Report | November 2017
As family firms account for 70% of GDP in the global economy and 60% of global employment, the importance of long-term value creation extends beyond individual families – it is among the main drivers of economic growth and business innovation, as well as livelihoods.An entrepreneurial spirit and close relationships are key elements at the start of a family’s journey. Initial success typically relies on one or two individuals with a vision for a new business, the energy to execute, and the determination to persevere. However, as a family firm matures and transitions to the second and third generations (and beyond), introducing formal policies and procedures to institutionalize the firm’s mission and values is critical to preserve its competitive advantage and enable sustainable growth over the generations.To understand how families in emerging markets approach these topics, INSEAD surveyed 123 family firms in Asia-Pacific and the Middle East to measure their level of institutionalization across six key attributes: family ownership and succession, intangible family assets, corporate governance and leadership, growth capabilities, organizational design, and access to capital.This report sheds light on how institutionalizing aspects of a family firm can help ensure its long-term health and survival. Case studies will help families understand their own strengths and weaknesses, learn from their peers, and derive food for thought for improvements within their own businesses. By nature, family firms are often inward looking and at times reluctant to seek external advice when faced with challenges. Taking a close look at the partnership opportunities between family firms and external investors, and interviewing 14 leading private equity firms, we report on how the PE industry can help family firms unlock value and expand.The exploration of the institutionalization of family firms focuses on businesses in Southeast Asia, South Asia (India & Sri Lanka) and the broader Middle East.