Family Businesses in the New Economy: How to Survive and Develop in Times of Financial Crisis

Abstract

The family businesses play an important role regarding the dynamism and strength of the European economy, long-term stability and sustainability. Many of the challenges facing family businesses also concern Small and Medium Sized Enterprises (SMEs), but due to the fact that family businesses involve three overlapping elements (the family, the business, and the ownership) they are different from other types of businesses. In Europe the family business sector is dominated by particularly micro enterprises with less than 10 employees and SMEs. Across Europe around 70-80% of all enterprises are family businesses. The current financial crisis has influenced negatively the majority of business activities and many family businesses found themselves in a new turbulent financial environment where uncertainty dominates and the market characteristics are radically reversed.This paper recognizes the importance of family businesses in both the Finnish and the Greek economy and the need for in-depth research about the dynamics of family businesses, the difficulties they face (strategy, succession, internal conflicts etc.) and factors influencing their survival (endurance) and sustainability. Despite the differences in economic structure and culture both Finland and Greece are small countries in the outskirts of Europe with a high percentage of family businesses. Finland counts on a highly industrialized manufacturing sector and is one of the economically and politically most stable countries in the world, whilst Greece relies on the service sector and in particular on tourism.Currently a cross-cultural study between Greece and Finland is undertaken. It includes an extensive literature review for deeper understanding of the research variables. In addition it incorporates a qualitative and quantitative research methodology. This paper describes mainly the results of a qualitative study carried out in 60 family businesses in the North-western part of Thessaloniki, Greece. The aims of the study were to record the new conditions that prevail concerning business operations in family businesses. The main findings from our study show that family businesses can combine sentiments with business dexterity and create unique dynamics towards business decisions. The financial crisis can be perceived as pushed “opportunity” in many functional areas of the business for reformation towards business sustainability and the creation of competitive advantage. It converts into a cause of reorganization of business plans and helps the company to adopt more formal management procedures for decision making. The combination of emotion with entrepreneurship also brings family members around a common goal of survival and due to the two separate systems of “family” and “business” resulting in a dynamic growth in the middle of the crisis. The adoption of a lean and flexible budget is an important parameter in responding to the financial crisis. Family firms have the advantage of being motivated and supported by all family members who are involved in the family business (e.g. willingness to work long days under difficult conditions with limitedly rewards), while in non-family businesses such commitment is more difficult to obtain. Other incentives for surviving the financial crisis can be contributed to the considerable consequence that a failure of a family business may have on the leader; there is a high risk regarding the family property, negative publicity of the family's name, and the sense of cancellation of the family's legacy. Managers of a non-family business do not encounter such pressures.