New family firms
Some new firms are controlled by an individual or a family, while other are not. In this section, we analyze newly established limited liability firms and business groups. Family ownership of new firm is strongly correlated with firm size, growth, profitability and survival during the firm's first years.
Some family firms were established a long time ago, while others are recent creations. The graph below presents the distribution of family-owned firms in 2020 by their founding year. There are some family firms that date from before 1900, but the vast majority have been established since 1980. We can see that more than 60,000 family firms are created in each of the last two decades.
We can also look at the number of firms starting or ending in particular years, as shown in the second graph below. We observe that the tax reform of 2006 encourages creation of new companies, as shown by the red line. Following that, the decrease in the starting equity requirement brings more new firms starting in 2011/2012. On the same graph, we report dotted lines on the secondary axis on the right. A small number of about 150 firms every year are a result of a spinoff from another company (dotted blue line). More and more firms end as a takeover target- 1500 in the last year of data. Between 1500 and 1700 companies go bankrupt is a typical year - more around the Global Financial Crisis of 2007 (dotted green line).
Looking at cohorts of new Norwegian firms established between 2000 and 2015, we can see that family firms have higher profitability in their early years compared to nonfamily firms:
The picture is similar if we look at mean or median returns on assets:
New nonfamily firms tend to be larger and grow faster compared to family firms. The graph below shows the sales of new family and nonfamily firms during their first five years:
New family firms have slightly higher survival rates compared to nonfamily firms in their early years. The graph below shows the percentage of new firms which are still active during the first five years since they were established:
This evidence suggests that family and nonfamily firms are different from their very inception: their initial ownership seems to predict their future path. Family firms are smaller, grow more slowly, are more profitable and are more likely to survive compared to nonfamily firms.