The Institutionalization of Family Firms Latin America

Family owned and controlled firms form the backbone of Latin American economies, accounting for 75% of all $1 billion-plus businesses in the region1 and 60 percent of its aggregate GNP2 . It follows that family businesses must create value and thrive for the economic well-being of their home countries. So how can family firms ensure long-term value creation? As family businesses mature it is critical that they embark on a process of institutionalization whereby they introduce and embed formal policies and procedures that strengthen commitment to their mission and values, preserve their competitive advantage and facilitate long-term growth. In 2017, INSEAD explored this process among 123 family firms in Asia-Pacific and the Middle East. The Institutionalization of Family Firms – From Asia-Pacific to the Middle East examined the opportunities and challenges these firms faced across key attributes of institutionalization: family ownership and succession, intangible family assets, corporate governance and leadership, growth capabilities, organizational design, and access to capital. The authors complemented these findings with insights from a group of leading private equity (PE) firms who, as regular investors in family-owned firms in the region, had their own perspective on the development paths of these businesses. In Phase 2 of the research series the geographical focus shifts to Latin America. INSEAD surveyed 131 family firms and interviewed select PE experts to understand the dynamics of the region. This report examines how institutionalization can help a family business secure its long-term survival and unlock growth. It includes an analysis of the survey results and individual case studies that can help family firms understand their own strengths and weaknesses and learn from their peers. It also explores partnership opportunities between family firms and PE investors and uncovers areas of best practice that support sustainable value creation.