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Family-owned companies, growth and innovative potential

Category:
News

Date:
14 December 2017

The FD Gazelle list, the ranking of fastest-growing companies compiled by Het Financieele Dagblad and Company.info, includes around a dozen family-owned companies. All companies that increased their turnover by at least 20% in the past three financial years receive an FD Gazelle Award. There appear to be many myths about family-owned companies. A widespread myth is that family-owned companies are alleged to be so conservative and eager to stick to existing products, markets and processes that there is little room for innovation. As a result, it is said, family-owned companies price themselves out of the market and bankruptcy is just a matter of time for them. Recent research has refuted those myths: these companies are both more innovative and more ambitious in committing investments to creating innovation.

The overwhelming dominance of family-owned companies in the Dutch and global economy still comes as a surprise to many people. They are astonished to learn that 70 percent of all companies with employees in the Netherlands are a family-owned company (Statistics Netherlands (CBS), 2017). FBNed is the platform that supports family-owned companies in their operations and entrepreneurial issues. By contrast to the myth, research conducted by Nyenrode Business University has shown that family-owned companies are no less innovative than other types of companies. For instance, over 62 percent of all family-owned companies have launched at least one new product or service in the market in the past three years. Forward-looking family-owned companies that introduced innovations to the market in the past three years achieved 14.6 percent of their turnover in 2016 from those new products or services. These family-owned companies spend an average of 4.9 percent of their turnover on research & development and this percentage has risen strongly at over 1/3rd of the companies.

Limitations in innovation

The Nyenrode research, conducted in 2017 in conjunction with ING and NPM Capital, shows that the availability of talented employees is the main factor limiting innovation at Dutch family-owned companies. They are also restricted by the availability of capital: the owners’ family capital is locked into the family-owned company. Over 32 percent of family-owned companies would be more innovative if they had more financial resources available to them. The innovative potential of family-owned companies can therefore clearly be limited by this. Accordingly, innovating family-owned companies are increasingly entering into joint ventures with or acquiring other companies. More and more, they obtain advice and knowledge by appointing an Advisory Board or Supervisory Board and work with customers, with universities and universities of applied science as well as with public educational institutions.

Owners of family-owned companies tend to be more open to innovation strategies than owners of non-family-owned companies. That may be a major reason why family-owned companies, despite their limited resources, are perfectly able to compete with non-family-owned companies in terms of innovation. Owners of family-owned companies often share the same views on innovation and support the innovation policy in full, and to a significantly greater extent than owners of non-family-owned companies, claims the Nyenrode research.

Innovation inspires families to engage in business

Winners of the FD Gazelle Award have already been announced in various regions. For instance, the brothers Ramón and Pascuál Ab won with their company Nova Incasso in the Northern Netherlands, and the Schippers family took second place with JAM, their temporary employment agency for young people, in the Southern Netherlands. Neither of those companies have been in existence for very long but both meet the criterion for taking part: they increased their turnover by at least 20% in the past three financial years. Both refocused an existing company because they saw opportunities for business and innovation.

It is of the utmost importance that everyone’s qualities, duties and characters complement each other in a family-owned company, the winning companies say at the FD Gazelle Awards. Various fast-growing companies have a mediator on stand-by to prevent debates from turning into conflicts. And people in family-owned companies consult regularly with each other: jointly reviewing which tasks and plans need to be carried out ensures a unity of purpose married to effectively coordinated growth ambitions and growth targets. Lastly, an owner of a family-owned company urges that “a family charter is essential,” for preventing or resolving tensions between owners and other family members.

Family-owned company supported by knowledge and skills

FBNed asserts that family-owned companies are crucial for innovation, growth and employment. They are the cornerstone of the economic community, and this is reflected in the platform’s role as a partner in dialogue with politics and politicians. Nyenrode University is not alone in researching family-owned companies in terms of various aspects of their performance, their role in the economy and their potential for innovation. Tilburg University recently launched a research group: the “Tilburg Institute for Family Business”. The institute’s teaching and research programme covers all aspects of family-owned companies. In order to continually develop new knowledge and insights on matters concerning family-owned companies, Tilburg University and PwC have joined forces, with Tilburg University providing multi-disciplinary research and PwC opening the gate to the practice of the family-owned company.

Want to know more about family-owned companies? NPM Capital offers support on challenges in family-owned companies.