German private sector “dominated” by family businesses: study

In 2017, around nine out of ten private companies in Germany were family businesses and they employed almost 60 percent of the workforce in Germany’s private sector, according to a study published by the Leibniz Centre for European Economic Research (ZEW) and the research institute for small and medium-sized enterprise (SME) at the University of Mannheim on Monday.

The ZEW study found that almost 70 percent of family companies in Germany are still managed by the family or owners. Out of 600 companies analyzed, 413 were run by family members and 187 by external managers.

“Of particular interest on this subject is the question of the extent to which demographic change is hampering succession planning in family businesses,” Sandra Gottschalk, ZEW researcher and co-author of the study, told Xinhua on Monday.

Gottschalk questioned whether German family businesses would be able to keep the company in the family or whether they would “be forced to close because no successor can be found”.

On average, family businesses in Germany had fewer than ten employees but the study showed that German family businesses “dominated” the private sector, accounting for “more than half of the employees and turnover generated”.

Between 2007 and 2016, the 500 largest family businesses in Germany created more jobs than non-family run German stock index (DAX) corporations, the bi-annual ZEW study conducted on behalf of the Foundation for Family Businesses found.

Among those 500 businesses, employment rose by 27 percent to 2.54 million between 2007 and 2016.

The ZEW study found that the bigger and older German family businesses were, the more they brought in outside help and put management into the hands of employed managers.

This result was to be expected because each generation lowered the probability “that a family member will be found who wants to take over the management and can do so,” said Gottschalk.

Germany’s DAX companies which are not family-owned, on the other hand, “were only able to increase employment by four percent to 1.55 million,” the researchers of the Leibniz Centre noted.

In light of the importance of family-owned businesses for Germany’s economy, the so-called Mittelstand, the Federation of German Industries (BDI) is calling on the government to improve the family businesses’ situation. “One cannot always only praise the mid-tier as the backbone of the German economy” while doing “practically nothing for better basic conditions,” said BDI vice-president Ingeborg Neumann.