Small Family Firms in Sweden: Analysis of Factors Determining Long Term Survival

Abstract: Family firms span from small where the founder is the only person in the company to large corporations that are listed at the stock exchange. Moreover, they differ culturally depending on the home country of the respective firm. However, what all family firms have in common is that they constitute a large part of the total amount of firms in the world providing employment opportunities and thus contributing to the welfare of countries. This fact makes family firms a highly interesting field of research. On the one hand family firms have many competitive advantages over other firms such as majority control of shares allowing fast decisions as well as customer and long-term orientation. On the other hand family firms face difficulties that non-family firms do not. One of the most common problems of family firms is its long-term survival which can be hindered by a lack of family members that can and want to take over, control issues due to family members who sold their shares, insufficient innovation, growth or profitability. That problem leads to the two main questions which will be analyzed in this thesis: a.) “Why do many small Swedish family firms often not survive in the long run?” b.) “What can be done to increase the survival rate of small family firms in a long term perspective?” Past and current research focused a lot on large family firms even though companies with less than 50 employees constitute approximately 96 percent of all firms in Sweden. Therefore, the thesis concentrates on small family firms in Sweden. Data needed for the analysis in order to answer the questions stated above have been gathered by a survey followed up by an interview to test and compliment the results of the survey. The results of the survey indicate that the main reason why small family firms in Sweden often do not survive in the long run is because they do not want to. Reasons why they were not interested in long-term survival several state that there are no relatives that can take-over. Based on the results of the survey an attempt to answer the question what can be done to increase the survival rate was as follows: For the family firms not interested in succession the benefits of long-term survival such as better products and services, wealth for owners, jobs and tax income for society were presented. For the ones interested in succession but facing difficulties recommendations such as the introduction of governance mechanisms were suggested. To test and compliment the results from the survey a telephone interview was performed with a few of the survey respondents get more in-depth information and opinions of the small family firms. The results of the interview validate the results of the survey.