Defining family firms
Many different definitions of family firms can be found in the literature. In the CCGR, we typically define a family firm as a firm (or a business group) where one family ultimately controls at least 50% of the equity.
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Multiple definitions of family firms are used in the literature. For example, different ownership thresholds are used to define family control, firms may or may not be required to have a family CEO, and a distinction may be drawn between new "entrepreneurial" firms controlled by the founder and established firms founded generations ago.
Much of the variation in definitions arises from data limitations. A study may use information only on publicly listed firms or the largest shareholders. Futhermore, information on the family relations between shareholders is often incomplete.
Most statistics produced by the CCGR define a family firm as a firm (or a business group) where one family directly or indirectly controls more than 50% of the equity. The 50%-threshold is chosen to ensure that a controlling family are able to make most of the decisions in the firm, and in particular chooses both the CEO and the board's composition.
CCGR's data base on Norwegian family firms uses the Brønnøysund registry of all limited liability firms in Norway and includes consolidated information for business groups. In statistical work, attention is restricted to active firms (defined as firms with positive assets, sales, and employment). Family relations among owners are known up to the fourth degree of kinship by blood or marriage and is drawn from (anonymized) administrative data supplies by Staticstics Norway (SSB). A detailed description of the data base can be found here.
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The controlling family's ownership stake is systematically related to the firm's size: higher ownership stakes are associated with smaller firms.
This is important to know, given the different definitions of family ownership used in the literature---the higher the ownership threshold is set, the smaller are the firms considered to be family firms.
The table below shows how the controlling family's level of equity ownership is related to measures of firm size (average sales, assets, and employment) in the population of Norwegian firms. The controlling family is defined as the family with the largest stake in the firm in 2019. (Sales and assets are in million 2019 kroner).
