Family Businesses Create More Jobs than DAX Companies
ResearchRecent Study on the Economic Importance of Family Businesses
Family businesses have a major influence on Germany’s economy. Approximately nine out of ten private companies in Germany were family businesses in 2017. They employ almost 60 per cent of all workers in the private sector. Between 2007 and 2016, the 500 largest family enterprises created more jobs than the DAX companies, making a sustainable contribution to job growth in Germany and worldwide. These are the findings of a recent study on the economic importance of family businesses which is carried out regularly by ZEW - Leibniz Centre for European Economic Research and the University of Mannheim’s Institute for SME Research (Institut für Mittelstandsforschung, ifm) on behalf of the Foundation for Family Businesses in Germany and Europe.
The study provides an overview of the corporate structure in Germany and the particular features of family-run businesses based on Mannheim Enterprise Panel (MUP) data from 2017. A company is defined as family-run if it is majority-owned by a limited number of natural individuals. The study shows that the private sector is dominated by family businesses, with more than 90 per cent of private companies being controlled by families and as much as 86 per cent being owner-managed family businesses.
On average, family businesses have fewer than ten employees. All in all, however, more than half of the employees and turnover generated in the private sector can be attributed to them. Broken down by sectors, family businesses in Germany are mainly active in the construction and trading sectors, to a somewhat lesser extent in mining, energy and water supply and disposal, as well as in financial and insurance services.
In addition to the large number of small family businesses, the study also identifies and analyses the 500 largest family businesses in Germany between 2007 and 2016. In the period under review, the number of employees in Germany working for these companies rose from 2.07 million to 2.54 million, an increase of 23 per cent. By contrast, the total number of employees subject to social insurance contributions in Germany grew by 16 per cent in the same period, while the number of staff in the DAX-27 companies (DAX companies excluding family businesses in the German share index) grew by only four per cent.
Family businesses record increase in turnover
Also on a global scale, the 500 largest German family businesses created a great number of new jobs. In 2016, more than five million people worked for these companies, which corresponds to an employment growth of 27 per cent since 2007. A similar development can be observed in the turnover figures: in 2016, the turnover of the 500 family companies with the highest turnover amounted to 1,106 billion euros, which is equivalent to a turnover growth of 36 per cent in the period under review.
In addition, the study examined for the first time whether the largest family businesses are still managed by the entrepreneurial family or the owners themselves, or whether the operational management is in the hands of an external management. Of all 600 family businesses with the highest turnover and employment in Germany, 413 are run by family members and 187 by external managers. The family-run companies are significantly smaller than the family-owned companies managed by third parties, both in terms of the number of employees and the turnover volume. During the period under review, family-run companies generated on average around one third of the turnover of non-family-run businesses.
Family businesses are increasingly seeking external consultancy support and putting management in the hands of employed managers the larger and older they are. “This result does not come as a surprise, since with every generation change the probability decreases that a family member both wants to take over management and is capable of doing so,” explains Dr. Sandra Gottschalk, a researcher in ZEW’s “Economics of Innovation and Industrial Dynamics” Department and co-author of the study.
About the study
ZEW and ifm Mannheim have regularly carried out the study on the economic significance of family businesses for the Foundation for Family Businesses in Germany and Europe since 2009. It provides an overview of the quantitative importance of family businesses in Germany. In particular, the 500 largest family companies in Germany are identified, analysed and compared with the largest listed non-family companies in the German share index DAX (DAX-27 companies).