Close your eyes and picture a world where the most revolutionary corporations are not giant tech giants but family businesses. Now open your eyes, since you haven’t got to assume: it’s real.
This is it our team With business experts found in latest global evaluation research on family businesses and family-run enterprises.
When we analyzed 193 studies published between 1996 and 2022 on the strategies, including innovation, implemented by these corporations, we found that smaller family businesses lead the charge in innovations – with a certain reservation.
Specifically, we found that small and medium-sized family firms in strong property rights environments are the most revolutionary in the world. They outperformed large family firms and nonfamily firms of all sizes.
To determine which countries have stronger property rights protections, we used the most comprehensive rating available, International Property Rights Index.
The index takes under consideration a variety of issues, including political stability, independence of the judiciary, corruption, ease of access to loans and protection of copyrights and patents.
The three countries with the strongest legal environments are Finland, Switzerland, and Australia. The US is in twelfth place.
Why is that this essential?
When business professors speak about “innovation“We typically check with research and development investments, business process improvements, latest product development, and other activities related to strategic product changes.
Previous research suggests that family businesses are kind of revolutionary based on two aspects: they are big and whether or not they are situated in the country where protects property rightsWhen property rights are not protected, people have less incentive to innovate – because their ideas are vulnerable to theft.
We’ve seen firsthand how this affects business owners. Some of our team members come from countries where property rights aren’t strongly protected—namely Kazakhstan and China—and we’ve heard from family business owners about their struggles with innovation.
Our work illustrates the importance of protecting property rights for business development. While such legal protections enable everyone to thrive, small and medium-sized family businesses can profit the most from them.
This isn’t entirely surprising. Larger corporations often have more robust systems in place to guard against risks like theft and fraud. And they’ve less must innovate because of their size and established presence in the market. Smaller corporations, on the other hand, must continuously innovate to compete and grow.
Family businesses also care about passing on their businesses to future generations, which supplies them an extra incentive to innovate: in the event that they don’t, they risk going out of business. This seems more essential for smaller, less established family businesses.
What just isn’t known yet
Our findings are qualitative, not quantitative, which suggests more research is required to substantiate them. We don’t yet know what innovations distinguish smaller family firms, or whether these innovations must be incremental Or radical.
Our team desires to learn more about the legal environments in which family firms operate and the way they affect behavior and performance. We plan to conduct more research on the different strategies that family firms pursue, equivalent to innovation, internationalization, and mergers or acquisitions.
Ultimately, we hope to search out best practices that may help family businesses thrive around the world – not only in select countries.