The fate of family businesses

Are family businesses more or less successful in the long term? Robert Frank comments on the trials and tribulations of family businesses pointing to a U.S. Trust study of “ultra-high-net-worth” family businesses. That study finds that “[w]hile these families are highly successful in building and managing their businesses, they are often less successful when it comes to transitioning their companies from one generation to the next, with only 15 percent of family-owned companies lasting past the second generation.” The study identifies lack of succession and estate planning, and failure to implement asset protection strategies as core problems affecting family businesses’ inter-generational survival.

On the flip side, in his book Dynasties: Fortunes and Misfortunes of the World’s Great Family Businesses, David Landes tells the story of eleven successful family businesses and argues that “dynastic businesses offer a proven route to developing emerging markets, while companies managed by unrelated professionals and funded by public investors offer mostly bad jobs and slim profit shares to local employees” (Amazon.com).

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