backbone of the global economy, making up 35 percent of the companies listed on the S & P 500 or the Fortune 500 index.

The study measured firm performance by net profit margin, employment, revenue, and gross income growth from 1992-2002. This time sample spans a full business cycle; the economy expanded from 1992 to March 2001 and then recessed for two quarters.

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