2023-08-02

Growth and family business succession

And that's 3! The TV program on " Growth and family business succession" was the third and final in our STEP conversation series as part of the global STEP Project Global Consortium (SPGC) network, of which the Family Entrepreneurship & Society Chair has been a member since 2016. This program highlighted academic research on the antecedents of growth, focusing on discussion of the concrete practices of leaders that enable companies to grow. Miruna Radu-Lefebvre, the show's host, discussed family business growth with our guests - Natalia Vershinina, Vincent Lefebvre and Dimo Dimov.

Growth, what are we talking about?

Edith Penrose's definition is considered one of the founding texts on the phenomenon of growth. In her book, Penrose makes it clear that there are two distinct perspectives on growth.

"The term 'growth' is used in ordinary discourse with two different connotations. It sometimes denotes merely increase in amount; for example, when one speaks of 'growth' in output, export, and sales. At other times, however, it is used in its primary meaning implying an increase in size or improvement in quality as a result of a process of development, akin to natural biological processes in which an interacting series of internal changes leads to increases in size accompanied by changes in the characteristics of the growing object. "Edith Penrose (1959) The Theory of the Growth of the Firm

The literature shows that company growth is not uniform, nor is it random or deterministic. It cannot be assumed that certain actions automatically lead to certain results or to increased growth. Indeed, corporate growth can be seen as a double-edged sword. Many companies express a desire to expand, but an interesting study highlights the sporadic nature of growth. In a sample of over 36,000 companies registered over four different periods, only 3% showed consistent growth. The vast majority of companies - over 26,000 in the sample - showed no growth over these four periods. These results problematize the question of growth by showing that, although many people want it, companies that actually succeed in growing are the exception rather than the rule.

Growth and family businesses

The Observatoire National de l'Entrepreneuriat Familial (National Observatory for Family Entrepreneurship) has studied family businesses and concluded that the French population generally perceives these companies as growing less rapidly than non-family businesses. But is this really true?

The question of whether or not family businesses grow is of great importance, not only in France, but in many countries around the world. The general perception is that family businesses are generally driven to preserve what exists and to engage in a cautious investment policy, which would explain why they are less likely to grow.

Yet family-run businesses face unique challenges due to their specific characteristics. Their loyalty to tradition, for example, risks locking them into a conservative behavior that could lead them to mobilize tried-and-tested methods, processes and modes of operation for long periods, without however guaranteeing their future success. What's more, it's a mistake to assume that growth will happen automatically for a successful family business. It is essential to continue developing the skills of the management team and employees alike, so as to be able to adapt effectively to changes in the industry, by learning and drawing inspiration from other companies. What's more, when the objectives pursued by shareholders are divergent, this can lead the company to miss out on growth opportunities.

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