Anatomy of family firms in Finland
Executive summary
This project uses comprehensive and reliable register data from Finland in 2006–2022 to examine the prevalence, importance, and behavior of family firms. Family firms account for 73% of companies, 42% of employment, 31% of revenue, and 22% of assets. While they dominate among small and medium-sized enterprises, they also are important at the top, employing one in four workers in firms with at least 50 employees. Family firms cluster in primary activities, construction, services, and trade, and they are particularly important outside the capital region.
Family firms have distinctive traits that set them apart from other firms. They are more profitable, maintain lower labor costs, are less capital intensive, invest more, rely less on debt, and pay higher dividends. Smaller family firms grow less and engage less in international business. The reverse holds for larger family firms. These features of family firms are especially pronounced in family-managed and closely held firms.
Report and presentation
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Detailed findings
Economic footprint. Family firms are the backbone of Finland’s corporate sector. In 2022, they represent 73% of active limited liability firms and account for 42% of employment, 31% of revenue, and 22% of assets; excluding foreign-controlled and government-owned firms, the corresponding shares are 76%, 57%, 45%, and 35%. Family firms are also important taxpayers: they contribute 30% of corporate income taxes, with this share increasing to 45% when foreign-controlled and government-owned firms are excluded.
Firm size. Family firms represent sizeable fractions across the size distribution, with the highest prevalence among small and mid-sized firms. Among firms with 1–9 employees, family firms account for 78% of firms, 73% of employment, 62% of revenue, and 48% of assets. Even among firms with at least 500 employees, the corresponding shares are 21%, 19%, 13%, and 10%, respectively.
Longevity. Survival over 2006–2022 is higher for family firms (37%) than for non-family firms (35%). As a consequence, family firms tend to be somewhat older than other firms.
Industry mix. Family firms are disproportionately represented in primary activities, construction, accommodation and food services, other services, and trade. They are relatively uncommon in health and social services and information and communication.
Geography. Family firms play a particularly important role outside the capital region. In the Greater Helsinki Area, family firms’ employment and revenue shares are 31% and 18%, versus averages of 48% and 49% across other provinces. Family firms are especially influential in Ahvenanmaa, Päijät-Häme, Keski-Pohjanmaa, Etelä-Pohjanmaa, Pohjois-Savo, and Pohjois-Karjala, and much less so in Greater Helsinki Area, Kymenlaakso, Etelä-Karjala, Pirkanmaa, and Keski-Suomi.
Family firm types. Most family firms have a family CEO, involve one generation, and are owned by few individuals. However, larger shares of family-firm revenue accrue to other types of family firms: 42% of revenue is generated by firms with an external CEO, 67% by multi-generation firms, and 19% by firms with more than ten owners.
Profitability. Financial performance is higher in family firms: mean EBIT to assets is 7.0% versus 4.6% for non-family firms. This advantage is largest among small firms but remains positive even for large firms. It also survives controls for size, age, and industry. This performance difference partly arises from family firms employing less capital and having lower labor costs.
Growth and internationalization. Family firms grow more slowly, by 1.1% less in annual revenue growth. They are also less likely to engage in international business by exporting (5% vs. 11%). These patterns solely emanate from smaller firms. Among firms with at least 50 employees, family firms grow faster and display greater international engagement.
Investment and financial policies. Investment rates are 1.1% higher in family firms, and the difference remains significant for larger firms and in regressions. Family firms carry less debt and pay higher dividends. The equity ratio is 51% in family firms versus 43% in non-family firms, and the propensity to pay dividends is 37% versus 20%. These differences hold across the size distribution and in regressions. While family firms hold more cash in univariate comparisons, this result does not carry over to regressions.
Heterogeneity by management, generations, and ownership dispersion. Conditional on size, age, and industry, family-managed firms outperform, grow and invest more, carry less debt, pay higher dividends, have lower labor costs and smaller asset base, and are less internationalized. Differences by generational stage are smaller. Firms with the greatest ownership dispersion are least likely to display the distinctive traits of family firms.
Owners in family firms. About 135,000 individuals, reflecting 2% of the population, hold shares in family firms. These owners are predominantly men aged between 40 and 60 years, and their average business wealth equals 415,000 euros. The wealthiest 1% of family firm owners holds 51% of business wealth. They account for 19% of employment and 33% of revenue in all family firms and pay 21% of income taxes collected from family firm owners. Collectively, family firm owners contribute 4.4 billion euros in income taxes in 2022, representing 11% of the nation’s income tax collection.