A new study by Aalto University, The Anatomy of Finnish Family Businesses, challenges common perceptions of Finland’s corporate landscape. Family businesses form a clear majority of companies and are, in many respects, the most stable and long-term-oriented ownership group in the economy. They are significant employers and help sustain regional vitality. In addition, family businesses invest more than other companies.
The new study is the first comprehensive review covering all Finnish limited liability companies and examining family businesses and their economic significance. Extensive data obtained from official registers on companies and their owners made it possible to classify firms as either family-owned or owned by other entities. This classification provides new insights into the importance and distinctive characteristics of family businesses. The study was funded by the Jenny and Antti Wihuri Foundation and the Finnish Family Firms Association.
According to Minna Vanhala-Harmanen, CEO of the Finnish Family Firms Association, the new study highlights the hidden strength within family businesses.
“Finland’s economy relies heavily on family businesses. Their strong role as employers, investors and owners makes them an indispensable part of our country’s corporate landscape. The role of family businesses as the true backbone of Finland’s economy has been both undervalued and underreported. It is therefore truly encouraging that Professor of Ownership Samuli Knüpfer’s research at Aalto University reveals the real value of family businesses,” Vanhala-Harmanen states in a press release from the Association.
Significant Employers
There are nearly 78,000 family-owned companies in Finland, representing approximately 73 percent of all companies. The number of family businesses has remained roughly stable between 2006 and 2022. They are most prevalent in South Ostrobothnia, Satakunta, and the Uusimaa region outside the Helsinki metropolitan area.
More than half a million Finns work in family businesses. According to Vanhala-Harmanen, family businesses account for 42 percent of employment in the corporate sector. Their importance is particularly pronounced outside the capital region, where in many provinces they are key regional employers.
She notes that family businesses have also increased their responsibility in employing Finns. While other domestic companies and publicly owned enterprises have lost jobs, family businesses and foreign-owned companies have increased their workforce.
Family Businesses Invest More Than Others
The new study challenges the perception of family businesses as cautious and risk-averse. On the contrary, these companies invest more than other firms.
“Family businesses have a higher equity ratio than other companies, and they invest more. The investment rate of family businesses is 5.6 percent, compared to 4.5 percent for other companies,” says Vanhala-Harmanen.
According to her, it is high time to improve the investment conditions for domestic companies, as family businesses have both the willingness and the capacity to invest.
“There is no point in focusing solely on attracting foreign investment. What we need now are swift measures to boost investments by companies already operating here. For example, accelerating permit processes for projects already underway would move the situation in the right direction,” Vanhala-Harmanen says.
Growth Potential Underutilized in International Markets
One of the key findings of the study is that family businesses employing fewer than 50 people grow more moderately on average than other companies. They also internationalize less. In contrast, larger family businesses grow and expand internationally faster than other firms.
Vanhala-Harmanen says that identifiable domestic ownership is a factor that helps companies succeed and grow. According to her, family businesses are committed to renewing themselves from one generation to the next. Longevity and continuity of ownership support competitiveness even in challenging times.
She estimates that family businesses have enormous potential for international expansion. Family businesses employing more than 50 people perform very well across all measured indicators.
“Now we should find ways to help more family businesses grow beyond this ‘magic’ employee threshold,” Vanhala-Harmanen says.
The photo shows the MSK Group’s facilities in Ylihärmä, Kauhava. Photo: Samppa Fjäder.