Family firms and geography
How important are family firms in various regions of Norway?
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 graph below plots the prevalence of family firms across Norwegian municipalities according to centrality. It uses the classification of municipalities into six categories 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).
While family firms represent the majority of firms in all regions, their prevalence increases outside the large cities:
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:
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:
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:
Family firms grow at a slower rate than nonfamily firm, but the difference is smaller in less central areas:
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: