When you hear the phrase “family business,” you might think of the backstabbing Roys of Succession or the dysfunctional Duttons of Yellowstone. But while TV’s family companies are entertaining, their real-life counterparts may be even more compelling.
Around the world, family businesses produce about two-thirds of all economic output and employ more than half of all workers. And they can be very profitable: The world’s 500 largest family businesses generated a collective US$8.8 trillion in 2024. That’s nearly twice the gross domestic product of Germany.
If you’re not steeped in family business research—and even if you are—their ubiquity might seem a little strange. After all, families can come with drama, conflict, and long memories. That might not sound like the formula for an efficient company.
We are researchers who study family businesses, and we wanted to understand why there are so many of them in the first place. In our recent article published in the Journal of Management, we set out to understand this different kind of “why”—not just the purpose of family firms, but why they thrive around the world.
The usual answers don’t really explain it
The standard answer to “Why do family companies exist?” is straightforward: They allow owners to generate income and potentially create a legacy for future generations.
A related question is: “Why do entrepreneurs even want to involve their relatives in their new ventures?” Research suggests entrepreneurs do so because family members care and can help when resources are limited.
But that might not be unique to family businesses. All companies—whether run by a family or corporate executives—balance short-term profit and long-term goals. And all of them want reliable workers who are willing to pitch in.
