Family enterprises play a crucial role in the Canadian economy. A recently published report suggests that family enterprises are the most powerful driver of economic growth in Canada, generating $574.6 billion – which is almost half of Canada’s private sector GDP – and almost seven million jobs in 2017. This “first-of-its-kind” study in Canada was a collaboration between the Conference Board of Canada and Family Enterprise Xchange. This research helps us to better understand “[t]he economic impact of family owned enterprises in Canada.”

Family businesses exist in all sectors and communities, from the local farmer and restaurant owner, to international companies in agriculture, communications, and retail. “Family enterprises produce nearly 7 million jobs in Canada. Empirical research also confirms that these businesses account for approximately 65 per cent of the output and 90 per cent of the jobs generated by small and medium-sized companies, which are frequently described as the backbone of the Canadian economy and are essential to our supply chains.” Additionally, “[n]early 2/3 of all private sector firms in Canada are family owned.”

Not only do family enterprises create jobs, invest in their communities, and give back to society, but it seems that they may experience more success than other firms. Family enterprises were also found to have longer growth and longevity than other firms, with total revenues growing 14.6 percent on average from 2007 to 2013. In contrast, other firms grew 13.9 percent on average during this same period. Of the firms that were operating in 2007, around 70 percent of the family enterprises were still in operation in 2013, compared to 65 percent of the other firms. Moreover, a 2018 study by the National Bank of Canada suggests that “family-controlled businesses demonstrate an ability to yield long-term returns over the span of generations.” They concluded that their sample of “family-controlled businesses from different industries and regions across the country outperformed the S&P/TSX Composite Index by 120.3% over a 10-year period.”

Although the reasons why family firms achieve these successes are not well understood, experts believe that enduring family firms share common traits – such as long-term orientation and an ability to adapt – that allow them to stand the test of time better than non-family companies.

“Over time, greater knowledge of family firm dynamics will help us to understand the unique challenges that these businesses face, and by extension their consequences for the broader economic base. And that in turn will facilitate improved educational support for family enterprises themselves.” Further, perhaps by identifying what enables these family enterprises to experience increased success, other organizations can also benefit from focusing on these same characteristics.

Author

Karen Macdonald and Viewpoint Research Team