Family firms and geography
How important are family firms in various regions of Norway?
Family firms
Norway has a varied geography ranging from large cities to small communities. The importance of family firms in local business life differs across locations.
Generally, family firms are relatively more important outside the largest cities, where they constitute the vast majority of firms.
The graphs below classify municipalities into six categories as defined by Statistics Norway (SSB), where 1 indicates central regions (Oslo and surrounding area), and 6 indicates the most isolated municipalities (for instance Lærdal, Nordkapp or Utsira).
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The graph below plots the prevalence of family firms in municipalities ranked according to centrality in the CCGR data base of all Norwegian limited liability firms.
While family firms represent the majority of firms in all regions, their prevalence increases outside greater-Oslo:
The pattern is similar if one considers the absolute number of firms rather than the proportion. The number of family firms decreases less compared to nonfamily firms as we move from the most to the least central areas:
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Family firms represent a key employer especially in less central regions. While only around 25% of employees in firms headquartered in the most central region (1, Oslo and surrounding municipalities) work in family firms, almost 70% do so in the least central regions (5 and 6):
The same picture appears if we look at the number of employees:
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Less central areas tend to have smaller firms. The decrease in firm size is quite steep for nonfamily firms, while the typical size of family firms is much more stable across various geographic areas:
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Family firms tend to be more profitable than nonfamily firms across all regions, with the largest difference in the most and the least central areas. The pattern is the same whether one considers average ROA or ROA of the median firm, although it is most pronounced in the first case:
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Family firms grow at a slower rate than nonfamily firm, but the difference is smaller in less central areas:
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What are the ownership characteristics of family firms in different areas of Norway? For one, the family in firms located in less central areas have more shareholders on average. They have more owners from outside the controlling family, and, in addition, the controlling family is larger, in the sense that it has more members with a stake in the firm:
