Defining family firms
There are many definitions of family firms used in various studies. We define a family firm as a firm (or business group) where a family ultimately controls at least 50% of the equity.
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There are multiple definitions of family firms used in the literature. For instance, the definition of what constitutes a family varies, there are different ownership thresholds used to define family control, firms may or may not be required to have a family CEO, and there may be distinctions between new, “entrepreneurial” family firms and established family firms in later generations.
Much of the variation in the family firm definitions used in various studies comes from data limitations. For instance, researchers may have access to just information on publicly listed firms, they may have just the list of the largest shareholders, and may not have information on the family relationships between them.
Most of the statistics on this website define family firms as the firms where a family ultimately controls more than 50% of a firm’s or a group’s equity. We account for extended family relationships, using up to the fourth degree of kinship by blood or marriage. Our starting dataset is all limited liability firms in Norway. We choose the 50% threshold to indicate the ability of the family to make most decisions in the firm, including the choice of CEO and board composition. We restrict our attention to active firms (positive assets, sales, and employment). We use consolidated numbers for business groups.
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Given the different levels of family ownership used in the literature to define family firms, it is important to examine the link between the family's ownership stake and firm characteristics.
Overall, we find that a larger ownership stake of the family is associated with smaller firms. The table below shows the average sales, assets and employment for various levels of ownership for the family with the largest stake in the firm in 2019. (Sales and assets are in million 2019 kroner).
